32min chapter

The DCo Podcast cover image

Ep 29 - Kyle Samani on Why Bitcoin as Digital Gold Might Be a Myth

The DCo Podcast

CHAPTER

Ethereum's Growth and Governance Dynamics

This chapter explores key moments in Ethereum's history, particularly during DevCon 3 in 2017, highlighting the challenges of network congestion and transaction costs amidst its rapid growth. The conversation transitions to compare Ethereum with Solana, focusing on their governance structures and implications for developers. It examines the evolution of cryptocurrency perceptions and the future potential of different blockchain ecosystems.

00:00
Speaker 1
I
Speaker 2
want to double click on something you mentioned that you and Tushar went all in on Ethereum, right? At what point that stopped being the case?
Speaker 1
I don't remember the date, but you could look it up. It was at DevCon 3 in November of 2017 in Cancun, Mexico. Multicoin is six weeks old at this point. And it's basically peak of the market November 2017. Ethereum is up 100x year to date at this moment in time. Obviously, all the ICOs all in Ethereum. Silicon Valley is getting excited. Coinbase emerges as like a real company in 2017. Binance emerges. I mean, 2017 was like a pivotal year for crypto. Ethereum is the star of the show. Like no questions asked. Bitcoin like was up 10x, Ethereum was up 100x that year. And gas fees are spiking left and right. Every time there's an ICO, gas fee spike, you know, takes minutes to include a transaction. of which was expected behavior. Like, none of this was like, oh, wow, like, where did this come from? They knew when they launched this thing in 2015, all of these problems were going to happen. And over the course of 2017, you know, every few days, the network is having, you know, real congestion problems and stuff. And obviously, they know this, and they've been talking about scaling for a while. And back then, there was plasma, there was state channels, there was hypercube routing, there was sharding, a whole bunch of ideas. And, you know, I remember I went to DEVCON and I was like, OK, guys, you know, Vitalik and CoreEF people, all eyes are on Ethereum. You were the star of the show in 2017, the greatest year in human history for an asset. Ethereum is the fastest asset in human history to $100 billion in market capitalization. Nothing else has come close. Actually, maybe Solana did, but that was a few years later. Anywho, so you have this spectacular run. You're the center of attention and you know you need to figure out scaling. It's your annual developer conference. Everyone wants to know what's the game plan. And you go to the keynote from the founder and vitalik gives you a history of ethereum because i don't know that was on his mind i don't really know i got to the keynote an hour early so i sat like in the front row and i like left and i was like are you fucking kidding like how can you be so clueless as to like what is going on in the world and to like not understand like what you need to do and just entirely oblivious. And so that was my moment of like, these people are clueless. I was already pretty frustrated. I mean, at this point in time, Ethereum is almost two and a half years old. I have been following Ethereum at this point in time for about 18 months. And I'm getting antsy. I'm like, hey, like, God, what's the fucking plan? And like, it's like, this is clearly the moment and the place you are supposed to unveil the plan and nothing.
Speaker 2
So like, was that the point that drove you towards EOS? And...
Speaker 1
Oh yeah. Immediately we began searching for alternatives immediately after DEF CON.
Speaker 2
And my follow-up was that, is Solana what you had hoped EOS would be?
Speaker 1
In one word, yes. I mean, that's a little crude, but like, sure.
Speaker 2
Like, I also want to follow up on, like, what happened with EOS later on and, like, how did you switch over to Solana? Was the story something similar to what was happening with Ethereum? Yeah,
Speaker 1
I mean, look, we started looking right after DEF CON. I think we initiated our first EOS position, I believe, in December of 2017. So, you know, a few weeks later. And I mean, EOS was in many ways the opposite of Ethereum. Big blocks. Dan Larimer had been around for a while. You know, they had raised a bunch of money. They were very aggressive. Like, you didn't have to look very hard, like understand that like these two teams were approaching the problems from almost opposite vantage points in kind of all respects. And that appealed to us. We were like, great. Like, I don't want something that looks 96 or 7% like Ethereum and is 3% different. I want something that looks totally different. And that's exactly what EOS was. And it was very clearly the most credible alternative of that time period. So it was just kind of a no brainer that we would end up there. In fairness to the Ethereum people, there were a lot of criticisms of EOS in terms of its gas model as the one that I recall most directly. I think there was also some known problems with its DPoS consensus as well. And the Ethereum people were like, yo guys, your system is broken, like it's not going to work. And our view was, dude, these are mechanical details, like they'll get figured out, whatever, who cares? And to the credit of the Ethereum people, they were absolutely right. Those systems, those problems were fundamental. And to the best of my knowledge, never actually fixed. And those issues are probably what led to the ultimate demise and fall of EOS.
