Validated

Welcome to a special episode of the Solana Podcast focusing on Crypto & National Security featuring Ari Redbord (Head of Legal and Government Affairs, TRM Labs) and Sigal Mandelker (former Under Secretary of the Treasury for Terrorism and Financial Intelligence). Amira Valliani (Policy Lead, Solana Foundation) guest hosts.00:09 -  Intros02:11 - Origin Story05:53 - Correspondent Banks07:37 - Why crypto resonates personally09:54 - Use cases of Crypto in humanitarian applications12:13 - Looking at the opportunity vs the risk16:06 - Typical Day at Treasury17:14 - What it takes to stop bad actors in Crypto24:53 - BitFinex Hack and Large seizures29:05 - Compliance and self-policing31:13 - Advice to other people in regulationDISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Amira (00:09):Hello and welcome to the Solana podcast. My name is Amira Valliani and I run public policy at the Solana Foundation. Today we're talking about an issue that's really been at the forefront of a lot of people's minds since war broke out in Ukraine earlier this year. And that's the topic of crypto and national security. We've brought two of the world's foremost experts to talk about how crypto links with foreign policy and the movement of money all over the world, and they are Sigal Mandelker and Ari Redbord.Sigal Mandelker is a general partner at Ribbit Capital where she deals with FinTech and crypto. But before this, she was Deputy Treasury Secretary and Under Secretary of Treasury for Terrorism and Financial Intelligence. She's joined by Ari Redbord who's the head of legal and government affairs at TRM Labs, the blockchain intelligence company. Before joining TRM, Ari was Sigal's senior advisor when she was the Under Secretary of Treasury and worked on a range of issues, including sanctions, anti-money laundering and a bunch of other scary and really important issues. Sigal and Ari, thank you so much for being here. We're excited to have you.Ari (01:15):Thank you so much for having us. I will say just to get things started, I'm a huge fan of sort of what you guys do at Solana and the team that's building with you and a huge fan of Sigal and just an amazing honor to be on a conversation like this with someone that I worked for when she was the under secretary and just really consider a close friend and colleague in the space now. So it's particularly cool. So thank you for having us.Sigal (01:40):Oh, it all goes back at both of you. I loved working with Ari then and I love being in this space with him now. It's pretty exciting.Amira  (01:48):I'm here for all of it. I think it's going to be a very exciting few minutes. I think the backgrounds are really interesting and you all know that this circle of people who come from government into crypto is growing, but it's small. And so very specific journeys I think got all of us into this space. I'm curious what got each of you interested in crypto? Why are you passionate about it? Ari, I don't know if you want to kick us off here. I know Sigal has a particular story.Ari (02:13):Sure. Yeah. No, happy to. Everyone has their sort of crypto origin story. And so many times you hear about "I bought Bitcoin 15 years ago." And for me it was really a lot different. We started to see it 2015 or so in a lot of our sort of large money laundering investigations that actually involve some of the sort of nation state actors like North Korea that we'll be digging into today. I think we sort of realized even then the power and promise of this technology, but also that if it was going to grow and flourish and they were going to build this new economy, that we needed to stop illicit actors from doing it. And that was sort of as a prosecutor and then honestly getting an opportunity to work with Sigal and the team at Treasury on some policy related issues in the space, I think really, really also got me interested in.At TRM labs, it's sort of like we sit in this sort of intersection, because I think we obviously believe very firmly in the potential and the growth of this new crypto economy, but at the same time, sort of understand that trust layer, anti-money laundering national security is critical infrastructure for it. And that intersection that we're going to be talking about today is really sort of where I see the most work that can be done.Amira (03:19):Yeah. I think that's incredibly important to remember that trust is really important to make sure that the space thrives. Sigal, I'm curious about your crypto origin story. Tell us how you got into it and why you're so excited about it.Sigal (03:31):When I was at Treasury, my job was very much a global job, so I would travel all over the world. In those travels, I would often meet with senior government officials from heads of state on down, central bankers, CEOs of banks, et cetera. And along the way, it became increasingly clear to me for a number of different reasons that our banks, US banks had massively de-risked all over the world. It became clear to me because in so many different countries, particularly in the developing world, in emerging markets, in so many different countries these senior officials and CEOs of banks would ask me if I could help them get access to US correspondent banking. We really studied to look at it and study it. And the trend is clear. Like if you start looking from 2012 to today, just as one example, the number of US correspondent, global correspondent relationships is very, very much on the decline.And so when I left Treasury, this became like an issue that I was very passionate about. How do we get great financial infrastructure and companies out of the US and elsewhere to be able to provide a variety of financial services in the developing world, in emerging markets, where in my opinion, in many respects, we had left them high and dry. And I came to the conclusion personally, that the only way we were going to do that was through disruptive financial technologies. And so I decided to find a place where I could pursue that passion. Along the way, I met our founder, Micky Malka, who has founded Ribbit along with Nick Shalek and some others about 10 years ago. I very quickly understood that really the mission of Ribbit is to change the world of finance and to do so exactly in this way through disruptive financial technologies that we're going to open up access to many, many more people in a much more efficient way all over the world.And so a week later, Micky called me and asked if I was open to having a conversation about joining Ribbit. It was definitely a road less traveled for a former undersecretary, but it was a super exciting path to go down.Amira  (05:36):I want to stay back on the beat that you mentioned about the drop of US correspondent banking all over the world. It would be helpful if you describe what exactly does that mean? What is a correspondent bank and why were you concerned about that as an undersecretary of Treasury? Why is that important to you?Sigal (05:54):For many reasons. First of all, correspondent banking, it basically allows banks all over the world in part to get access to US dollar accounts among other things. And when you don't have that correspondent banking relationship, when you're being de-risked, there's just less access to the US financial infrastructure in many different ways, which means a lot of things. One of the things that it means is that if you think about our various sort of tools of financial leverage, we're seeing that play out right now in Russia, right? Where sanctions has become a major tool of national security. But if you're issuing a sanction in a country or a region that has very little touch points with the US financial infrastructure, then that economic leverage no longer actually really works, or it's less likely to work. It's more complicated than that.Also, the US traditionally has been the exporter rate of democracy and American values. We have always prided ourselves in innovation and being like a center for ingenuity. And again, when you don't have US capital or those kinds of relationships all over the world, I think that's not only really to the detriment of the US, but also to the detriment of people all over the world. And then they're just going to go to alternatives. And that's definitely happening as well.Amira  (07:14):One of the things that we've chatted about before is, it's not just a whole for US national security, but there's a bunch of people out there who when US banks aren't abroad, they're still looking for financial services. One of the interesting things about crypto is it offers that.Amira (07:29):Sigal, I know you have a really personal story of why crypto and access to financial services are important to you. Now I was wondering if you could tell us a bit about that and why this industry resonates personally.Sigal (07:39):Yeah, so it's really in part because my parents are both Holocaust survivors. During the Holocaust, they were in hiding in a part of Poland that is now Ukraine. They were kids. So they were separate, but they happened to be relatively close to Lviv. And the only way at the time that my dad, for example, could have ate, had access to any food, was my grandfather would go out in the middle of the night and he would steal potatoes. Once he stole a pig ear and brought it to my dad and my dad said "It's not kosher dad, I can't eat this." And my grandpa said, "No, it's the only way for you to get nourishment." So when I think about, I imagine what would've happened back then if this technology existed and they had access to a phone and they had relatives far away who could actually send them some value that they could use to barter for food, something like that was just totally impossible back then. You couldn't get anything from your family members who were in another country.Actually when I was at Treasury, there was somebody who had brought this idea to me of being able to use crypto to provide humanitarian aid, for example, to refugees in Syria. And I thought it was a really fascinating concept. And of course, it's so prescient today because the crypto community, including very much the Solana community, has really stepped up and used crypto working with the Ukrainian government to do exactly what we