“[Proof-of-stake and proof-of-work] are equally secure from a consumer’s perspective, but are fundamentally two sides of the same coin. Proof of stake doesn’t require the energy, but requires a lot more software complexity.”
Anatoly Yakovenko is the creator of Solana. In this episode, he tells the story of Solana’s founding and recent exponential growth. He explains some of the company’s key distinctions from other blockchain protocols, particularly the differences between proof-of-work and proof-of-stake. Yakovenko further details Solana’s approach to security protection and optimizing for speed and high performance. He lays out some of the next steps for the company and highlights the game-changing nature of two Solana-powered companies: Serum and Star Atlas.
MODERATOR
SPEAKER
Anatoly Yakovenko
Founder & Chief Executive Officer
Solana
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
TIMESTAMPS
0:00 – Intro & background
4:15 – Creating Solana
6:49 – Proof-of-stake vs. proof-of-work
9:50 – Crypto maximalists
12:26 – Solana, FTX and a new decentralized exchange Serum
14:52 – Solana’s path to validation
17:00 – Ethereum vs. Solana
20:20 – NFT project: Degenerate Apes
23:00 – Settlement vs. execution
26:32 – Nakamoto coefficient
32:15 – 2018 crypto pullback
34:05 – Importance of key custody
38:30 – Crypto gaming and Star Atlas
41:45 – What’s next for Solana
EPISODE TRANSCRIPT
John Darsie: (00:11)
Hello everyone, and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. Our goal on these talks is the same as our goal at our SALT Conferences, which we're excited to resume here in September, of 2021, and to have our guests participating on an exciting panel at that event.
John Darsie: (00:43)
Our goal is to provide a window into the mind of subject matter experts as well as provide a platform for what we think are big ideas that are shaping the future. This summer, it's Solana's summer. There's no bigger idea than the growth of Web 3.0 and decentralized finance. We're very excited to bring you a special SALT Talk with Anatoly Yakovenko of Solana. Anatoly is the creator of Solana. He led development of operating systems at Qualcomm for more than a decade, distributed systems at Mesosphere and compression at Dropbox. He holds two patents for high-performance operating systems protocols, was a core kernel developer for BREW, which powered every CDMA flip phone, and led development of the tech that made Project Tango AR/VR possible on Qualcomm phones.
John Darsie: (01:30)
Hosting today's SALT Talk is Anthony Scaramucci, who's the founder and managing partner of Skybridge Capital, which is a global alternative investment firm. It was the first fund to funds and first registered '40 Act fund to make direct allocations into the crypto space, so we'd like to think we know a few things about crypto, but certainly not anywhere near the level of our great guest today. Anatoly, we're excited to have you. With that, I'll turn it over to Anthony to drive the majority of the interview.
Anthony Scaramucci: (01:55)
Before we got started recording, I said to Anatoly his backdrop makes him look like he's coming in from the future. That is more or less the truth about your life, Anatoly. You're a hardcore engineer. You spent most of your career at Qualcomm. Tell us more about your background that led you to build Solana.
Anatoly Yakovenko: (02:18)
I'm an engineer by trade. I went to the University of Illinois. Started really, my engineering career there at a startup with some friends. I was trying to build voiceover IP phones. This was back in 2001-2002, and saw the dot com crash as a student, then. At that time, my advisors were telling me that computer science would not be a good career choice. Ended up in San Diego, working for Qualcomm and started really working on optimizations, all things making software faster, from day one. Really, my experience there, I got to see the mobile revolution.
Anatoly Yakovenko: (03:00)
If you guys remember, phones in 2003 were not like the supercomputers that we hold in our hands today. That transition happened over a decade and really powered by the amazing people at Qualcomm, TS&C, across all the fabrication, the entire fabrication industry and mobile chips. That was a huge 10 million-person effort around the world to make that possible. I was working in a small piece of it, ready high-performance firmware, but seeing that transition really showed the power of Moore's Law to me, and this is something that has been like, exponentials have really been fast from far away. 20 years is a 1,000 X improvement.
Anatoly Yakovenko: (03:48)
In the moment right now, it's going to take years to see a doubling in performance. And that may seem really slow.
Anthony Scaramucci: (03:57)
You talk about the epiphany that you had and you were talking about the construction of an arrow of time and what you set out to do with Solana. Explain what that means to our audience.
Anatoly Yakovenko: (04:13)
Yeah, there's an interesting problem in mathematics because there is no clear definition of time. Einstein's equations work in both directions, forwards and backwards. And we take this for granted, as engineers. You look at something like second generation cellular networks, they wear these things called time division multiple access networks. It literally means that you have a source of time that tells which cellphone, which tower has the right to transmit over a certain frequency. And that's how all these networks get coordinated and folks can then transmit information to a large number of people across the same channel, across the same shared channel that is rotated through time.