Speaker 3
Kyle, did you guys at any point in time look at L2 solutions on ETH? Like, there were a few in 2017 ETH ecosystem, as far as I remember. Or like 2018, let's Oh,
Speaker 1
the term L2 did not exist at the time at all. There was discussion of the closest concepts to what we now call L2s were state channels. There was one called Raiden and then Plasma, which would fit under the academic efforts from L2 today. But in practice, Plasma just doesn't solve any problems for anyone to no one's fucking building it. But the term L2 did not exist radon was around they did raise money they did an ico obviously they've done nothing in the six years since then seven years since then plasma is also basically only existed in academic i mean there's probably some proof of concepts that were you know written like of but no one has actually seriously tried to productize plasma to the best of my knowledge so you know other people came up with ideas on how to scale Ethereum in the ensuing years. One was called Scale, S-K which we did invest in at some point in 2018. And then the term L2 may have been like loosely thrown around in 2017 and 18, but really had no defined meaning at all. I think L2 came to have a more concrete shape as kind of the roll-off terminology came into existence. And if I recall that that kind of initial terminology was spearheaded by, I think it was Carl Floresh of the EF. And then he later became one of the founders of Optimism. And he worked on some of that early kind of research and thinking, I believe with Vitalik, this is probably 2020. Yeah, I'm guessing this is early 2020. I
Speaker 3
don't think we have mentioned Ethereum as an L1 to begin with back in 2017. You
Speaker 2
didn't have to, right? Because there was no reference. I mean, it
Speaker 3
was
Speaker 2
literally the only thing around. There was absolutely nothing else.
Speaker 3
I think just double tapping on this, right? I know you gave a few reasons as to why EOS didn't work out. Did you guys at any point in time see dApps or, you know, any kind of initiative that went towards making EOS commercially viable the way Solana is today? I'm
Speaker 1
trying to remember what apps were around. And we looked at a bunch of EOS-based applications in 2018. Yeah. I cannot recall any of their names specifically off the top of my head. So that tells you what you need to know.
Speaker 2
That makes sense. Since then, Kyle, I mean, you guys start looking for alternatives and at the same time, the fund is also taking shape. You guys are probably hiring, expanding the team. So how has the seven years been for you guys? Like if you can share some broad strokes inside view of Multicoin, so to speak with us.
Speaker 1
Yeah, I'd say it really took us a few years to figure out who we are, or I should say like how we want to operate as an investment firm. I'd say probably four years is probably pretty good assessment of that. You know, in the first few years, we were doing at least two major things that we are no longer doing. One of which is we had an internal quant team. We were trying to build a quant strategy with the hope that we could eventually launch a dedicated quant fund in addition to our hedge fund, which is a buy and hold type vehicle. And we ended up scrapping that and throwing that all away. It wasn't working. The second major thing we were doing that we don't do today is we were actively trading beta. Today, our fund strategy is we're 99% net long. Very straightforward. That's not like hard and fast rule, but I mean, like, you know, directionally, that is true. And we are obviously a very long biased fund. And we realized our core strength was asset selection and thesis formation. And we became very comfortable with that fact and came to learn how to talk about that with our investors and obviously focus all of our team's efforts around that. So I think that was like the big thing we had to figure out. And it took us a few years to figure it out. I think, I mean, I think most fund managers should have more clarity on those questions when they launched their funds we did not and i think the reason we did not was our own naivety i mean tushar and i were 27 when we launched multi-coin i was 27 to chart i think was 26 and we had never worked at an asset management firm before so we had no formal training whatsoever from another firm and then the market was just like truly wild enough that we kind of just felt like hey we can like there's easy money to be made in all these different places. Probably mostly it was just our own naivety about like how to build an asset management business. We feel pretty confident now that, you know, we're generally in our swim lane. And to be clear, I actually think it's important that you step out of your strike zone every now and again. You should never be too rigid in your strategy, but you should know what your strike zone is You should be aiming to play in your strike zone at least 90% of the time. I think somewhere between 5% and 10% of the time, it's very much warranted to kind of deviate from your strike zone. And then obviously, if and when you are going to deviate from your strike zone, you need to be very clear about why you're doing so. And yeah, it took us a while to figure all that out. I
Speaker 3
think, Kyle, do you think the market would be as patient? Like you said, you took four years to figure out the comfort zone, right? If you were starting off today, do you think it would have just taken you as long to figure out what your strike zone is? And do you think the markets would be patient enough for that? I
Speaker 1
think 27-year Kyle would fail launching multicoin today. Unclear what 34-year Kyle launching in 2024 would do. And obviously the last seven years of my life have been multicoin. So it's hard to reflect on counterfactual Kyle who did not do multicoin.