couldn't do in the forties '40s, which is to provide aid to the government in their fight for freedom, to help people get access to food, medical supplies, and elsewhere. And for many reasons, we could, I know, get into. I don't think banking is really necessarily set up to provide that kind of access in that way. It's too difficult. It's too complicated. Our banks don't operate in those parts of the world often where people really need that assistance. But crypto is global. It's everywhere where you can get access to it. In many other respects, it's just like a really groundbreaking innovation.Amira (09:31):It's kind of amazing, I mean, how much history repeats itself and how much access to these tools they were needed 80 years ago, they're needed today. Ari, I remember you telling me an example of how the US government I think, maybe it wasn't, was able to get aid into Venezuela directly using crypto. I'd love it if you could tell us a little bit more about that example.Ari (09:51):I think that was Sigal's story so I'm going to give her that one.Sigal (09:56):Okay. Well, this actually happened after I left Treasury, but I think it's also incredible. So when we had very heavy sanctions on Venezuela because of Maduro and what he was doing in that country, when we had the sanctions program, I made sure, or at least when I oversaw it, I made sure that in the Venezuela context we had the most forward leaning general license for humanitarian aid in particular that we had ever had before. I basically told our team like, "Everything that's ever been on the cutting room floor, we need to put it in this program because we need to help people who were literally starving to get access to aid." The other challenge was that it was very, very difficult for the US government to get anything resembling humanitarian aid into the country. I mean, literally, there were shiploads of stuff that the US government had sent and Maduro wouldn't allow it in or accept it.I will say that even though we had these very forward leaning general licenses, NGOs would come to us, to me and to Ari, I had a call that Ari will remember at the state department where these NGOs would say, "Look, we know you've got this general license, but the banks were all de-risking us. They won't allow us to continue." And I said at the time, "Well, tell them to call me. I mean, this is why we had that such a forward leaning general license>" but banks are just very risk averse in that way.And so fast forward, actually after I left Treasury, what was the one way that the state department working with Treasury and I think with Airtm and maybe with Circle, they were able to get USDC to help something like 60,000 or 80,000 doctors and nurses who are fighting on the front lines of COVID in Venezuela. Again, it's just like Ukraine. It's another really amazing use case where our banks weren't able necessarily, maybe some did, but many weren't able to get humanitarian aid in. But boom, instantly you could send it in and you could account for it because it's transparent, so you can audit it. You can make sure that if it lands in the wrong hands, that they can't use it. So it's a really incredible tool to allow access to, again, just like Solana is doing to allow access to a very fast payment system or a transfer of value for humanitarian purposes while also ensuring, helping to ensure at least, that it's used for the right reasons.Ari (12:14):I think what's so interesting is there's this narrative that crypto with these sort of qualities, decentralized permission list, cross border value transfer at the speed of the internet, somehow it's only used by illicit actors. But the fact is those are the qualities that allow it to sort of move outside of traditional financial systems to provide aid to people that would otherwise not have access to it. And I think this Ukraine moment in this really horrific situation is this incredible example of how communities, decentralized communities have developed in order to support a resistance movement in a government. I mean, Zelensky talks about Twitter being a tool of the resistance or a tool of Ukraine in this moment. Well, what you see happening on Twitter is communities developing to send cryptocurrency to support movements there.Admittedly, I think Sigal and I are often talking about sort of the financial crime and the money laundering risks and the things in sort of that space, but you do have to step back and say like, "We have to stop bad actors from using it because it's so good and there's so much power and promise of it to do good." I do think we're having sort of a watershed moment in Ukraine where you're having this sort of global event where we're seeing hundreds of millions of dollars ultimately will flow to Ukraine in cryptocurrency and really arguably sort of the first maybe use case at scale of what the power of this technology can do. I think it's an exciting moment. Obviously, it's a moment you never wanted to see, but I think this will be an example that will be able to use as to why this technology has so much promise.Sigal (13:47):Yeah. And I would say just to add to that really quickly, what I like to talk about when I'm talking to policy makers and regulators, et cetera, is that you have to stop looking at everything through the lens of risk. Risk is important. We want to mitigate risk, but really what you need to do is start looking at the opportunity and how this technology will enable so much opportunity. Because what we have today are a bunch of developers, innovators, builders, dreamers, right? Who are literally thinking about how to build out a more efficient financial infrastructure for the future that many more people ultimately will be able to access and use.That part of the infrastructure that deals with illicit finance and investor protection, that's being built too. So you can do those things really in parallel and therefore really drive out. In many ways more successfully than what we have in traditional finance, the illicit part of it as what we're seeing is like the vast, vast majority of people in crypto, they're just builders. They want to grow new things whether it's NFTs, games, payments, access, Ukraine, et cetera.So if you only look at things as a regulator from the perspective of risk, then you're never going to let anything grow. You really have to start talking about how to use this technologies as a great opportunity, including one of the reasons that I came into this space, right? Which is because I thought like this is this great opportunity to build out potentially much better financial infrastructure, which many, many more people will be able to access in the future. And if a portion of that remains in the United States, then the United States will be able to continue to be a center of financial innovation for years to come. If it doesn't, that's a different story.Amira (15:29):A lot of folks in the audience have never actually been in your shoes or anywhere close to it. I want to take a second to dig into sort of like that Carrie Mathison type stuff, which is like, let's look behind the shroud and see what it looks like to walk into your desk at Treasury every morning and understand what's coming past your desk from the risk perspective. Let's help figure out why regulators might be so concerned and help listeners understand what it was like to track down bad actors when you were in Treasury. So what did that look like for traditional finance specifically? What would you see? What does the process look like? How do you start your days even?Sigal (16:06):I used to start my day every day with an intel briefing. Basically with a briefing, where I would learn about all the potential terrible things, terrible things around the world that were happening and potential terrible things that could happen. So when you're in a job whose title is terrorism and financial intelligence, that's just the way your day is going to start. You're constantly thinking about how to protect not only Americans, but people all over the world from bad actors. So that's how you start. Literally, the framing of your day really starts with hearing about bad stuff that could potentially happen. And then in many respects, you said about your day in part to ensure that that bad stuff doesn't actually come into place. There are all kinds of different ways in which that happens.Another big part of my job was also to think about how do we reform, how do we provide much more guidance to the private sector which we did really with the FinCEN guidance in 2019 and in lots of different ways through our sanctions programs, through advisories that we issued to help the private sector also work with us to better protect themselves against being abused by bad actors.Amira (17:15):What does it actually look like when you're stopping bad actors? So you talk on sort of vagueness, but think about a case where maybe you had to take traditional tools of finance to stop a bad actor and what that process looks like. And then how does that actually contrast when you're thinking about a crypto bad actor? What are the differences in that process?Ari (17:32):One thing that we did at Treasury and at DOJ when I was in AUSA is you put together great teams and you reached out to all kinds of different pieces of the inner agency, the executive branch. So when we were prosecuting a case, we would want to ensure that we had a team of the best IRS CI agents and HSI and FBI. It was very similar at Treasury, right? I mean, if you were going to do a sanctions' designation on North Korea for example, you would want to ensure that you had the right policy people in the room from TFFC, and that you'd have the right intelligence from OIA, that you'd have exactly the right subject matter experts from OFAC on sanctions and FinCEN on money laundering and financial crime. And you would put them all together. And I think this is what, why Sigal was frankly so successful, is that you basically would reach out to teams of subject matter experts. And you'd put these teams together and they would inform great policy.I think one thing that sometimes is missing is that there's this sense that sort of like from the private sector that the government doesn't