Anatoly Yakovenko: (04:58)
This was the first thing the engineers thought of when they started building these things. That's really hard to pull off in crypto blockchain because this new kind of technology is built with very different trust assumptions. There is no AT&T. There is no FCC, there is no central authority that says what time it is, or who gets to [inaudible 00:05:22] a block, or who gets to be what part of the network. And that's a really tough, challenging problem. And this epiphany that I had once I realized there's a way to construct a source of time that doesn't depend a central authority, doesn't depend on AT&T or anything like that, or FCC.
Anatoly Yakovenko: (05:40)
Then we can start building the same level of high performance wireless optimizations but not applied to blockchain, it would apply to crypto.
Anthony Scaramucci: (05:49)
So I'm going to put it this way because I think it's appropriate, part of your genius is taking ideas from your life experience and watching them unfold in cellular technology and then applying them to blockchain. So Steve Jobs, I want you to react to this. Steve Jobs once said that genius is a remix of ideas and seeing things on parallel planes that somehow connect. Is that true in your case?
Anatoly Yakovenko: (06:20)
100%. I'm standing on the shoulders of giants. That all the stuff that we're doing; the algorithms were in the 4,000 in the '50s and '60s. The engineering was done in the '70s and '80s and now we get to apply it to these new emerging technologies over and over as engineers. So we get to reuse the experience and brilliance of all these amazing people that came before us, for sure.
Anthony Scaramucci: (06:48)
So there's a difference between proof-of-stake and proof-of-work. So there are many listeners here that don't know the difference. If you could describe what the difference is between proof-of-stake and proof-of-work.
Anatoly Yakovenko: (07:02)
Oh, that's a tough question. It's hard to describe because the problem is hard to explain. It's how do you trust anybody on the internet? How do you know that when you make a poll on Twitter and you say you think that omelets are the best breakfast, that you see those votes that actually come from people instead of bots. That's a tough problem. Proof-of-work is a way to solve it by forcing every vote to contain a proof that some amount of electricity was spent to generate it. So somebody somewhere had to go and burn some energy to do it.
Anatoly Yakovenko: (07:40)
That's how Nakamoto Consensus or bitcoin and Ethereum prepare networking. Most of the other major currencies work, but this is buy the energy in the [inaudible 00:07:54]. So it costs a lot of money to do this process because you have to go pay somebody for the electricity to go generate those groups. I'll say [crosstalk 00:08:05]-
Anthony Scaramucci: (08:05)
So proof-of-stake is better than proof-of-work?
Anatoly Yakovenko: (08:11)
It's different. So the cool thing about proof-of-work is that it is real physics. It is real electricity. There's no way for somebody to fake it. And the way that proof-of-stake works is that you realize on a common agreement on what the network is and then a way to split the way to those votes and transfer those votes cryptographically. So equally secure from a consumer's perspective, but fundamentally they're kind of two sides to the same coin. But different sides.
Anatoly Yakovenko: (08:47)
Proof-of-stake doesn't require the imaging, but requires a lot more software complexity, a lot more infrastructure. I think it takes more resources, brain resources to run. You've got to spend a lot more time making sure that the keys are secure, that there's no way for a package to go [inaudible 00:09:08] them and a bunch of other stuff.
Anatoly Yakovenko: (09:10)
Before working [inaudible 00:09:10], it was in a lot of ways kind of much, much simpler. It's like a motorcycle gas motor, there's two cylinders in it, you pour the gas in, it runs, versus something like a Tesla where it's a much more complicated system, but much more efficient.
Anthony Scaramucci: (09:31)
Okay. I think you did a great job explaining that. There's a lot of maximal-ism and tribalism in bitcoin. Some people are bitcoin Maximalists, some people are Solana Maximalists, others are Ether Maximalists. What do these guys get wrong, if anything? Or, are they right and should everybody be a Solana Maximalist?
Anatoly Yakovenko: (09:48)
So I've seen this as an emergent technology, over and over. I remember when people were fighting over Linux file systems. They were Maximalists who believed that a certain kind of file system for your Linux distribution was better than anything else. And it's, I think this comes from when you're building something really complicated, like a personal computer, like where the idea is much bigger than the technology and the technology is so complex and you start to rely on your gut feel of what is going to bring about a change in the world?