Speaker 3
The reason why I was curious is, you know, I think that the period between 2017 to 2021 was relatively more forgiving versus the market now. Or maybe you have a different view of it, and that is the market was way more brutal back then.
Speaker 1
I agree. I think the markets are becoming less forgiving over time. I mean, that's the nature, right? I mean, it has to. Well, sorry. So I think as a general statement, that is true. And that's like a function of market efficiency. However, the extreme inefficiencies could actually lead you to blowing up in some ways easier back in the day. Most obviously, just trading anything with leverage. I mean, volatility has decreased substantially. Back in the day, trading a random altcoin with leverage on OKEx in 2019, like that was a recipe for disaster. It's still possible to blow yourself up doing that now, but it's definitely harder. Not that we do that, but just as an abstract statement, there are new ways to blow up, but it's getting harder to outperform. That is for sure the case. Possibly it's getting easier to not blow up. I
Speaker 3
was discussing Multicoin with Saurabh prior to this. And one of the things I flagged to him is that the coolest thing that Multicoin did is it lasted for seven years, right? If you consider the number of funds that have lasted for seven years, there's so few. And I was just like, you know, props to Kyle and team for that.
Speaker 1
Thank you. For what it's worth, I agree. The most important thing we did was not die. Right. Okay, so if
Speaker 2
you were to launch an L1 or an L2 to compete Solana today, what
Speaker 1
would it look like? I don't have any good answers. I've talked to a lot of people building L1s and L2s about these kinds of questions on a fairly regular cadence. And I've got nothing, largely nothing specific. I think to the extent I'm forced to answer the question, I would approach it like the Say guys did, which when we invested in Say was a couple of years ago. And the Say guys said, look, Ethereum and Solana claim to be neutral. And as a result of that, there's all of these either bad or inefficient design decisions in their systems. And we are going to not be neutral. We are going to explicitly violate quote unquote neutrality in the interest of building a better product and or developer experience. And say Viva 1 launched and there was like a permission validator set and they gave, I think like a C-Lob primitive was built into the chain. And I think they prioritized Oracle updates at the top of the block. And there were like a few other things of that kind of nature that they did that like definitely not as neutral as Ethereum and Solana are. And I think they made the right set of decisions. Or I should say, their thinking I think was correct. Obviously save V1 did not attract meaningful adoption and they pivoted into what is now save V2, which is a parallel EVM thing. We'll see where that goes. But you know, I think the second iteration of that same experiment, I mean, one iteration of that experiment was DYDX, which their V4, well, there was the second version and then the V4 Cosmos version. And it seems like the Cosmos version was actually a few steps backwards net-net, which is a real shame. And then, you know, the other kind of more modern iteration of that same theory is Hyperliquid, which is basically taking the same set of opinions that Say did and then going even one step further. And they actually built their own Perp decks as well. And so, you know, to the extent that I would launch a new L1 or L2, it would probably be along the lines of what Hyperliquid is doing.