know what it's doing and this sense from the government that the private sector just has a certain agenda. I really do think at the end of the day, some of the best subject matter experts in the world are in both places. When you have those public-private partnerships, you're going to have much, much more success. So to me, it really is about putting together great teams of subject matter experts. I think we're seeing that today quite frankly. I mentioned North Korea.For example, you have this hack of the Ronin, Axie infinity blockchain a few weeks ago. And very, very quickly, Treasury essentially identified Lazarus group, a state actor from North Korea as having engaged in that attack. I'm not there anymore. Sigal's not there anymore. But what I imagine happened is they put together teams of experts from those different places who were using blockchain analytics tools to watch the flow of funds in that attack. And then you saw the designation, the sanction of a specific address for the first ever time associated with Lazarus group. And then you saw those funds flow to three other addresses, and immediately you saw those addresses sanctioned. And then you saw those funds flow through mixing services, which are basically exchanges on blockchains that mix funds and send them out, sort of clean the other side. And you saw those funds flow through a mixer called Blender.io that was ultimately designated sanctioned by OFAC.So again, while we're not there anymore, when I see these actions, I sort of picture a skiff, a secure facility within Treasury a few steps from where Sigal and I sat. I picture this group of true subject matter experts sitting around and laying out game planning, these types of actions. I think that's as inside baseball as I could do here. But I do think that like the key is great teams, and we were always very lucky to work with great teams.Sigal (20:22):Speaking of which, I was also really smart to bring brilliant people to work with me in my front office. And of course, Ari was very much at the center of that. We're in war mode all the time at Treasury, right? You're always dealing with really bad actors.Ari (20:40):I picture Sigal running when I think of Sigal, in heels down.Sigal (20:45):Clicking.Ari (20:45):And I remember actually ended up buying shoes that had sort of sneaker styles soles on the bottom because you were so constantly running up and down the hallways of these marble floors, because that's exactly what it was. You were always in a rush. It was always because the work you were doing was important.Sigal (21:01):I lost a lot of shoes that way. One thing I will say when Ari's talking about Lazarus, the first time that I really understood the power of blockchain analytics and blockchain technology was actually when we had sanctioned a big network. I think it was the first time we sanctioned... I actually included wallet addresses. Literally within a day, maybe it was that same day, I don't even remember, Chainalysis had put out a piece that literally identify all the different addresses that were linked to the ones that we had sanctioned so that people could very, very quickly know what to stay away from, like what was really bad news and actually protect themselves from interacting. Ideally, we could freeze funds.I remember at the time saying to a different senior advisor, Leah Bressack, like, "Yes, this is what we want industry to do. We don't ever see this kind of analysis from the banking industry." And that was really in part because that capability doesn't exist in the same way. I mean, sure, we saw lots of SARS and sophisticated SARS from banking, but for somebody, a Chainalysis or now TRM to go out and very quickly publish reports much more quickly than we may have been able to do that really helped immediately track, detect, and deter illicit activity was really quite extraordinary.Ari (22:25):Yeah. I mean, it seems so obvious to probably most of your audience and certainly to us, but the ability to follow the money to watch financial flows in cryptocurrency is extraordinary compared to the traditional financial system. I mean Sigal and I both cut our teeth as prosecutors doing bulk cast smuggling cases and networks of hawalas and shell companies and Russian real estate and London and high value art, right? There's no TRM or Chainalysis for those things. Those are very hard. And in crypto you can follow the funds with great financial crime investigators at US law enforcement and globally can follow the funds using these kinds of tools in ways that were unimaginable before. So yes, you can certainly move money faster in larger amounts in many respects, but you have tremendous visibility. I think a lot of times that's missing still even from the conversations around sort of fraud and financial crime in crypto.Amira (23:22):So let me push on both points because I think this is really textured and no one knows more about this than you two, I think. So there are two people that might push back on what you just said. One is, I would say the folks that I think are especially concerned about crypto's usage for money laundering. Those people might say, "Yeah, but you're seeing the rise of privacy focused chains, of blending services, these things just make it impossible to obscure the movement of money. It's only a matter of time before we see these things succeed." And so maybe the technology's working for us now, but you're the first to say that this tech is early. How are we going to be able to catch terrorists and oligarchs once stuff advances?Ari (24:02):Yeah. No, it is still a little bit sort of a whack-a-mole. But it always has been in sort of the cat and mouse game between law enforcement and bad actors. I will say that so many of the big crypto investigations over the last few years involve mixing services, they involve privacy coins. Law enforcement ultimately was able to make those investigations using a combination of blockchain analytics like TRM, like Chainalysis, but then just great police work, off chain police works, subpoenas and search warrants, putting together the pieces.Amira (24:30):Is there an example that you can go into on that front?Ari (24:33):Yeah. I would say the Bitfinex case is a tremendous example actually. So I mean, essentially what you had there was a 2016 hack of an exchange where the money just sat there in a wallet. And then all of a sudden you started to see it move over the course of years across blockchains.Amira (24:49):And for background, for folks who aren't familiar, tell us what the broad strokes, the Bitfinex hack.Ari (24:54):Sure. Yeah, so really just that until recently, right? It was at the time one of the largest crypto hacks. About $70 million of Bitcoin was stolen from the Bitfinex exchange. A hacker breached these cybersecurity and stole about $70 million in Bitcoin. That money basically sat on an account for a while and then started to move in these individuals. They basically used every office station technique in the book, from mixers to privacy coins, to dark net markets and automating transactions which means you programmatically move funds across blockchains in order to obfuscate. Well, ultimately law enforcement used blockchain analytics tools to trace and track those funds through mixers and dark net markets. And ultimately, to be able to seize what grew to be about $4.2 billion, the largest seizure in US history, ultimately sees those funds.What's so interesting about crypto, and I think Sigal made this point earlier, is the blockchain is forever. So you don't just have to be ready for whatever the analytics tools and whatever the investigation tools is when you do the hack and when you start to launder funds. You have to worry about what it's going to look like five years down the road, what the technology is going to look like. Because law enforcement was able to follow those funds across years and across blockchains, ultimately actually arresting a couple in New York city a couple of months ago and charging them with laundering the largest seizure in US history. So there are definitely powerful, anonymity enhancing tools out there, but I will say that law enforcement is still making a lot of these cases.Sigal (26:38):Yeah, I would just add. I mean, like in this very early days, still nascent technology, the reason that some of the largest seizures of illicit assets in history has come from crypto is not because there's more illicit activity in crypto. For all of the reasons that Ari just mentioned, it's just in many respects easier to trace and ultimately to disrupt than what you have when people move all kinds of assets through shell companies and like all sorts of different parts of the world. That's really important because if you just look at the headlines and you say "Bitfinex, largest money laundering seizure in history," then you may just jump to like, "Oh, of course, because it was crypto." But no, people are just using crypto for bad things. It's really because law enforcement now with blockchain analytic firms, et cetera, and prosecutors have all these amazing tools at their disposal.Silk Road was another example. I mean there was a seizure last year or the year before of a billion dollars worth of, I think it was Bitcoin, that traced all the way back to maybe the earlier days of Silk Road. And boom! All of a sudden, money moved and they were able to pounce. I mean, frankly, if you're a bad actor, I would say as more of these cases are like coming to a fruition, stay away from crypto. There's a very decent chance you're going to get caught.There's also this narrative that I think has largely tamped down, but there was a narrative that crypto was going to be used on mass for sanctions evasion in the Russia context. And for a number of different reasons, I just don't think that, and I think Ari would probably agree, that's just not going to be the case. It's not that it couldn't be used for some, but Russia has been very good at money laundering for a very long time through things like real estate and shell companies and all kinds of different mechanisms that we've investigated for many, many years. With crypto, there isn't like the liquidity to move assets at the volume or scale that they would need