Anatoly Yakovenko: (10:25)
Is it going to Apple and the historically designed thing? And I become an Apple fanboy, an Apple Maximalist. Is it going to become Linux and opensource community, or is it going to be Microsoft that's a vertically integrated company with a great founder? It's really tough to make those decisions in a very objective way and that's, I think, the source of and nexus of it. I think in some ways, it's just part of the growth process of any new, emerging, transformative technology.
Anatoly Yakovenko: (10:55)
If we thought that crypto was going to be a fad, we wouldn't have [inaudible 00:11:02]. It would just go away and peter off. But because it's such an idea that is so big and so much bigger than anything else, that I think this is where it comes from. When people really try to grasp it and try to understand it, it fit all in your head but it's so big, that it's pretty hard to do.
Anthony Scaramucci: (11:21)
All right. Well, you're doing a great job, so I want to keep going here. And I hope you don't mind the complexity of these questions, but I think it's important for our listeners because you're at the forefront of something. They're watching something emerge and prosper and grow exponentially and I think learning from you as the founder, I think, is super important. It's sort of like we're right here at the inception.
Anthony Scaramucci: (11:44)
Let's talk about Sam Bankman-Fried, a favorite of yours and a favorite of mine, and also Sam Darsie's. Sam is the CEO and founder of FTX. He's really building the first, in my opinion, I think he has the capability at least of building the industry standard, the Microsoft, the Tesla, the Google of crypto with FTX. So he's a brilliant young man. He decided to build FTX decentralized exchange known as Serum, on top of Solana. Now, he's pretty impressive, so how did you convince him to pick Solana and why do you think he picked Solana.
Anatoly Yakovenko: (12:25)
So yeah, we had our first conversation literally a couple of weeks after we launched. And that was a year and a half ago, not even that long ago. Less than a year and a half ago. And we showed him this demo where it's a very simple page, we load it and he starts messing with keys and we see cryptocurrency transactions fired off and get confirmed as fast as he can type. So every keystroke was generating a transaction and when you compare that to something like Ethereum or even the competitors that have launched since, today, there's a stark difference between the user experience of dealing with this network with then, versus what you see now.
Anatoly Yakovenko: (13:09)
And that's really what set off the light bulbs in their head, in Sam's head and their engineers. And really from the engineering team came this drive that's still the best version of a decentralized exchange. We know how to build the best version of a centralized exchange. Let's do the same, and now it's possible. Which is something that they've been wanting to do internally for a very long time. So they incubated this project Serum, and now it's got a life of its own. There's these independent developers that are building on it, working on next versions of it.
Anatoly Yakovenko: (13:43)
It's really cool to have somebody like Sam that has a centralized service to commit to building something that could disrupt them, like fully commit to it. How often do you see that? I think Steve Jobs and I think how the iPad and iPhone disrupted their iPod sales, which is a big outsider revenue for them. Fully commit to something, a new product line that was risky but totally disruptive to the entire industry. So Sam as a person and as a founder, as a CEO definitely deserves a lot of respect for that.
Anthony Scaramucci: (14:24)
I am admirer of his and yours, but I'm also an admirer of Andreessen Horowitz. Ben Horowitz spoke at our event in 2019, before the pandemic. After your third hackathon this past May, A16Z became enthusiastic about Solana and they began the process of validating and investing in Solana. Tell us about that experience.
Anatoly Yakovenko: (14:53)
We were in Silicon Valley, we talked to them a bunch of times and the biggest question was that, is it possible to build a new ecosystem that has not really suffered from Ethereum? A whole new set of applications, new operating system, new ways for developers to build these things. That was a big risky question. Is there going to be developer to option? And what we saw over the year since we launched is that there's a large portion of devs that are ready to go build different kinds of tools. They see these technologies as tech stacks, as they should.
Anatoly Yakovenko: (15:32)
As an engineer said when they look at Ethereum or any other exchange, they should look at it, "Here's a technology that can do a feature, that's X, Y an Z at the toss, I'll pick the best one for my product." And we saw that, they'd proven true, when we saw this really massive explosion in the ecosystem of dev streaming into build.
Anatoly Yakovenko: (15:41)
We had prizes in our hackathons for seed funding and these were, I think, the de-frag hackathon had a prize of 300,000 and potential funding for a team that wins it, but before the hackathon was even finished there were, I think, over 10 teams that have raised over a million each already. So what we saw was that teams that are founders that want to build a new business, like a whole new company running on top of Solana, they saw their eyes light up when they saw the performance and the benefits of network infrastructure and they were able to build the products and MPV and raise funding those four weeks that we ran the hackathon without us even being the main driver of that. So this was really to me like a sing that we were onto something and I think a sign to everyone else.
Anthony Scaramucci: (16:49)
So how would you then if you had to tell people, what is the difference between Ethereum and Solana?