Speaker 2
Fair. I think you've been quite vocal about MEV being a major model of value accrual for L1s, like versus the fees and DA fees and all other kinds of fees because they are tending towards zero over time with better infrastructure and hardware. Like, how do you think of this MEV? Like, should it go back to where it originated from, like Flashbots guys think about, or should it go to like searchers and validators? I mean, I think the searchers share is also going to go down as probably 10, 20% max. Most of it will be captured by validators. So I just want to understand how you think about MEV in general. So there's
Speaker 1
no generic answer between like wallets, takers, makers, validators, and searchers. There's no generic way to answer, like split that percentage up to collectively out up to 100% of like what should be the market equilibrium. And the reason there isn't a generic answer is because like there are fundamentally different kinds of MEV in different contexts and situations. And let me unpack probably the two most important categories, or maybe three most important categories. The most high-profile category is sandwiching or just straight front-running, which is very common today on both Ethereum and Solana. And that type of MEV, searchers are capturing, I don't know, somewhere between 50 and 80 percent. And then the balance is going to the validator via priority fees. That will go to zero percent searchers. High degree of confidence in that statement over the next few years. Searchers are strictly leeches. And I think it's important to understand them as leeches. And everyone in the ecosystem should actively fight them and can fight them. And I expect searchers will not get to zero, but will trend towards zero. The second major category is sex-dex which, like, is totally fine to me. Searchers, go have fun, fight as hard as you want on whatever statistical models you want on these things. Validators will get some. Searchers will get some. Great. There's no creation of MEV here. I mean, the creation of the MEV is the LPs are stupid and leaving money in the AMM. And if the LPs are the ones leaving the money in the AMM, like they should lose the money. I got like, there's no basis for them to be rebated. It's like, no, that's, that's what you signed up for explicitly. Or if you're a market maker and you have a limit order on the book and you get picked off, like again, you know, I mean, that's an engineering optimization challenge in your own infrastructure. So again, I feel no sympathy for you. And like, you should get picked off and searchers should take some of your money. That's fine. And then the third major category is what I'm going to call like application-specific MEV. So this would be like back running an Oracle or like liquidating someone on like Aave or Drift or something, you know, one of these kinds of things. And in those systems, again, you can take searchers to pretty close to zero. You don't have to take them absolutely zero. You need them to have some incentive to act, but that incentive can be fairly low. And the vast majority of that value should accrue either to, you know, the Dow, like the DriftDow or CommunoDow or something, if it's like a liquidation relative to one of those systems, or it, and or it should accrue to validators in the form of priority fees from the searchers. But like, you can just obviously imagine if, if the liquidation penalty is a hundred points, you know, 80 points can route to the app, to the DAO, meaning Camino or Drift. And, you know, 20 points goes to searchers, right. And then searchers are gonna have to pay some presenter that in form of priority fees, you know, to the validator for inclusion. I
Speaker 2
think this is what Uber guys are building, right, Joel? The OEV, like, I think, yep,
Speaker 3
correct. Correct.
Speaker 1
Yeah. So, Pith wrote a post about this a few months ago, basically just, it's a back running auction, which obviously is, again, ties into all of the above.
Speaker 3
But what I'm also hearing is it's not profitable enough to be doing any of this, you know, post priority fees and validate incentives and the like. Do you think that search operations are worth investing in at this point in time? Would you invest in a business that explicitly? I mean,
Speaker 1
if you generally have a background in HFT and their market making, yes. Otherwise, no.
Speaker 2
Okay. So like you're saying that, okay, MEV is one of the major sources of value accrual for L1s. So how does that value accrue to the tokens? Like, can we just bring it home? Yeah.
Speaker 1
Anytime someone pays a priority fee to the validator, then that's going to the validator. And then the validators are paying typically the vast majority of that fee. And now in some cases, a hundred percent of that fee to stakers.
Speaker 2
And so none of the L1 tokens, I mean, to be frank, I think two of them claim to be money. I think it's Bitcoin and ETH. They call themselves ultrasound money. Although I don't think the meme holds true any longer because it's not been deflationary or whatever. So is it strictly a meme that accrues value? I mean, a source of value for L1s? Or do you think of there's anything else as well? Like the moneyness as such? I think the moneyness thing is real.