to do that. Plus, if they try to, boom, the TRMs and Chainalysis and law enforcement kind of actors would likely be able to, at some point, quickly detect it, plus you have all these regulated exchange who have done really a terrific job working with law enforcement to be able to help trace and track and disrupt this activity.Ari (29:06):The only thing I would just kind of add to that, I think Sigal makes a great point at the end there in particular around compliance. I think there's this sort of sense that, "The wild west" is what you hear thrown around in terms of sort of the regulatory landscape. And at least on what we're talking about today, sort of that AML national security space, look, crypto businesses that operate in the United States are treated as like any other money service business for purposes of this. When you're looking at sort of the large exchanges where so much of the liquidity is today, they have robust compliance controls in place. They have compliance officers, they have policies and procedures. They use tools like TRM and Chainalysis in order to monitor transactions. This is not the wild west when it comes to stopping sanctions evasion when it comes to stopping bad guys.Ari (29:51):I mean, look, I think the reality is, there is certainly illicit activity occurring in crypto, but honestly, illicit activity occurs in any thriving financial system. Bad actors would not want to use it if it wasn't working, that's certainly true of cash. That's certainly true of sort of anything else. And as we see the growth of this economy, we're going to see more illicit activity just by the nature of it. But as an overall percentage, it's going to remain very, very low because I think as Sigal mentioned, it's not a great way to launder funds. It's not a great way for illicit actors to move money because we're watching it all the time. It's not just blockchain analytics and law enforcement. I mean, the coolest thing is when you jump on some of these Discords or on Twitter and you watch these super sleuths and parts of these different communities develop that are in these like open source tools that are following the funds in a hack. There is a self-policing element too, in this community that has never existed before when it comes to sort of following the money, watching financial flows.Amira  (30:50):I think the headline from this episode's going to be advice from former Treasury officials, if you're a terrorist financeer, don't use blockchain.Ari (30:57):100%. Never use crypto. Yeah.Amira (30:59):This has flown by, and I feel like I have a million more things I could talk to you both about. But in our last couple minutes, maybe any advice you have for your peers who are in your shoes today, talking about sort of the growth of this new industry. What would you tell them? What do you wish you could whisper in their ear? Or maybe you've already whispered in their ear.Sigal (31:14):Look, what I say is, number one, you have to interact with the technology. You have to meet the entrepreneurs, the developers, the founders, to really understand what's being built. I mean, I had amazing folks around me in the government, but there's nothing to teach me to talk to me about this stuff. But there's nothing like interacting with someone like Anatoly or what have you to really see and envision what the future can look like with this infrastructure. So if you really want to understand what's happening, get out there, interact with the technology if you can. There's all kinds of ethical restrictions that don't allow enough people to be able to do that, but there should be mechanisms to allow you to interact with the technology, number one.Sigal (31:55):And number two, be open minded. Learn what's happening, what can the future look like, why do we think ultimately, why are there so many of us who've left government who are investing so much of our time and energy in these technologies because we actually believe that it's quite possible that this is where the future of finance lies. That's number one. Number two, if you're looking at how to regulate it, don't just put your mind around all the old tools that you know that you've come to rely on for the last century, right? This is a fundamentally new technology. It's transparent in a way that we haven't seen before. It's open source. There's so many different attributes of the technology that can help mitigate risk. And so be open to fresh new frameworks that potentially in my opinion not only, let's say on the AML side, can continue to drive illicit activity out, but really, really importantly can bring many more people around the world access to the financial ecosystem.There's 1.7 billion people, at least as of 2017, who didn't have access to banking. We got to solve that problem. It's not enough to go to inter agency or multilateral meetings all over the world and talk about it in five minute interventions, which is often what happens in these meetings. We got to really find the technology that can help solve those. And then US people, they need to really focus on how can they maintain that leadership. It's not going to be by calling things wild west and it's not going to be by only seeing things through the lens of old boxes and old frameworks that were built up when we were using the telegram. I mean, not the app Telegram, like those telegrams that they used in the '30s. And then also, perhaps not the same frameworks that we were using when we were still using the rotary phone. I mean, this is fundamentally new technology. Let's understand it and regulate it in a way that makes sense in light of the technology and allow it to experiment and grow so that we can build something out really together that can be truly extraordinary.Ari (34:13):I think that's so beautifully said. I share a lot of those sentiments. I've been lucky to have really the coolest jobs that you can ever have, so don't take this personally, Sigal. But I have the coolest job that I've ever had now. I think it's because I've just gotten to sort of engage with this incredible community of builders and innovators. And they all understand, I think, uniquely that we're building essentially a new financial system. I think it's so important that regulators sort of also embrace that moment, that this doesn't have to be the same. We don't have to do what we've done before. We can work with the technology. We can work with these builders sort of build something new. I think Solana is an amazing example of this because the focus on speed and the focus on sort of that incredibly strong community of NFT builders and gaming, and really I think all the things that are starting to develop to me are like really the future not just of kind of the technology, but really also compliance and regulation.The metaverse is not going to be a place that is entirely unregulated. It's going to be regulated, but it needs to be done in a super smart pro innovation kind of way. I'm so hopeful that these communities that I feel like I have been lucky enough to engage with over the last year or so, that regulators and policy makers are also engaging with them. So yeah, no, it's an incredibly exciting time. I don't know, I get up every morning kind of feeling that. I think it's sort of like, how do we inspire regulators and policy makers to kind of feel that same way.Amira (35:39):I'm revved up just hearing you about talk about this. Let's go.Ari (35:41):Let's go.Amira (35:41):All right.Ari (35:45):Sigal and Ari, thank you both so, so much for your time. We really appreciate it, and in giving us the inside view of what it's like to be a regulator dealing with these issues. I think I've learned a lot and I think our listeners have too. Thanks a bunch.Sigal (35:56):Thank you so much. And thanks for bringing us back together.Ari (35:59):Thank you so much. I loved it. Thank you so much.Sigal (36:02):Thank you. 

Kanav Kariya (President, Jump Crypto) joins the Solana Podcast to discuss his optimism for the future and the many areas in which Jump Crypto is innovating in the crypto and blockchain space. Austin Federa (Head of Communications, Solana Labs) guest hosts. 00:49 - What is Jump?03:07 - The path to operationalizing crypto06:00 - Optimism for Crypto10:49 - Discovering and Building in Crypto with Jump14:24 - Personal Journey at Jump16:43 - What's being built at Jump?17:55 - Reasons to want to build19:39 - What does Pyth offer?22:22 - Criticism about conflict of interest26:30 -  How Web 3.0 facilitates resource coordination28:46 - Data contributors benefiting from onchain data31:01 - Token Plans for Pyth31:46 - Message bridging34:48 - Wormhole, stable coins and asset tokens37:36 - Time synchronization for cross-chain dApps39:14 - State storage on wormhole for dApps40:21 - Is Wormhole layer 0?41:14 - Wrapped NFTs44:13 - Jump's position towards NFTs48:36 - Exciting things in the ecosystem49:43 - Custom silicon / FPGAs53:22 - A parallel execution model? DISCLAIMERThe content herein is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. Those who appear in the content may have a financial interest in any projects referenced, and any content herein is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.  