Anatoly Yakovenko: (17:00)
Short version, it's like when Intel shipped the multi-core chip. We're the multi-core. We're the massively multi-core version of a single CPU processor. Like you can think of it as the batch position in hardware when we went from single speed networks to now very parallelized high performance networks.
Anthony Scaramucci: (17:25)
So as a result of that, can Ethereum catch up? Can they create applications that can make them, or innovations that can make them, multi-core?
Anatoly Yakovenko: (17:37)
There are different ways to approach this. So Ethereum and Ethereum 2 and the way it's designed, I make these kind of morbid analogies, Solana's designed as you'd build a nuclear first strike detector. You want to maximize the number of sensors you have and how hard it is to break into all of these sensors and how hard it is to corrupt the entire network. Ethereum 2 is designed so there are some survivors left after the attack to tell you that it happened, which is a different thing.
Anatoly Yakovenko: (18:14)
You're building these shards and you're building a network which is maybe slower, but in some ways has some different properties which is what Ethereum 2 and their vision is going after. And some of the ways you can think about it in terms of, "Well, why do I care as a user?" In finance, you have these things called settlement platforms, things that do settlement. And then you have exchanges everywhere where execution and clearing occurs.
Anatoly Yakovenko: (18:43)
I like to think that if you were to apply a financial lens to it and think of it only from centralized finance and not application. Solana is the execution layer, in fact you access a bunch of different settlement layers. If you're in this settlement layer, then you connect to a different bunch of execution layers. So we're as a network, the hardware and the design and everything else that Solana is built for is to be this global place for execution, price discovery. In my mind, this is where all the fun innovation occurs.
Anatoly Yakovenko: (19:14)
I can name a dozen companies that do trading exchanges. I don't know a single settlement platform.
Anthony Scaramucci: (19:23)
No, listen that makes sense. I want to shift gears before I get John involved. He's the Millennial, Anatoly, so he's going to try to ask better questions that me, okay? But you're older than him, so I want you to defend me. But before I get him involved, you have this major NFT project called Degenerate Apes. Now, where did the name come from first of all? Is that just another name for human beings, Degenerate Apes?
Anatoly Yakovenko: (19:48)
I guess so, yeah.
Anthony Scaramucci: (19:50)
Yeah, I mean I'm sure that's basically what it is. We're all just degenerate apes. So now you've launched this on Solana, it is an incredible [crosstalk 00:19:58]-
Anatoly Yakovenko: (19:58)
We didn't release this. This was an artist, a random artist who [crosstalk 00:20:02]-
Anthony Scaramucci: (20:02)
Let me rephrase that. A random artist launched this on Solana. I'm sorry, I want to rephrase that to make sure that it's accurate. But it's an artist that came up with these degenerate apes. It's on Solana. People are super enthusiastic about it, but I think it's something important for the validation of Solana. So tell us what that is.
Anatoly Yakovenko: (20:22)
So again, it's really tough to show that Ethereum's network effects are not where I'd like.. Until somebody actually shows and proves that consumers really care about the speed and price and the use of the network moreso than the Ethereum of it, that is called Ethereum. What they care about is the experience, more than the network itself. So you have to go and proof it. So this was something that we suspected was going to happen eventually. We didn't know where or how or why.
Anatoly Yakovenko: (20:53)
And this project launched by this artist that maybe is coll looking NFTs that look like apes. They're adorable, I guess. They're cool and it had a positive network viral effect and what we saw was that people really liked the experience. They cared more about the product that this artist was making, much more so than they cared about what network it is on.
Anatoly Yakovenko: (21:22)
And because a lot of it is cheap and fast, it never got in the way of that experience. And this is what we hope to see more of that. As artists launch, they should pick Solana's network because we will never get in the way. You don't want to know that Qualcomm is the modem that is running inside your iPhone. You just never want it to fail. You never want to have the bad experience. You basically want to forget about it.
Anthony Scaramucci: (21:54)
John Darsie. By the way, Anatoly, congratulations Anatoly. What you're doing is nothing short of brilliant and I'm sending you a big hug and I'm wishing for even greater success for you and the Solana ecosystem.
Anatoly Yakovenko: (22:07)
Thank you.
John Darsie: (22:09)
Yeah, I mean to go with your analogy, Anatoly, this is not an Ethereum bashing session by any means, but almost Ethereum is a gas powered car, that there's gas stations all around the country, all around the world. It's easy to fill up, people use it almost by default, despite some warts on that protocol. Solana is the early stage Tesla of the crypto ecosystem, where once the infrastructure and the network effect is there to support the charging stations and everything you need, it seems like Solana has the advanced tech to lead the Web 3.0 revolution. Is that sort of the way you guys look at it? Is it in terms of network effects? It's all about creating projects like the Degenerate Apes and then we'll talk about Star Atlas in a second. But just how important are those network effects?