Speaker 1
Clearly, Bitcoin is a non-sovereign store of value. That's not really a question. Because it quite frankly, is nothing like there's no way to explain a trillion dollars of market cap in Bitcoin. I've never even seen another plausible explanation for that. No, that's a different question. And is that a good thesis for good theory? I would contend the answer to that is no, it is not. But like clearly a lot of people believe in it and put their money where their mouth is. I think the mechanics, I think the way people talk about moneyness is mostly incorrect. The traditional view of moneyness as espoused by the Bitcoin people is based on a fairly simple set of criteria. Most importantly, the supply schedule in Bitcoin's case, obviously famously is 21 million. It also includes a few other parameters. You know, can you validate the block at home? That's a very Bitcoin centric statement, but like, sure, I can see how that lends itself, quote unquote, towards being money. Although I think that's basically nonsense. You know, centric resistance, I think is like, if you're going to claim to be non-sovereign money, I do think you need to have a credible claim to censorship resistance. People say Bitcoin's the most censorship persistent of the major chains today. I don't think that statement is meaningfully true. Yeah. I mean, the mining pool is like what, four mining pools or something, maybe either 51%. And it's just generally the number of mining pools is fairly limited. And that just really skews Bitcoin's economic and censorability in pretty negative ways. then obviously there's like another element fairly obvious one is just like hey how like usable is it and like if i send you tokens like do you feel like you got them instantly or like forget about me trying to rob binance of a billion dollars like if i send you tokens and i can just double spend and do another zero con from you know a higher fee somewhere else i can just walk off that's like not a good user experience for money. And like in Bitcoin today, it's trivial, you know, to do that. Obviously, you're probably not going to do that at the $4 level, like cup of coffee level. But like at the $5,000 level, like you could see a lot of malicious people, you know, trying to do that. So it's just obviously like kind of crappy in those dimensions. But like where Bitcoin shines, supply schedule 21 million, like no questions asked. It is the most predictable asset in human history on that dimension. Where I think the money people have gone wrong is they overemphasize that one dimension at the expense of all of the others. And like, yes, look, Bitcoin provides nine nines of probability around the supply schedule as we approach 21 million in the year 2140 or whatever it is. Well, like, dude, like nine nines and three nines, like, I don't think that matters. And so that to me is like a major point where I diverge from everyone else. Ethereum people, I think very stupidly leaned into the same basic framing and said, well, yeah, our money's programmable, like, great, sure, but ultrasound money, deflationary, aha, we got you. Bitcoin, we outdid you, it's your own game. And I think that was just like a very stupid thing to do because I think it's like, yeah, you're focusing on the thing that like, even if you are correct, that ETH stays perpetually deflationary, like you can't prove that it will be deflationary and so there's fundamentally right it's not a predictable supply schedule and so like it's like a too smart by half i'm like nah dude like the point of the 21 million is that it's knowable ahead of time which it is fundamentally not for ethereum so i think that they like pick the wrong variable and then pick the losing argument for the wrong variable. And then I look at Solana, look, I'll be the first person to tell you, I don't think Sol is money or whatever. But like, since Sol is obviously comparable to ETH and Bitcoin as like an L1 asset, let's at least continue this framing for the purposes of Sol. blog post in 2018, I think it was called Path to Tens of Trillions or something to that effect. And in it, I laid out what I call the utility thesis of money, which is the one of these systems that becomes the most widely used will be the one that like its native asset becomes money. And to me, you know, coming back to the original framing of like censorship resistance, usability, I see a world pretty clearly, you know, in three years, I think Sol is substantially more censorship resistant in a world of multiple concurrent block producers than Bitcoin ever can possibly hope to be. Or that even Ethereum, at least based on my current understanding of the roadmap, could hope to be. The credible part, obviously, Bitcoin is not even relevant. Can you unpack
Speaker 2
that? That it would be more censorship resistance?
Speaker 1
oh i mean if we're in a world three or four years from now in which the solana blockchain mainnet has 20 30 40 50 concurrent block producers that's my base case that is just objectively way more censorship resistant than a system with a single leader because now it's like you send it to the guy and the guy says no it's like fine just like go to the next guy you got 30 others to choose from who are block building now and presumably in the next one or two seconds that's that's going to rotate anyways and then obviously there's like latency of like hey i don't have to go across the pacific ocean to like get to the leader i can like there's a guy you know presumably within a few hundred miles of me and then there's the the framel part but but i think like the system that ultimately powers the most economic activity, which, again, at this point, my base case is Solana, that will be the one that most people will be like, oh, OK, this is the one. Like, fast forward five, six years from now, let's assume at least 500 million DAUs of, like, some combination of these chains, whether it's Ethereum, Solana, SWE, Aptos, whatever. The only thing that I can tell you with 100% probability about that state of the world is Bitcoin still does what it does now, which is it's fucking inert and dumb. It doesn't do anything and it's still slow and shitty. And I think everyone in the world will be like, Bitcoin, like, oh yeah, it's like the boomer coin. Like, I don't know, it doesn't do anything. You know, today, like, does my mom know how AWS works? No. Does my mom understand that AWS powers Netflix? Yeah. And I don't mean that like, she literally knows Netflix is the largest customer, but like generically she understands like when she hits the play button on Netflix, there are some cloud servers somewhere that happens to be Amazon or Microsoft or Google, but it's like one of the three big ones that like powers the show. And I believe we will be in a state of the world i obviously let me be clear she does not have to understand that fact like there's nothing requiring her to understand what aws is but just because like she functions on the planet earth and reads on the internet like she understands that and i believe we will be in a state of the world five six seven years from now in which everyone will understand i think it will be solana will be powering the substantial majority of these global financial transactions and if we are in the state of the world in which that is generally common knowledge, then I expect Sol will be the number one asset in that bit of the world.