This content is intended to be general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented without undertaking independent due diligence and consultation with a professional advisor. Austin (00:10):Welcome to another episode of The Solana Podcast. I am Austin Federa, sitting in for Anatoly again this week. Today we've got a pretty special episode I think. I'm really looking forward to this conversation. I think it's been a long time coming with a few false starts. Today we have Kanav Kariya president of Jump Crypto, or do we just say Jump at this point?Kanav (00:32):Yeah, Jump Crypto is good.Austin (00:34):President of Jump Crypto, which maybe this time last year very few people knew existed, very few people knew what you guys were doing, what you were building, what your role in the ecosystem has been. So yeah, I guess let's just go ahead and Jump right into it. What is Jump Crypto and how did it come about?Kanav (00:51):Yeah, thanks for having me on Austin. So for context for the audience that aren't very familiar with us, Jump is historically a prop trading firm founded over 20 years ago in the pits at the CME. Today one of the largest quantitative trading firms in the world. And we started a crypto division over seven years ago. It started as an intern project at the University of Illinois, where we were running a miner in a closet and building some trading infrastructure.And today we've got over 150 people on the crypto team doing a lot of different things. So the way I like to describe our business is spitting it into three primary pillars. One is prop trading, which is exactly what we do on the other side of the house, we build trading intelligence and we scale it. The second piece is building and that's the piece that I hope we'll get to talk a lot more about on this call and it's closest to my heart and closest to the heart of the team.And that's in building pieces of infrastructure, really streets and sanitation for the space and a couple of the marquee projects that we've really focused a lot of our efforts on have been Wormhole and Pyth. And of course, along the journey, we've aligned ourselves with a lot of the major ecosystems in the place, including Solana, Terra and a whole number of others in building a lot of different things across those platforms.The third bucket is venture, I like to call ourselves accidental VCs in that we found opportunities to add value, or we had requests come in to work with partners over the last six years in various different capacities. And we found that we could be meaningful in those contexts and work with people that were solving problems for us. And that has now grown into the venture division that's deploying across the space.Austin (02:31):I want to get into a lot of the work that Jump is doing as core code contributors and supporters of projects in the ecosystem. But I kind of want to start a little bit with that journey. I would say that the transition from prop trading equities and commodities to prop trading crypto, that feels pretty organic. And there's a number of firms in the space that have also made that transition. Albeit you guys seem to have made it sooner than a lot of other firms in the industry. What was that process like of going from deciding that you wanted to add crypto to actually operationalizing that? And then we'll get into some of the journey to actually becoming builders.Kanav (03:07):The project started as an intern project at this thing called Jump Labs. There was a research lab at the University of Illinois and was meant to work on cool stuff with the university on working on fun problems. So alongside the crypto stuff we were doing when I was an intern, there was a VR project working with professors at the university to abstract away trading screens. And there was work on some interesting machine learning and networking problems.And the group has grown out of that. And of course matured out of these things, but we've definitely strongly retained that ethos. Now I want to caveat this by saying we definitely didn't have oppressions in being infrastructure builders. When we started the project in the lab that many years ago. It's been a very organic and natural process for us. And it's hard to make the instant leap from prop trading to what we're doing today, but it's easy to reason through the steps along the way.As one of the earliest large trading firms in the space, we had a lot of requests from institutional liquidity exchanges, OTC platforms, and importantly projects that were looking to solve trading and liquidity related problems. And those conversations gave way to us exploring a lot of DeFi projects and a lot of L1 platform projects that shared a lot of the problems they were thinking through on complex financial system design or programming in resource consumer environments, which are very natural and germane to a quantitative trading firm. And those conversations led to jamming about foreign ideas to implementing governance proposals, to maybe starting to write a little bit of code in them. And then all the way into committing over 50, 70 engineers that we have today in building through the space. And that process involves a few different steps. One, it involves the willingness for the institution at large to be mentally long the space. It requires a recognition and frankly a little bit of a taste of the upside.It requires flexibility, which of course, prop trading firms just generally naturally just have to have. And then everything else you can just learn along the way, right? We've done a lot of things wrong. We've stumbled over ourselves a hundred times, but you've got to keep digging shots on asymmetric upside and with all the resources that we've had at the firm I think we've been able to make some good ones.Austin (05:20):Going back to you last year, Jump Crypto had sort of a moment where it decided it wanted to make itself public. You wrote a blog post that was laying out. I wouldn't quite call it a thesis, but laying out an idea of how you view the space and the role that something like Jump could play within it. One of the things I was struck by going back and rereading this is your level of optimism in this post, right? Which is something that you don't see from many financial trading firms. You see them seeing opportunities to make lots of money. You see them making lots of money. They're very profitable endeavors, but you usually don't see optimism contained within it. Where'd that come from?Kanav (06:01):That's a pretty good question. So quant firms today are basically research and development firms, right? So the people that build trading systems, that build the intelligence behind trading systems are generally of quantitative background. They generally have PhDs in either statistics, machine learning, physics, those kinds of endeavors. And the people building the platforms are low latency high performance systems engineers that there are different optimizations across every level of the stack to build robust, scalable, fast infrastructure.The environment down to the lab five years ago was about exploring this space. It was like, what does this space mean? Right. And it wasn't about, okay, how are we going to make X billion dollars kind of getting into this endeavor? It was about exploring it. And I think it attracted that kind of people and it occurred that kind of environment.And the leadership that stays since then has kind of embodied that. And just personally I'm a raging optimist, I believe in technology, I believe in the future, I believe in building towards something bigger. And thankfully I think the firm has shared those ideas and I hope I've been able to shape a lot of the culture and behaving that passion.Austin (07:10):Where do you think that optimism in yourself comes from? There's a lot of things you could have gone into coming out of school. What about both, something, an organization like Jump, which is undoubtedly a great place to go work. But you stay there for a while now, you've worked your way up, you're now in charge of the crypto division. Where does that sense of optimism in you come from and what makes Jump the right place for that?Kanav (07:33):I feel something for Jump because they had a cool internship program and they had a lab on site and they were working on really fun problems in a well resourced environment, that just made it fun and attractive. And after I had the opportunity to intern there for eight to 10 months, I kind of got a sense for the possibilities that existed. And this is the flexibility that the whole space had. And it was like, you come in, you get to make a lot of bets, you get a lot of resources. And if you make good bets, you get more resources and then you get more resources. This is the only place I've ever worked. I think it would be rather unique to have that kind setup. And again, no, I wouldn't say it was a passion moment to come in to Jump and know that I would be able to build suites and sanitation for crypto. But I knew I would get to do a lot of really cool stuff, work on fun problems with smart people. And where does optimism come from?Austin (08:25):Yeah. I mean, you look at a space like this. It's been through boom and bust. There's tons of amazing projects being built in the space that end up going nowhere. And especially from the vantage point of a trading firm, right? One of the secret sauce of a trading firm is it can make money in an up marketing, it can make money in a down market, right. And that is the advantage of a professional trading operation versus a more passive trading operation. But again, like those are not usually characteristics that breed optimism. Those are usually characteristics that bleed margins, where you're optimizing 1%, 2%, 3% here. So you can compound that over a year and it will make a marginal difference. But again, that's not usually an optimistic space, that's a very functional space to work in.Kanav (09:10):Yeah, it is. And traditionally I don't think it lends itself to naturally just exactly this. Jump culture has kind of always been a little bit unique. So Jump also has a number of other kind of divisions that work on non-high frequency trading stuff. Historically, since about 2011 or 2012, had a VBC arm called Jump Capital that invests in growing technologies in this space. They've had some cool endeavors in the biospace working on automation there in healthcare.And so the founders have generally been optimist. They definitely believe in the future. They've been able to take shots at things that are going on. And even if it's not naturally germane to the trading business in and of itself, the culture itself lends itself to being able to do something like this, which is a really awesome combination of knowing how to monetize, but then also knowing how to build. Yeah, it's been an absolute pleasure to be able to soak in from that environment.Austin (10:04):Let's look at the building for a bit. I think it's pretty open secret at this point that Jump are core contributors to Wormhole and Pyth, you've been very heavily involved in that process. Take me back to some of the early days there where you are internal to Jump, and you're saying like, "Hey, we need to do more than just trade and invest in this space. I think