Anatoly Yakovenko: (23:00)
So I think there is a difference between settlement and execution and it's just I'm not sure that you can design a network that could be best at both. So if you're like folks at Ethereum, they're coming in from this idea of self-sovereign money and bitcoin and what that is, and what they're really focused on is competing with bitcoin and this idea that we can have a global currency that is self-driven and self-sustaining.
Anatoly Yakovenko: (23:31)
Then settlement becomes the most important thing of that feature. You almost have to pick, every time you make an engineering decision, you have to pick that as the most important factor, no matter what. And we're coming in as communications falcon folks and I'm looking at this thing, "okay, its censorship resistance is the most interesting thing that separates a block chain from a database." And the use cases that are interesting there are this idea of decentralized finance, price discovery, how do we optimize for that? How do we optimize for the execution layer?
Anatoly Yakovenko: (24:07)
It's possible that there's no proof, or at least no one's really tried to build one, but in my gut, kind of engineering level check, it's really hard to do both. It's a perennial push and pull problem. What we're doing is really going to be the fastest possible way to do price discovery, execution. But the settlement, final state can occur in any number of networks and you see that already with the number one trading pair at Serum is bitcoin against the FCC.
Anatoly Yakovenko: (24:37)
None of those are natively issued tokens at Solana, right?
John Darsie: (24:40)
Right.
Anatoly Yakovenko: (24:40)
Somebody else, they're [inaudible 00:24:42] settlement at bitcoin, certain guaranteed settlement of USDC and that's fine. Those are just two different goals. And what we will do deliver a cheaper version of that. The way that it's designed, it's never going to be as fast as, as responsive to user events as something that we're building, which is, "Let's beat NASDAQ, let's flip NASDAQ and Andreessen." That is like [inaudible 00:25:16] floats to this idea of information propagating through a censorship resistant network at the same speed as news, as financial news travels around the world and makes impact on prices, we want to be competitive with that speed, speed of microfiber.
John Darsie: (25:31)
Right. The idea of decentralization, there's a lot of things in what people would deem as crypto that are not actually decentralized. Especially as crypto becomes institutionalized, it's sort of a magic word in crypto, a lot of times decentralization goes away. You talked about somebody like Sam Bankman-Fried, who has a centralized exchange, also investing in a decentralized exchange with Serum that's built on top of Solana, there's an interesting idea around the Nakamoto coefficient. I think [inaudible 00:26:01], general partner at Andreessen Horowitz first coined the term, but it talks about the true decentralization of different block chains.
John Darsie: (26:08)
Bitcoin is famous as a proof-of-work blockchain that it requires 51% of users on that network in order to basically corrupt or takeover the network. Proof-of-state block chains, the Nakamoto coefficient is lower, but Solana, in terms of proof-of-stake block chains, has the highest Nakamoto coefficient. Can you talk about why that is and why that's important?
Anatoly Yakovenko: (26:32)
Yeah, and this is back to that analogy that I made of surviving the nuclear strike versus detecting it. And again, decentralization is a meaningless term and there's a lot of ways to look at it and fundamentally, everyone should go look at, read that article Webology, but basically, given all of these different ways to look at it, what is the smallest way we can draw a circle around the parts of the network that if we destroyed that piece that the network would halt, or the network would be disrupted in some way.
Anatoly Yakovenko: (27:05)
And that's really minimum surface area for an attack. In consensus, specifically and why this matters specifically to price discovery or execution of orders and flow and information flow, is if you have a visibly [inaudible 00:27:25] tolerant system, if you control more than 33% of the nodes, the stake, the voting in that thing, you can decide the order of events. And that means that if I have 33% of the stake and hedge fund A, wants to transfer dollars from financing it to Coinbase. And hedge fund B wants to transfer also dollars to finance the Coinbase. I get to pick which fund goes first.
Anatoly Yakovenko: (27:50)
And that's a problem. That's a problem for finance. I can't corrupt this data, I can't steal anyone's money. I can't create the network and cause it to sign, put in your keys that guarantee that you have custody, but I can definitely pick the winners and the losers. And for some use cases, that doesn't matter. Solana is, I think, one of those use cases where order of events no longer matters. It doesn't matter if hedge fund A, gets settled eventually first or second, within some reasonable timeframe. And that's kind of the idea of self-sovereign money and bitcoin. Their form of censorship resistance is that if I have my keys, I have my bitcoin and I submit a transaction that maybe not today, but within weeks or definitely months or years, somebody will eventually process it. There will be at least one honest block producer and enough of them in a row to guarantee its settlement.