Speaker 3
Kyle, which would be those applications? Let's say your mom is using an application seven years out and it's based off Solana. What would it be? I'm just trying to get a gauge of it.
Speaker 1
Oh, it could be just finance generally. Could be Helium and stuff like that. It doesn't have to be that my mom is using anything that touches crypto directly. I mean, look, if Visa is settling, I mean, look, it can be a case that, like, my mom swipes her credit card or uses Apple Pay, and then it's just public information that Visa is coordinating the settlement of USDC on Solana Rails from my mom's bank to the Merchants Bank. I wouldn't call that an app of crypto because in her mind, literally, she's still wiping her credit card in the same way she does today. But as long as that understanding is public information, which, again, I expect it will be over some period of time, then the chain that powers that, I expect its native asset will be number one in crypto. Because I think everyone will look around and they'll be like, Bitcoin, that's fucking boomer coin. What does this do? And this other one powers all of these important finance things. I'll
Speaker 3
just push back on that Bitcoin bit, right? I would think that it's just like gold. People would probably think that it's just one of many things that people can just buy. Gold is not used for fintech. Gold is used for store of value, I would presume. It can do the boomer thing and still be relevant, so to speak.
Speaker 1
Sure, yeah. That statement is obviously true. Again, what I am underwriting is a derivation from the status quo. What everyone, 99% of people in crypto, are projecting about Bitcoin in the future is that you can generally take history up to the current moment in time and reasonably project that that same general lens will persist. Like, I'm not stupid, and I'm not, like, misunderstanding history up until now. Yeah. I am explicitly projecting a fundamental change in perception. In the same way that, like, I think, I mean, if you look at, like, the early media around computers in, like, the late 80s and the early 90s, Bill Gates was like, computers are going to change all white collar work. And you're going to sit at a computer and type all day. And everyone's like, are you fucking crazy? These things are horrible and this is dumb and it's bad. And like, obviously, the perception of computers have changed very substantially over that period of time. And what I am explicitly underwriting is that the default perception will be Bitcoin and Solana look kind of the same to me. They're both called a crypto. They both kind of use this cryptography thing. I don't really know how it works. They both have these funny long addresses that I can't fucking read. They both move money around, clearly. And like Solana powers all the useful stuff and Bitcoin does not. You know, at some point, whether it's in four years or nine years, we'll be at a point at which everyone in the world generally understands that to be true. And in that state of the world, I don't understand why like soul is not split to Bitcoin. I
Speaker 3
think that's a generally a beautiful way of framing how you look at the world and investing in general, right? Like I think you're comfortable betting against the status
Speaker 1
quo, so to speak. If you were to restart history in 2024, I mean, assume we have the fiat money system as we have it now, because that is what we have now. Gold would not be a thing. Gold is only a thing because of its historical relevance. And again, history is path dependent. So I understand why gold is what it is today, although I disagree with it, but fine. But that doesn't therefore mean digital gold will be functionally equivalent to regular gold. That's the jump that 99% of people in crypto make. And that's actually the jump that I think is like fundamentally unsubstantiated because that is in and of itself its own form of projection. That's
Speaker 3
some beautiful framing, by the way. Does this
Speaker 2
follow that reasoning by analogy, analogy doesn't work? Like, is it something that you guys internalize at Multicoin? No,
Speaker 1
I've never explicitly not liked Bitcoin for that reason. But now that you mention it, I've got another talking point. Thank you very much. All
Speaker 2
right. Okay. So I've seen your Solana will flip Ethereum talk, I think a couple of times to prepare for this. So you talk about the North Ethereum not having one and Solana consistently having one, right? And then you lay a case as to how Solana has improved upon metrics and so on, right? So I saw one video of Sriram and Lilly, and they were going back and forth. I think this was at the time of breakpoint or somewhere around that, right? Sriram was arguing for Ethereum and Lilly was arguing for Solana. I think they almost tried to answer each other's questions or comments towards the other party. But one thing that I think was left was Sriram mentioned this, that let's say I'm a builder and here I have to choose between these two systems, right? One is very difficult to change. Probably it needs approval of 500 people for the thing to change meaningfully. That is Ethereum. Whereas Solana, it can decide and ship out a phone in probably a couple of quarters or three quarters or a year or whatever. it doesn't take much to internalize things in its protocol, versus I know a fact that if I'm building a data availability layer or whatever in Ethereum, the chain is not going to try and compete against me in that particular domain. So he was laying the case basically for credible neutrality and saying that that is the credible neutrality that Ethereum offers. And that's why he chose Ethereum. I'm probably paraphrasing a lot, but he was arguing along these lines. And I don't think there was enough time for Lilly to respond to that. So if you can, that would be great. A lot of responses.