we can actually build." And especially you're talking about this from the perspective of sanitation and roads and the very base level infrastructure. Crypto's been around for a long time. I think most people coming into the space in that time horizon wouldn't have necessarily looked at and said like, "Oh, there's very base level features that are missing from this ecosystem." What was that both discovery process like, and then the process of convincing everyone internally that this was worth dedicating resources to?Kanav (10:50):Yeah, the discovery process was very organic. We had a lot of inbound from people looking to solve trading and liquidity problems because a lot of people in the space, even though we were quite kind of new of our trading presence, and as one of the early trading firms that really was trying to make bigger pushes in the space. When you get to talk to awesome founders every day about all the problems that they have and get to build relationships with them, you start to uncover a lot more of the problem space that exists, start to internalize a lot of it.And once you've got the opportunity to sit in that for a little bit, and I'm sure you see this today. We are much later on than we were when we made a lot of those big switches, but there's still a lot of opportunity, right? When we were kind of ideating on the origins of Pyth, the conversation we had was, look, our whole thesis at Jump Crypto is to be as long aligned with the space as possible, right? We're trying to get the maximum exposure we can on the space that we think is going to be explosive. And we're trying to ideate this ways which we put that quote unquote trade on, right? The best way to put a long trade on in a growing space, and the best mode to value capture is value creation. There's definitely a lot of inefficiencies created by hyper growth, right? And there's room to capture those inefficiencies. But those are small in magnitude relative to the absolute value creation at play.And then there's a value creation capture correlation that you think about there. So if you think about it in that lens and you know that you want to be big contributors to the space and just aim to create a lot of value to both, then you start thinking about what the opportunities are within your realm to be able to engage in that capacity.Austin (12:27):But at some point there's a meeting, or you have a boss who you report to, and you have to go down and sit down in front of him or her and say, "Hey, I want to spend a lot of money to hire a lot of engineers to do something that's going to be totally public and totally open source at a firm that historically likes to stay out of the news."Kanav (12:46):It was a few meetings.Austin (12:46):Yeah, I'm sure.Kanav (12:46):And it's kind of baby steps along the way, or big steps along the way that compound into a complete shift and a big switch of that nature. We had this summit, we called the August summit a few years ago. And we went down to an offsite location and we talked about what being in this space means for us and how we differentiate. And I remember we showed up with these sheets that we went around and distributed to people. We were like, this is the toolkit that we have. This is the opportunity set in the space.And everyone kind of had their own, things went on, but that was one of the approaches that I've taken. And if we believe this is where the space is going, this is the opportunity set that we can tackle. And these are the levels that we have to pull, right? And then you socialize that and you try to convince them people that there is opportunity to be had here and you get buy-in to take a first little step. And once you get the buy-in to take a first little step, and you kind of really show the big medics of differentiation in a native space, you get the buying for the next step.And then suddenly it's the entire [inaudible 00:13:47]. You get the whole kitchen sink thrown behind you, and then you are kind of propelling to this part that you want to be at. And that's the whole thesis of Jump everywhere. You take bets with asymmetric upside and we throw the kitchen sink at things that are working. And a lot of the stuff that we were doing started working.Austin (14:02):How is that journey for you personally, going from an intern involved in a few projects now to the Jump Crypto teams over a hundred at this point?Kanav (14:11):Yeah. We've got over 150 now, hard to keep track.Austin (14:14):Wow. Yeah. From a leadership role, and from your own perspective, how has that transition been? What parts of it were easier for you? What parts were harder than you were anticipating? Scaling yourself is often much harder than scaling a company.Kanav (14:28):Without a doubt, yeah. I started in the team as an intern like you pointed out, working on software problems. I came back to the team a year later in a formal full-time capacity, working on quant problems, which was to do with predicting crypto markets, building alpha and kind of scaling that piece. And the early conversations with projects where we were trying to solve liquidity problems was an area that I got really, really interested in. And I just kind of went about trying to build that a little bit further.Over time that led to a transition from engineering and quantitative work to more conversational business development work, just having spent years across all those functions and natively knowing how to live them has been the biggest tool that I've been able to build in the toolbox. Now that doesn't teach you how to manage a hundred people, that doesn't teach you how to propagate culture. It doesn't teach you how to scale hiring strategy. Doesn't teach you how to value the troops when things are low.I definitely want to make a claim that there are many who are close to a finished product, rather than trying to be good at everything, good at every one thing, we always try to be excellent at a few things. And then by force just propel everything forward. I'd say some of the biggest lessons I've learned, the biggest mistakes we've made, definitely been in the shape of trying to shove square bags in a round hole. Where in a trading environment it's like the only people you have on your team are engineers and quants. They're just smart people that can solve any shape of technical problem you throw them at. When you move that towards sales and marketing and product and everything else, that all kind of falls apart.Kanav (16:05):And you need people that are able to natively live within specific sub domains across those functions. And that's something that we've been trying to scale in. I spend basically all my time hiring and trying to focus on making sure our zero to one projects have a lot of momentum. But yeah, it's been an awesome journey. And of course I have support from a company that's grown to a 1500 people as the largest quant trading firm in the world and so lots of guidance and help along the way.Austin (16:33):Let's talk a little bit about that work you guys are doing and actually building. So if I understand correctly, the two projects that you are mostly core contributors to is Pyth and Wormhole. Is there anything else that you'd put into that category of engagement?Kanav (16:46):That's the highest level of engagement for sure. We do a lot of things across the big ecosystems of course. We can talk all of what we're doing with Solana. We're always trying to get deeper. We built an NFD project on the Metaplex landscape after their investment as an intern project. That was a real fun one. We've been core contributors to some of the projects that are coming out on the data landscape today. We've worked on a lot of the mechanism design that goes on, on the other one. And there's a few other projects, but the highest levels of engagement have definitely been with Wormhole and Pyth.Austin (17:18):Looking at over that landscape, Pyth high frequency Oracle. But again, Oracles, they've existed for a long time. There's a number of name brand ones that got their start on the ecosystem in the 2017 range. Lots of people have had ideas about Oracles over the years, some of them have worked, some of them haven't. Similar to Wormhole, bridges have existed for a long time. Bridges are actually the basis of how any L2 works, right? Both of these are hardly new ideas I would say. What about looking at the landscape gave you guys the confidence to say, not only there's a need for something different, but we can help build something different and better.Kanav (17:57):Again, just like 100% organic. In that August summit, we were looking at some of the biggest things we could do. And a big problem that everyone kind of kept voicing to us is that they don't have access to equities data. They don't have access to fast data so that they don't have to have things like clawback mechanisms and all these different things that LPs don't get direct on every turn, right?The fundamental thing with financial oracles is that they're used to settle risk transfer. They're used to set a price at which two parties exchange value. And if that price is latent or slow or not accurate, one side gets left folding the bag. Now, DeFi, the way protocols are constructed, the side that gets left holding the bag is either the LP that's contributing to the protocol or the protocol stakers or a key stakeholder in building the ecosystem.And the takers are able to take all that value. If you are going to build something that's going to house all of OTC, if we're building something like synthetics for example, and your protocol stakers are taking the other side of every trade that happens on S-Oil or SSNP, you need to make sure that's the right price. Otherwise you're just going to get up the way down to zero. When we were ideating on what the biggest ways we could contribute is let's contribute our data. And the first idea was in let's start, let's go and figure out how we bring together a network of people to build an Oracle.It was how do we contribute our data, right? And we browsed through the category of solutions. We had all the conversations. We spoke to dozens of investors and builders in the space. And there wasn't an easy way to slot in high fidelity financial data, into