Anatoly Yakovenko: (28:46)
But the use case that I think is more interesting is in realtime, there are orders, there's trading, all this information that stays locked up in NASDAQ, locked up at NYSE and CME, and decentralized financing, the primary use case of that, you really need to guarantee that it's as hard to corrupt as possible. And it will never going to be perfect so that it can be centralized and then taking on that responsibility yourself. But the only way to guarantee it is to maximize the minimum set of independent operators that add up to that 32%.
Anatoly Yakovenko: (29:23)
So it becomes much, much harder to draw that circle to make that set of that sub-network that could pollute and start corrupting the information flow. So this is really like the number one parameter that we're focused on and because of that, a lot of the engineering designs that I've spoken about, it has to be super high performance, it has to process a lot of messages, it has to do a lot of cryptographic signatures and you end up with something that is quite opposite of Ethereum 2 or any other competitor networks that are more focused on the settlement piece.
Anatoly Yakovenko: (29:59)
So that, I think, when we first started going to [inaudible 00:30:08], I thought, "Everyone else is going to do the exact same thing," because it was so obvious to me. This is the most important thing are these networks, the censorship resistance piece, the only way to ensure that actually works is to maximize the number of parties that are participating in the network, and the only way to ensure that, that's possible is to optimize the hell out of it. Actually make it possible to handle all these messages.
Anatoly Yakovenko: (30:32)
To me, it seemed like the obvious thing, but it turned out that basically we're the only ones really focused on that, and that's, I think the most important thing for finance. Even something like payment. You have somebody like big FinTech company that's in payments, Visa, or whatever, they need to guarantee that when merchants start receiving these payments, there isn't some set of small parties that can stop the flow of volume, because their business, their livelihood depends on it. They actually care that the stuff gets settled within seconds versus days later.
John Darsie: (31:08)
Right. Yeah, no one of the things I admire about you and I admire about Solana is you are focused on speed and you are focused on performance. We're very enthusiastic about the crypto space generally, but there is a lot of cheerleading that goes on. There's a lot of financially driven decisions, whether it be the big wave of ICOs that took place in 2017, or some of the other more nefarious things that go on in that ecosystem. But you guys had your heads down from the beginning, focused on building the highest quality product and not paying attention to the price of your coins or anything really financially driven.
John Darsie: (31:46)
When you were building Solana in early 2018, the bottom fell out of the crypto market, it was sort of a challenging time for a lot of people that once became enthusiastic about crypto and then pulled back a little bit. Goldman Sachs famously shuttered their plans to open a crypto trading desk. Did that pull back, that sort of bottom falling out of the crypto market in 2018, was that challenging at all for you? Did you lose heart at all, and what generally motivates you to continue building Solana?
Anatoly Yakovenko: (32:15)
It was like the media's psyched to peddle a dinosaur. It was definitely crypto winter and we saw a lot of teams fall apart. We were always somewhat conservative. We never raised a ton of money. We always had about two years of runway, so we were always like, "We've got to build this thing as fast as we can and really focus on the key product that we think is going to make a difference, like the key differentiator."
Anatoly Yakovenko: (32:47)
From our perspectives, probably one of those unexpected things that there's no way we could have wished for us but was extremely beneficial to us as a team, but it really forced us to focus and build the right thing. Every Silicon Valley book has all these lessons, "You should do X, Y and Z. Focus on the key thing, look for products, go for the most important users, worry about product market, theta development, [inaudible 00:33:15] everything else," but a lot of luck and the environment forces you to make those decisions.
Anatoly Yakovenko: (33:20)
I think again, all the options, some of our competitors, they raised hundreds of millions of dollars I think in some ways, they risked them way too early. They didn't have the same hunger or drive.
John Darsie: (33:35)
Right. This SALT Talks, is a series that we bring to both people that are very deep in the crypto world and also some people with a little bit less knowledge and experience. So this is one of those questions that is addressed more to that introductory crowd, but you've been very vocal about the fact that if you don't control your keys, you don't really participate in crypto in its truest sense. So, for those that are less familiar, could you explain the reasons why controlling your keys is so important?
Anatoly Yakovenko: (34:04)
So purely from a financial perspective, if you have custody of your keys and there's some value associated to those keys, 100% of the network can be corrupted and it's impossible for it steal your coins. This guarantee that your keys provide is a cryptographic certainty that you have custody of that thing. And when you're talking about particularly dollars, it's a peer-to-peer guarantee between you and Circle, which has this ledger that's represented by this cryptography at Solana but the money's, in fact, in a bank somewhere.
