Original Title: "Anatoly Reflects on Solana In 2023 & 2024"

Translation: Sharon, Joyce, BlockBeats

Editor's Note:

The last time Bankless interviewed Solana founder Anatoly was after the end of Solana Breakpoint 2023 on October 30th. In the two months since then, hot topics such as Solana's airdrop projects, Saga mobile phones, NFTs, memes, and more have demonstrated Solana's development potential to the community. SOL has also risen from $36 at that time to break through $100.

On December 26th, Bankless host David interviewed Anatoly Yakovenko, co-founder of Solana and Solana Labs, to discuss Solana's achievements in 2023 and future development in 2024, including the story of Saga mobile phones, the "surprise" brought by BONK, and Anatoly's vision for the development direction of the economic ecosystem on Solana. BlockBeats has compiled some of the video content as follows:

David: It's great to talk with Anatoly Yakavenko. Recently, it seems that Solana has turned a new page, with Jito airdropping $200 million to over 10,000 different addresses. With new addresses and TVL constantly breaking through, the Solana ecosystem seems to be truly recovering. This has caught the attention of many people in the crypto industry, including myself. So today, we're having an unscripted conversation with Anatoly.

David: The recent progress of Solana seems to be very smooth.

Anatoly: Yes, it was surprising for me and others. After the FTX crash at the end of last year, I was mentally prepared that Solana would not succeed in the beginning of this year. I thought to myself, "This is what failure looks like." My emotions became very negative, and the ecosystem faced many risks.

As far as we are concerned within Solana, all core engineers say that no matter what code I write, the problem still exists and I still need to complete this task. I think this is good. For the vast majority of companies in the Solana ecosystem, they have received the signal to fight or flee, and most companies have chosen to fight just to build better products. But it takes time for people to go from "shocked" to "Alright, people are really building." I don't know how this happened.

David: It has been 13 months since the FTX incident. What does the handling of the FTX collapse mean for the cryptocurrency industry and Solana, especially Solana? What are the impacts on the Solana ecosystem now?

Anatoly: Double down. The FTX crash will cause those with low faith in the Solana ecosystem to leave, while those with high faith will double down. If you can survive, this is the best thing that could happen to the ecosystem.

We have a very core, powerful team that has implemented super links. They have a deep belief and have been building all year, seeing it as an opportunity. Now I have more space, less noise and fewer competitors in my product category. This is actually a huge victory.

Some people, when they see that their biggest competitor is now distributed across five different ecosystems, become tough and unable to stay focused. For those who have this kind of energy, this is a rare opportunity in life. Seeing them rewarded for their efforts, I think this is the best thing that can happen in an ecosystem.

Because the efforts people put in really pay off. This is just like the beauty of PoW in Bitcoin, which achieves this anonymously through game theory, and it's magical. This approach doesn't always work though.

Solana's Technical Design

David: Compared to other ecosystems with higher throughput, builders could have had better choices at that time. What do you think made people stay?

Anatoly: I think it may be because the technology Solana relies on is very unique. It uses a technology that is very different from others and has some unique properties. This is obviously more risky. It's like you did a bunch of "strange" optimizations, and people thought you were crazy at the time; but after many years, people found that the technology became mature.

Just like those who have a deep understanding of technology, they understand the reasons why we make these choices and appreciate these technologies. In fact, many people feel that being part of an ecosystem is better than operating their own L1. So many people make choices that I believe are based on technical reasons.

When you have a good team, there are many people around you who want to build. I think one of the best things about Ethereum is that when you talk to Dankrad (a researcher at the Ethereum Foundation), you feel like this person is really smart. This is like Ethereum's best selling point.

Later on, we began to see this situation happening on Solana. I believe that the researchers are not the cornerstone of Ethereum, but a group of ordinary developers who can hone very cool things.

David: What do you think is the most important element driving the entire Solana ecosystem? Why is it?

Anatoly: This is a very good question, but also difficult to answer because I don't know. I don't know if we have a super smart thing, I think maybe it's parallelism, and we can solve problems through failure and experimentation. I think this is a very cool innovation.

We now basically see all these ecosystems with inscriptions on them, and some have very high Gas fees. People using blockchain see not just inscriptions, but the entire blockchain saturated to the point where transactions cannot be completed. This is actually a failure of liveness, isn't it?