existing Oracle solutions. And so we spoke with some of the founding partners of the Pyth program and came to consensus that there was an opportunity here. And that led to the first step and we just kept building sets.Austin (19:39):In your mind, what is it that Pyth offers that other Oracle solutions don't offer?Kanav (19:46):Pyth is a very hyper specialized tool for high fidelity financial data, specifically financial data for settlement of risk transfer, right? If you think about the way the market data landscape looks today, it's different across asset classes, but there is a class of people that have access to high fidelity, streaming price data that they can legally distribute and make available to a protocol, create like an Oracle program.One you need access to very fast financial data, which is hard to get and even harder to have a legal right to distribute. You want to make sure that the people who are publishing the prices are the real owners of the data so that you can set incentives for the data to be accurate, right? If you are staking the value of a third party aggregator, their third party aggregator has no skin in the game. That's one of the other kind of fundamental things that you have to think about.And third, you need to acknowledge the fact that a price is not absolute. A price for Bitcoin has about 20 liquid trading venues that are distributed across the globe that can often be fractured, that can often have all kinds of different idiosyncrasies. And that being able to accurately determine the price on most relevant venues and build a dispersion is really important. If you think about kind of all those things together, you want very fast access. You want a broad range of access of independent sources, not reporting from the same source.You want very high liveness and uptime of course, and you want kind of good legal clarity that that price can continue to be distributed because you don't want the application to suddenly get turned off when the regulator says, "What's going on?" And those are the kind of key things that Pyth has really focused on very heavily to build that piece of infrastructure and Solana was the perfect opportunity. Before Solana there wasn't a way to create a high fidelity fast Oracle. There just wasn't a need for it and there wasn't a platform for it, right. And so all those things just came together.Austin (21:49):One of the criticisms that you'll hear about Pyth is that because of its structured model here, where the people providing data are permissioned at this point and are also like firms that are professionalized trading operations themselves, that there is an inherent kind of conflict of interest in that system. With any system in blockchain, you have to assume everyone is trying to cheat, everyone is trying to extract the most value possible. How have you gone about setting up incentives to make sure that the users of Pyth and the contributors to Pyth are not at odds with one another?Kanav (22:27):Yeah. I think you made a totally fine point there in that we are building for byzantine systems, right? And so that's the kind of incentive design you've got to keep in place. I'll frankly say I think that claim is a little bit ludicrous for a few different reasons. Once you peel back the onion just a little bit, and I'll talk through some of the reasons why.Austin (22:43):Let's peel back the onion.Kanav (22:44):One, you've got to first understand that the amount of value that can be created in actually pulling something like Pyth off successfully is dramatic. And the forms that are building this are now incentive aligned to make that happen. But two, this is an open sourced protocol, it is decentralized, and you can look at exactly what the inputs are, how they're being aggregated and what their resort in price output is.Three most importantly, there are about 50 financial firms that are submitting independent price data to this article to construct final outputs. And these financial trading firms aren't friendly with each other. This is the very first time that a group of highly adversarial trading firms, banks, exchanges, and ODC players across the entire space have come together and said, "Let's go build a piece of infrastructure." And one, I think that needs to be celebrated a lot, it's a huge win.But two, the trading firm, there are 50 global financial trading firms contributing their proprietary prices directly to Solana on the Pyth program today. We have realized that these 50 comprise of between 60% to 80% of global asset class volumes at this point, given the network of participants that have aggregated around this protocol. When you are that big of market share that you're covering that kind of breadth, the participants in the protocol themselves are on the other side of each other's trades almost by definition. And so who's manipulating the price against who? Let's kind of just start there.The system of incentives that set up in this taking protocol, you can read through this on the Pyth white paper has some really intelligent aggregation algorithms that put all this data together, that identify the quality of each of these independent data publishers that then sets out a mechanism to aggressively punish providers that don't have good prices. And good prices can mean I published a malicious bad price. It can mean I have slow prices. It can mean I published, I had a bug, it can mean anything.The incentive design mechanism is meant to reward data providers that are not honest, but that have great data. And that's a fundamental difference in how system designs, we're not kind of rewarding agreement, we're rewarding prediction. And so you are rewarded for correctly predicting the price that would come up rather than for rewarding agreement between parties, and which can both have different kind of models and can both work in different ways.But there is almost no possibility for one collusion across these landscapes, given the composition of the people in the network. And the incentive structure again is obviously explicitly set up to discourage that. Third, all these forms are heavily, heavily regulated. I spoke about 20 years of its reputation and a giant, giant business behind kind of making a lot of this happen. And we're definitely incentive aligned to make this thing as successful as it can possibly be.Austin (25:39):The Web 2.0 world and the rise of FinTech apps has largely taught people that organizations that claim to be on their side often aren't. There's very legitimate reasons from a market making perspective that during the game stock run up and squeeze, users of Robinhood and other FinTech applications, their trading was turned off. Now, there's a bunch of really good backroom reasons for why that might have happened. But the effect is what matters to the retail trader, which is that they were using a platform that they thought gave them equal access to a market, that platform did not provide them equal and neutral access to a market.I think when people look at something like Pyth, it wouldn't be crazy to say that, well, the same incentives that made us think that Robinhood was on our side, could also be applied to Pyth. What is different about the Web 3.0 space and the construction of something like Pyth in your view that makes that not something someone should worry about.Kanav (26:37):Web 3.0 is fundamentally any means of resource coordination, and it facilitates that by, one, facilitating the export of trust. And the export of trust is actually one of the big reasons why the whole Robinhood debacle went on, right. They basically ran out of margin requirements in order to continue to clear trades on one side, since it was so directional.And there is this massive web of intermediaries that set up all throughout traditional finance for the express purpose of establishing trust as the FCM, the DCM, the clearinghouse, all the other three letter acronyms. And all of them exist to make sure that when a match occurs on any platform that actually settles into a financial trade.In crypto the match is the execution. And that's facilitated by the fact that you can export all the trust of executing a piece of code onto Solana, onto Ethereum, onto the blockchain itself. And that's unlocked this completely new means of resource coordination, which makes things like Pyth possible. It means that you can explicitly lay out a system of incentives in a closed loop fashion. And regardless of who's uploading the code, or who's proposing designs or architecting any of this, everybody is independently participating according to the incentives laid out very plainly by the program itself.And that means DRW and Jane Street don't have to trust Jump when they decide to publish prices to pay. That means they look at the program that's running on Solana that they can read. They look at Solana's trust model and decided they can or don't trust Solana as a platform. And then contribute to the platform that then self executes and lives on its own terms. And the fact that we can allow different kinds of state to compose in a trustless fashion is the entire revolution Web 3.0, that's basically what the whole space has been building for the last 10 years. And that's what makes Pyth possible, it simply was not possible before.Austin (28:32):What does something like Jump or Jane Street or anyone who's a data contributor to Pyth, what do they get out of it? What is their incentive apart from any rewards that might be generated from contributing data. How are they then going back and using this on chain data in their own operations?Kanav (28:51):There's a few elements. And so one, it is fundamentally a two sided marketplace, right? It has data publishers and it has data consumers. And the other interesting thing like Uber did for taxi cabs, where it created a marketplace where cars could now come online, created this marketplace where data that was once latent came online.Jump is publishing its own trades to the Pyth network. That is IP that it has the legal rights over, has only just been a cost center so far, and now has the opportunity to get monetized. And that's the same for all of the trading firms that sit in the network. It's a lot of people to turn cost centers into