Anatoly Yakovenko: (34:45)
So that peer-to-peer relationship, I have keys that represent dollars in Solana, Circle has its dollars in a bank. The entire Solana network would be 100% corrupted and there's no way to break that as long as the keys are secure, between you and Circle. That's really what allows the state to scale, and really allows the network, like Solana to operate much more like a switch, like a AT&T or like a pure infrastructured information provider. The only thing that it's doing is making sure that this data's propagated and everybody can see that, but it really has no control over the values or the money that is actually being stored. It has zero control over it.
Anatoly Yakovenko: (35:26)
So that's a very important thing but from a decentralization, kind of like where is this industry going, if everybody holds their form of Coinbase, the Coinbase has a single key that represents all of those assets, it becomes the focal point for finance. Might as well use a bank, like what is the difference? There are differences, there's security between Coinbase and you see that better ETIs, maybe cheaper wires, but the users don't actually get to have those guarantees because they're so on the hook for Coinbase to do the right thing.
Anatoly Yakovenko: (36:11)
Removing all those obstacles is what allows an app developer, like an application developer that wants to provide returns to the users to build something, but purely with code. Never trusting, without any trust, never taking custody of anyone's funds, but allowing to coordinate 100 million cryptographic keys to borrowing money from each other and start giving a real return without any middleman.
Anatoly Yakovenko: (36:37)
If this is possible in software, you don't need a third party like Coinbase in the middle to pay another three, 4,000 engineers. You look at something like UniSoft, folks that have never heard of Ethereum are a peerless competitor. UniSoft is like 10 people. It's an exchange that has 32,000 pairs traded on them, 10 people. Because, it's a bit of code that just coordinates people. It doesn't actually take custody, and this is where I think the power of crypto is this ability for very small teams to build highly leveraged software that creates these new financial instruments, which similar instruments or where you have a traditional finance, but it removes all possibilities of failure, fraud and that's the magic of it. We actually leave people with self-custody to go exercise their power.
John Darsie: (37:34)
I mean one of the things we're so excited about for SALT in September is getting you, Sam and Jeremy Allaire from Circle on stage together to talk about just basically the new financial infrastructure that you're building on de-fi crypto rails, if you will, between USDC, the stable coin that was launched by Circle. Obviously what Sam is building at FTX, and also at Serum, and how Solana all plays into that as basically the optimum base layer for all that.
John Darsie: (38:05)
But I want to talk about, and this is not something that you guys developed, just to be clear again, but Star Atlas is a play to earn game that's being launched on the Solana blockchain that people are very excited about. The idea of play to earn games, in general, fascinate me and I think have a massive future. Could you talk about play to earn gaming? Could you explain to people what it is and why there's so much excitement around Star Atlas?
Anatoly Yakovenko: (38:30)
So gaming I think is one of those new opportunities for crypto, but simply that I don't always believe it's going to happen because I don't know if you've ever played like Ultima, [inaudible 00:38:42] or World of Warcraft's, I started with Ultima when I remember as a teenager I went to the bank, got a cashier's check, mailed it to somebody during the snail mail to get an item from Ultima [inaudible 00:38:54]. So that process of a person actually paying money for a digital item that they have no ownership of, it exists. There are secondary markets for World of Warcraft goals, Ultima, online as well had some and [inaudible 00:39:13] line, which is a space [inaudible 00:39:14] for very sophisticated economies around its units. Those things exist and they run and Star Atlas is an attempt to make it wholly on chain. To use all the same leverage and technology that, you have the best market makers in the world using Serum to trade, can now use that inside and exchange for crystals or energy units, whatever, it's like Star Atlas to build your spaceships. How cool is that?
Anatoly Yakovenko: (39:46)
It's all in one single giant computer that doesn't really care if it's trading bitcoin into dollars or endgame units. That's the essence of it is, "Can we build a game that is owned by the players that are generating their own content and that content is valuable because there are consumers, like players that just want to pay?" They don't want to play through the game, they don't want to earn those items, but they just want to have the experience, and [inaudible 00:40:18] that substitution. Like do you have enough people that want to effectively own the game and be those content creators and earn a living from it, and enough consumers that want to just experience parts of it?
Anatoly Yakovenko: (40:30)
It's, I think, something that feels like science fiction. So probably five years away. So I should start working on it now. [crosstalk 00:40:39]-
John Darsie: (40:39)
Ready Player One.
Anatoly Yakovenko: (40:40)
Exactly.