Assuming that you work at a large internet company and you have a database. When everyone wants to order some strange things at the same time, you will get the heat, but all your other payments cannot go through because there is a huge backlog waiting to process some random viral things.

In every database system, this kind of situation will occur, but it took me a long time to see it, to break it down, and to realize that it is something that has similar computer science problems in the real world. I linked it to economics to deal with related economic issues.

In fact, we are very fortunate that Solana has the idea of having an access list for each transaction, which is necessary for every transaction. We did this for performance reasons, and it is also the fastest way to build the runtime. But having this information allows us to do this in every part of the stack and its own economics.

Just like I was thinking, what is the fastest virtual machine? I copied the effective designs I knew in DSP and GPU, and developers would go through a very painful process of telling the system, this is the memory I want to access. What I mean is, I have such experience and can work for ten years completely, knowing that this is the fastest thing, but I don't know that this is the most critical part of cryptocurrency.

When we see these faults, we must solve them, or I think the idea of a single global public chain, where many shared applications use the same state, is a bit outdated. If we can, if the global gas fee soars, then parallelism doesn't matter, right?

So fortunately, we took the right steps and failed in the right way, and the solution is obvious. I think this may be the unique aspect of Solana - we have gone through a long exploration, and I think we have found the right answer on how to build a shared permissionless system in the system.

David: What is the term for this technology?

Anatoly: I believe that the technical term in the database field is isolation, which means that you need to have transaction isolation. So one transaction is isolated from another. When you implement isolation, you can execute these transactions in parallel, and no matter what their execution order is, you can get exactly the same results.

It's cool that once you do this, once you specify that the information is available in the memory pool during the transaction, your block producer will fill the block with the highest priority fee; and at runtime, the virtual machine will say that all your possible trades in specific markets such as USDC and UNI are already saturated.

You cannot add more content to the block, but you still have block space for other things. In this case, the block producer can skip all fees with high priority and defer them to the next block, but then take all fees with low priority and subsequently take all low priority fees that do not touch the saturation pool.

This is why there is such a cost for isolation and localization, because you have this heat, everyone will occupy it, and everyone is still greedy. So they filled the hottest market, but they will think: I still have space, so I don't accept all other things like noise. So, this is what we found we must do so that we can support multiple payment methods, NFTs, and DeFi, which are the three major use cases.

David: The isolation of exchanges is being broken, making them more decentralized and open. Do you think that the walls around the market have collapsed and that players are now the new leaders?

Anatoly: We wait and see. My view is that, just like the people who are trying to think about how to capture it, the question is how do we capture MEV in the protocol? People are trying to find solutions, but I think it's unsolvable.

So you will have methods like Ethereum, which runs on a slow chain through cryptoeconomics and auctions; I think you will see the approach taken by Solana is like physics, how do we make the chain so fast that similar information cannot physically propagate around the world?

Then you have localization, like a certain fairness enforced on a physical distance. For example, I can submit my transaction to the nearest block producer, which means the amount of information they can evaluate is only local to me. No matter what happens, it cannot fully control the global state, so we can reduce latency.

If we can do it, then it would be very cool to see which one is better. Maybe Solana is worse, let's wait and see what happens.

Anatoly: During the peak period of STEPN, we had 2 million active accounts. What I learned from this is that for users who are highly incentivized economically, if their activities are not creating daily value or similar activities, they will experience a steep peak and then quickly decline.

These are like economic explosions. Interestingly, I think these users are basically like they are already cryptocurrency users. Once someone figures out how to handle any wallet, they can easily switch, and their mental model has already been established for this.

This is what I believe to be the key part of the growth of the encryption industry, which is how many people can calculate the mnemonic words, just like the total number of addressable users. And then after that, the conversion cost of installing the extension is very low. So you can see all the parts are there.

If all we find is speculative, game-like economic incentives, I don't think it will last. But if we find real-world use cases that create value for these users, they will be stickier and stay. I think the latter is still unproven. I hope this bull market cycle can make some progress like real-world applications, such as payments and the like.

Just like Helium, I think its users wouldn't be fond of crypto users, they are users of the Helium Network. You can get the idea of tokens for creating map quality, at least enough to get them to join the wallet and get the mnemonic phrase.