Speaker 1
One, the core gatekeepers of both the Ethereum and the Solana roadmaps are very centralized. And neither of the ecosystems goes out of its way to make it crystal clear exactly who has social power or not. If you ask around in kind of both ecosystems, the answer you kind of come to is whoever controls the engineering roadmap for Anza and then the equivalent functions for the five or six different Ethereum client teams. And actually there's a lot of things like, for example, Vitalik recently proposed a 33% blob size increase like a month or two, and was shot down by like the engineering elites. So my point is that the number of decision makers as it pertains to controlling commits to the canonical client, you know, GitHub repositories is very limited, like on the order of like five people per ecosystem, not meaningfully larger than that. And then now there's a different question of validators and like, look, if the guys like update the thing and like just change inflation and print themselves a bunch of tokens, hopefully the validators will catch that ahead of time and like, it won't happen. So like there are some checks and balances in both systems. Again, I don't think there's a meaningful difference between 3000 and 10,000 as it pertains to like catching something of that nature. So I disagree with the first point you said, which is free. I was like, oh, 500 people have to read for Ethereum. That is not in practice how EIPs are merged into these systems because there is a VP of ENG who controls each code base, who ultimately chooses what goes in or not. So that's comment one. Comment two, Sriram saying a lot of people presumably are more inclined to at the base layer, move up the stack or launch adjacent products that could theoretically compete with competitors. I think that's correct. I don't really disagree with the assertion. I just, like, don't think it matters. Like, okay, look, if you're building something that is adjacent or tangential to the L1 in some way, and if the L1, core L1 team chooses to compete with you, like, sorry, shit out of luck, man. I don't care. Am I worried that, like, Solano's gonna compete with Helium? Like, no. Like, I've known Amir and the Helium team from the beginning, and, like, those are not words they have ever said. It just, like, doesn't fucking matter. So, like, when your worldview is focused on L1 adjacent infrastructure, like, look, it's a threat, but like, fine. If Google shows up and competes with you tomorrow, like, does it fucking matter? Like, it doesn't matter. Like, other people showed up to compete with you. So I don't know. I just don't care. And then third point, or it's more like a 2B point, is like, Sriram, based on this logic, is saying, therefore, Ethereum is more credibly neutral than Solana. And I agree, as a general statement, credible neutrality is a straight worth optimizing for in these systems. Where I diverge from Shriram is in his framing as like, ah, this is the one vector of credible neutrality that rules all of the others. And that I like strongly disagree with. Clearly, credible neutrality has a lot of elements to it. And like, one is, you know, Nakamoto coefficient, another would be the number of clients, another would be number of validators, a number would be a stake distribution. Like, there's a lot of these things that go into, like, a system as a whole being credibly neutral. And certainly the one that the tree realm highlighted is like, to me, very obviously not the most important one. If you told, I had to choose, like, what's the most important vector through which I think about credible neutrality, I think it would probably be Nakamoto coefficient, because that's like how many people it takes to stop the chain from finalizing. That strikes me, it's kind of the most simple and objective measure. But again, that is prudent and incomplete.
Speaker 2
Yeah.

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.
App store bannerPlay store banner

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode