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Multicoin: Why invest in Squads Labs of Solana Ecosystem?

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This is the best multi-signature solution on Solana for institutional traders, cryptocurrency consumers, and builders

Original Title: Build With Squads

Original Author: Vishal Kankani, Multicoin Capital

Translated by: Kaori, BlockBeats

Today, we are proud to announce our investment in Squads Labs, the core contributor to the Squads protocol and a leading multi-signature solution on Solana. Their recent $5.7 million funding brings Squads' total funding to $12.5 million to date.

Our first investment in Squads was at the end of 2021. Since then, they have grown to become a cornerstone of the Solana ecosystem. We believe that this is the best multi-signature solution for institutional traders, cryptocurrency consumers, and builders on Solana.

Evolution of Financial Custody

Regardless of how technology develops, the demand for custody remains consistent. Since the era of goldsmiths and bankers in the 17th century, enterprises have heavily relied on banks to safeguard their assets. However, as demonstrated by the recent collapse of Silicon Valley Bank, even after centuries of evolution, banks still carry inherent bankruptcy risks.

Aside from simple custody, Wall Street also relies on a complex network of clearing and settlement layers. Until recently, this process was a physical transaction, reaching its peak during the paperwork crisis of the 1960s. To address this crisis, entities were created that later evolved into the DTCC, which digitized securities and became the central hub for all clearing and settlement services. However, despite electronic trading shortening execution times to seconds, settlement still measures in days.

After the global financial crisis in 2008, the custody industry underwent a transformation. Regulatory scrutiny led to consolidation of major custodian banks (which were already oligopolies). As of the end of June 2022, the total assets under custody of the four largest custodian banks amounted to $136.6 trillion. Modern custodian banks offer more than just custody services; they provide fund management, securities lending services, etc., often resulting in internal conflicts of interest. The concentration of assets and the emergence of conflicts of interest have brought new forms of risk. A concrete example is the implicit pricing dispute between the world's two largest custodian banks, BNY Mellon and State Street.

Blockchain represents the next generation of evolution - it is the best combination of digital and credential tools. They natively store digital assets, enable instant global payment settlements, allow for real-time transaction settlements, and greatly reduce counterparty risk. In addition, smart contracts have the potential to not only simplify back-end operations, but also save billions of dollars for the financial industry according to multiple research results. Therefore, we believe that assets in the real world will be tokenized in the future. We have already seen this trend - there are already over $1 billion in nominal private loans and US Treasury bonds circulating on the chain.

However, being one's own custodian is difficult and can lead to single point of failure. To solve this problem, custody must be decentralized within the organization and allow multiple parties to exercise sovereignty in a programmable way. Therefore, the ultimate evolution of custody that we envision is a future where organizations can store and manage their assets through a multi-signature wallet.

Squads: Solana Multisig Standard

With the maturity of cryptocurrency, institutional investors and internet-native organizations need a way to manage assets. This is where the role of a multi-signature wallet (also known as a multi-sig wallet) comes in. Unlike a simple cryptocurrency wallet that only requires one party to sign a transaction, a multi-signature wallet requires multiple parties to sign a transaction.

Squads was launched as one of the first multi-signature wallets in the Solana ecosystem in February 2022. Since then, investors and developers on Solana have quickly regarded it as a universal standard.

Now, more than 100 teams (including well-known teams such as Helium, Hivemapper, Jito, Drift, Marginfi, Backpack, Jupiter, Pyth, Tensor, etc.) rely on Squads (v3) to coordinate team and financial assets (valued at approximately $500 million at the time of writing). The Squads (v3) codebase has undergone 13 months of rigorous testing in the market, undergone 4 independent audits, and most importantly, has been formally verified.

Traditional enterprises have already perfected access control, allowing specific employees to handle fund transfers in various situations. In order to achieve meaningful scale, internet-native organizations also need similar controls.

On top of the Squads protocol, Squads has built a powerful and feature-rich platform that provides teams with a complete set of project management tools, including team permissions. Developers can use Squads as their program upgrade permission to eliminate key person risks and reduce the risk of malicious code entering production. It also provides them with financial management control functions, making it easy to store and distribute funding, manage fundraising assets, income streams, liquidity mining rewards, and more.

What’s Coming Next?

Earlier this week, Squads launched a major upgrade to the Squads platform and introduced some new products, making its functionality even more powerful than before.

SquadsX

除了桌面和移动界面外，Squads now has its own network extension wallet - SquadsX. It is Solana's first multi-signature browser extension wallet.

SquadsX is designed specifically for teams and organizations, enabling them to interact with decentralized applications and DeFi for the first time while still providing enterprise-level security. SquadsX solves the biggest problem with multi-signature (insufficient availability with DeFi) and enables new group management activities such as liquidity provision, lending, borrowing, and on-chain transactions, all directly from Squads multi-signature.

Squads（v4）

Aside from SquadsX, Squads has also released a major upgrade to their protocol, "Squads v4". Squads (v4) has passed audits from Neodyme, OtterSec, and Trail of Bits, with formal verification from OtterSec and Certora currently underway. Squads expects that by the end of November 2023, the Squads (v4) codebase, which has undergone rigorous auditing, will be set as immutable. Squads (v4) boasts some new killer enterprise features, and we'll highlight a few below:

1. Time Lock: Squads (v4) introduced time intervals between program upgrade approval and on-chain execution. The time lock increases the chances of discovering errors before the new code goes live.

2. Roles and Permissions: Squads (v4) provides enhanced accounting and expenditure capabilities at multiple addresses. Permissions include spending limits and enabling withdrawals without reaching the threshold.

3. Fee Relay: Squads (v4) also introduces a "Fee Relay" that allows multi-signature wallets to pay for all gas fees related to Squads. Once activated, team members can sign transactions with zero SOL balance, simplifying operations and allowing decentralized applications to bear gas fees.

4、Batch Payment: Most encryption-based startups have several employees and contractors, just like traditional organizations. Squads (v4) introduces the ability to perform batch payments. This is a very popular feature.

5、Support for Address Lookup Tables (ALTs): Each Solana transaction requires listing every interacting address as part of the transaction. Prior to the introduction of ALTs, the address limit per transaction was actually 32. With the introduction of ALTs in Squads (v4), the number of addresses per transaction has increased to 256, allowing for more complex transactions.

Through SquadsX and Squads (v4), the Squads team has built blockchain-native hosting infrastructure. Now, they are building new and exciting products on top of this infrastructure, bringing in attractive revenue streams.

Enterprise operations involve financial management, payroll, human resources, and engineering operations. In the field of encryption, operations also include authorization, transaction limits, on-chain voting, code authority, delayed implementation, and more. Ordinary people do not interact with protocols, and the reality is that only a few people in the encryption field directly participate in these protocols. This means that there is huge potential to simplify enterprise operations in the market. We believe that Squads opens the door to the encryption field in a secure and reliable way, and provides some of the most attractive enterprise-level and institutional-level products on the market today.

Over the past 18 months, despite the bear market, the Squads team has demonstrated strong focus and execution. We are pleased to support Squads in leading the new era of internet-native infrastructure, enabling self-hosting and on-chain capital coordination.