However, I want something like Venmo. Why can't we have a global encrypted Venmo? Everyone can send real currency to each other, euros, dollars, and it works like this.

So this is my biggest story, just like when I see numbers, I am happy that it is happening and I am glad that the network is not crashing and the fees are not skyrocketing. This is already a praise for good engineering. But we need to see real-world use cases, and I think these use cases are sticky, and users will not leave.

David: Do you have any different views on how far the encryption industry can go in terms of its utility? In the optimistic and pessimistic discussions about cryptocurrency, how would you define Solana's position in it?

Anatoly: I definitely think I am super optimistic. I believe that if the Western world does not accept the value of the cryptocurrency industry, then it is useless and no one will care. The only reason for having a high-throughput, low-cost chain is that it adapts to the daily use of ordinary voters at the consumer level.

So I think I am very optimistic. I would say that from a legal standpoint, it will basically be established, and we will have some ways to operate and launch decentralized systems. All of these things will happen, and every bank will have a stable token.

However, if I also believe that in that world, narratives like Bitcoin are very important because they have a coercive problem. And if the cost of shutting down Bitcoin in the Western world is Orwellian, requiring massive surveillance and interference in the lives of ordinary people, then this is politically difficult.

I think they can shut it down, but if it requires so much political capital, such a huge violation of privacy and personal freedom that it is politically unfeasible, it means it won't be shut down. Because I believe we still live in a fairly representative world.

David: Solana is one cycle behind Ethereum, and Ethereum is one cycle behind Bitcoin. If this trend continues, there will typically be enough stablecoins on Solana and enough applications, some of which may have high TVL vulnerabilities. Do you think this is a sign of the end of the bull market?

Anatoly: A year ago, many people left Solana, but some people stayed to continue building. During this period, people had nothing else to do, for whatever reason, and I think it may be because it was launched at the worst possible time.

I believe that everyone has experienced a common trauma, and everyone is searching online for the next terrifying news, as if no one has anything else to do, just like you only have this Dogecoin. I actually don't know how these things cause viral spread, I am an engineer.

Saga Mobile and BONK

David: Why do many people in the Solana community have BONK?

Anatoly: They do like to do large-scale airdrops in all NFT communities. Solana users value NFTs very much, and I have also bought NFTs and the like. So they did a very good job in screening the targets, and the entire distribution process did not reset. We survived that moment, and it was long enough for developers to start developing more products, just like they continue to integrate into every DeFi market and every NFT project, and continue to talk about it so that the community will not die out. Although I don't know the real reason, the only thing that makes sense to me is that developers have released a bunch of products that attract users.

David: But BONK and Solana ecosystems overlap significantly.

Anatoly: I think this is because the developers of Solana and the developers of NFT are two separate groups. However, they are both building network tools and a bunch of interesting things for people to use. There is some overlap between them, but clearly there are two different types of developers. I think BONK has connected the two.

We believe that everyone has received this mobile phone, and placing applications in large app stores is a painful process. However, if our phone has things like NFT airdrops, the people who receive the phone will spontaneously become interested in these things.

This means that developers can deploy applications to even small target-rich environments. So we like to talk to every NFT project, we talked to the developers of BONK. Additionally, the price of BONK will exceed that of the Saga phone.

During the bear market, no one cares about mobile phones, BONK is worthless. We sell 20 to 30 phones every day, as if we are gradually losing them. Because most DeFi protocols do not gain 20 to 30 users every day, you need to sell 20,000, which takes years to achieve.

Anatoly: No, we have a team and we didn't let it fail. The team was there, and we figured out how to handle it and found a way to excite people about it. We spent the least amount of money to extend the runway for the team. After Breakpoint, our sales achieved a 2-3x growth. We sold 50 to 75 Saga phones every day, which is good, but still slow.

Then, BONK took off and people realized that the current value of BONK airdrop was only half of a mobile phone. I think people see this as if the mobile phone is actually half-priced, or if you have some BONK, you can sell them for the price of a mobile phone and balance it out, so you still need to spend money to buy this phone.

David: So I agree with this point, just like Ethereum charges fees and burns them, instead of just deciding which public institution is better than the other. It feels good because no one's rights are violated and everyone is treated equally.

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