John Darsie: (40:41)
A popular book and movie, Ready Player One, that you... I read the book many years ago and said, "Wow, I could see our future resembling that in some way," but then you start to look at things like meta verse gaming play to earn gaming, something like Star Atlas, and you're like, "Wow, we're not that far away from that future where people are going to derive a lot of pleasure and probably spend a lot of time in these virtual worlds." It starts to help you crystallize in your mind why NFTs are so valuable. And why virtual digital real estate has value.
John Darsie: (41:11)
Because at the end of the day if we live in a highly virtual world, this is an oversimplification, there's no reason why those things shouldn't have the same type of value that people derive from physical goods and physical real estate.
John Darsie: (41:24)
Last question I have for you is, what is in your plans for the future? Obviously, you guys have had an explosive summer of growth, like I mentioned in the opening, it's been Solana summer, even though you guys are very humble and avoid the cheerleading that exists in a lot of areas of crypto, but what are the next topics of focus for you and the team at Solana labs?
Anatoly Yakovenko: (41:45)
So we're super engineering heavy company, like we're mostly focused on the boring side, which is let's build a fast software like system fast database. And it's almost like, it's oddly boring work. We have a bunch of performance improvements, most downhill engineering. You've got to benchmark, task, analyze, improve and that's something we've been doing, I think, for the last year, since we launched.
Anatoly Yakovenko: (42:18)
And we're continuously, incrementally improving everything. Maybe that's part of the success story is that iteration is the most important thing when it comes to engineering. I think that was an Elon Musk quote. So if that helps you, our goal is how do we iterate and improve the network as fast as we can?
John Darsie: (42:40)
Right. Do you think your focus on development is something that attracted people like Sam to the project? And I think Sam, as much as anyone, he again, takes sort of a sober view of crypto. He understands the bull case. He understands the bear case for certain protocols and for the industry as a whole. Do you think your heads down mentality is something that's attractive to hardcore developers themselves, and also people that are building on top of block chains?
Anatoly Yakovenko: (43:11)
He's not an engineer so this was really I think, in a lot of respects, this is driven by the engineering team that was like, "Hey, this isn't going to work. Let's just go build it." It feels like to maybe to outside folks, it feels like there's some master plan. It's not. There's not. There's kind of like fire driven development, "What is the most important thing that we need to fix right now?" is very much part of our daily routine. And what that means I think for the future is, I think more, kind of like I mentioned before, you don't notice Moore's Law when you're in it. But with those improvements, exponential improvements occur over large spans of time because really, really staggered.
Anatoly Yakovenko: (44:02)
So this is what I hope we should see in the next four to eight year. Imagine 100 million people with self-custody on a single network, or a billion people with self-custody on a single network. What impact they have had is very unpredictable. It's like me in 1996 telling you that sharing pictures of cats and babies with your friends and family is going to be worth a trillion dollars. You would tell me that I'm crazy.
Anatoly Yakovenko: (44:30)
So how do we predict where the stuff goes is really, really hard for us. There's folks that are heads down in the hardware and in the software.
John Darsie: (44:41)
Anatoly, it's been a pleasure to talk to you. Again, we're super excited about Solana. I think the more you talk to people in the space, the more impressed they are, not only with the amazing technology you've built, but also the power of the network effects of some of these projects that are coming online. And certainly you guys have a ton of momentum. So we're rooting for you, we're excited to see you in person in September and have that conversation you, Sam and Jeremy on stage at SALT. And we'll be, again, rooting for your success going forward. But thank you so much for joining us.
John Darsie: (45:12)
Anthony, you have a final word for Anatoly before we let him go?
Anthony Scaramucci: (45:14)
I just think it's a brilliant exposition of what you created and part of genius frankly, is simplicity, and I think you did an amazing job of explaining where things are and why you guys are on the cusp of something huge. It's already huge, but it's going to even exponentially more huge. So congratulations to you, Anatoly.
Anatoly Yakovenko: (45:37)
Thank you, so much. I appreciate it.
John Darsie: (45:40)
And thank you, everybody for tuning in to today's SALT Talk with Anatoly Yakovenko, the founder of Solana. Just a reminder, if you missed any part of this talk or any of our previous SALT Talk, you can access them on our website, on demand at salt.org\talks or on your YouTube Channel, which is called SALTTube. We're also on social media. Twitter is most active @SALTConference. But we're also on LinkedIn, Instagram and Facebook as well. And please spread the word about these SALT Talks, we love educating people, especially on this new, emerging asset class, crypto Web 3.0, all these types of topics. So again, please share this talk with your curious uncle.
John Darsie: (46:18)
On behalf of Anthony and the entire SALT Team, this is John Darsie, signing off on SALT Talks for today, we hope to see you back here again soon.