potential elements in the marketplace and that bootstraps the supply. The consumers of the data obviously are paying for this extremely created highly robust set of data inputs that then get aggregated. And that creates kind of flows in one direction. And then like your regular two sided marketplace, it accrues value, right?All the data publishers today in Pyth have some sort of stake of asset interest in the thing succeeding. And there is a set of incentives that then rewards them for the correct participation going on with fees, rewards, all those kinds of things. And all that is in gross detail laid out in the white paper and we can go over some of that. But the off chain applications and some of this stuff is also quite interesting, right?So if you look at kind of back office systems around the world at forms like Jump, you don't need microsecond level access to financial data, but you need that for your trading engines because otherwise you're playing at a disadvantage related to the field. But in order to make sure that your clearing prices have happened correctly in order to make charts in order to do something like a trading view, in order to get on the Bloomberg terminal or to be on a ticker somewhere, all these applications are now easily facilitated by subscribing to something like Pyth, that's living on an open kind of blockchain area. And so a lot of the off-chain use cases are getting more and more interesting I think over time. The fundamental value is in creating the pricing source for on chain data. And this is kind of like an awesome thing that just falls out of it.Austin (30:56):That's a really interesting way of thinking about both the incentive alignments and the rule that the data providers versus the data consumers play in the market. Are there any token plans for Pyth?Kanav (31:07):Yes, there is a token plan for Pyth. You can read all about it on the white paper, no comments on timing or anything of that at this point. And that's going to be a networking governance decision, but I'm sure in the near future.Austin (31:16):Transitioning over to Wormhole, which is the other project that Jump is heavily involved in as a core contributor of the code. When people look at wormhole, I think it's very easy to look at it and say, asset bridge, multi chain, cool, fundamentally utility. The first thing I noticed when we were talking about this and looking through it is this whole component of allowing different smart contracts on different blockchains to communicate with each other. I think most people understand how asset bridging works. Can you talk a little bit about this whole concept of message bridging?Kanav (31:51):Yeah. And this also kind of goes back to your question on, how do you decide that there's an opportunity here when bridging is something that people have talked about for a while? When we were kind of ideating with everybody else on kind the Pyth's team and the network on how Pyth goes across chain. Hendrick and team were building Wormhole as Solana Eths token bridge on the hackathon project at [inaudible 00:32:17].And I called Hendrick and I asked him, "Look, is there a way to generalize this thing so that we can get Pyth messages across?" We're building this Oracle thing on the best, fast, scalable censorship resistant message bus we can, but we want to get it to all the other ones that operate on a slightly different resolution. And through the course of that conversation, we came to a conclusion that enabling generic message bosses to allow this cross chain composability in a much more high dimensional fashion than just the token bridge word was a massive opportunity set that had to be filled.And so when we launched last August as a completely generic message bus. And what that means is that any piece of state that is created or lives on a blockchain can be included as a message that then gets communicated to any other blockchain environment. And so if you think about Oracles, you think about a governance board, right? Uniswap passes a governance board on Ethereum, produces workloads on a lot of different chains. The outcome of that governance board has to, in a secure, reliable fashion, be communicated to all the other geographies that Uniswap lives on. That needs to be encoded as a message.And so Wormhole has outpost contracts on every chain that is deployed, it is deployed over eight chains today. The outpost contract just listens for a message that is sent to that contract and the Wormhole network of guardians attests to that arbitrary binary block. That block can then be picked up, relayed to any other blockchain environment, verified that is coming attested from the homeowner network and then decode to do anything arbitrary and interesting. And so generic message process have really exploded over the last year. We've seen so many awesome applications being built on it. And I think we're just kind of scratching the surface, right? There's a lot to do here.Austin (34:04):When I think about messaging, I think about how a lot of the models right now for cross chain communication of assets are a little tedious and maybe have more risk inherent to them than are necessarily required. A very centralized example, USDC, right? You can go to FTX and you can withdraw USDC as an ERC-20, as an SPL token or across several different networks. And what's happening there largely is because the mint authority to that is centrally controlled. They're able to issue new, quote unquote new USDC natively on each layer that USDC is supported on. Do you see the capability of developers using something like Wormhole to make that possible for fully decentralized, both stable coins and just asset tokens?Not only possible, but already widely adopted in the Wormhole X asset framework, right? There's over four and a half billion of assets in the token bridge today. And the word token bridge kind of has meant a lot of different things to people at different points in time, right? The old token bridges were bidirectional, state sponsored bridges that sovereign ecosystems would run to communicate to Ethereum, to get liquidity in as soon as possible.And then if you send that across a different bridge, then you would have like a double wrapped and triple wrapped implementation and just an absolute UX nightmare. When you use something like Wormhole's X asset framework, you retain complete path independence as you move assets across the ecosystem. Once you're registered as an X asset, let's take USD as an example, there's a couple billion dollars of USD on the bridge today. It flows throughout the ecosystem using Wormhole on the back end, Terra bridge money, uses one more on the back end to expose one of many front ends to users.When USD flows from Terra over to Ethereum or to Solana to Polygon and then to Avalanche, it retains the same representation on Avalanche that USD flowing from Terra to Avalanche directly or through any other part in the ecosystem would retain. It's a truly cross chain native asset. It doesn't fracture liquidity, it fungus seamlessly, and it allows a lot of cool composition.If you look at something, now like the result in second order effects of this, it's this theme that we've been calling X Dapps, right? So cross chained apps. And we've seen kind of the first marquee deployment of one of these apps in the form of X anchor, which is deployed on the Avalanche chain now, right?And X anchor is just a light set of endpoints that's deployed on Avalanche. And all that does is it lets you kind of hit some functions that then really assets and/or messages bundled or separately or back to the Terra blockchain and then trigger state transitions on the Terra site. Anchor contracts don't need to be deployed to every chain. You don't need to replicate state everywhere, you don't need to stay synchronized continuously. But you allow for outposts and communications and different chains to then communicate back to the home chain using messages and assets. And now the USD that's in the X asset standard can be deployed to X anchors everywhere. And it's a much faster, much more robust getting strategy that has far less communication over.Austin (37:07):Let's dig into just a little bit on like a technical level too. When you're talking about X Dapps or cross chain Dapps that are communicating via Wormhole, you're inherently talking about fractured state across multiple L1s or L2, it's unavoidable when you're ... anything cross chain is inherently working under a fractured state model. How fast does that time synchronization need to be for developers to actually deploy something like an AMM or a club across chain and actually maintain price parody and appropriate liquidity between them.Kanav (37:42):Yeah, I'm glad you brought this up. There's a few different programming models for how cross chain Dapps works, right? One is you try to state synchronize as aggressively as possible. You keep sending messages back and forth. You have allowances, risk limits, tolerances that allow your apps to communicate. And the other is this X Dapps framework where state only lives on one chain and you allow people from other chains to then interact with it.Now, of course that also comes with its own downsides, right? If you look at something like a club and you're trying to trigger a cross chain swap using the club from another chain, you are inherently incurring the latency of the two blockchain transactions and the finality assumptions that you want to kind of work with that. The more stateful your application becomes, obviously the more latency and risk constraints everything through. With something like a lending protocol or like a cross chain anchor, things like that. They are less stateful than something like an order book, but order book is probably the most stateful you can get right in the spectrum of applications.And so any cross chain swap design inherently has to have some additional liquidity back then, that's like fundamental, right? You can ask people to take risk on your behalf. You can have the protocol take risk on your behalf, but that risk exists. There's a lot of ways to program around it and create better user experiences, but fundamentally that's a real problem and somebody has to be compensated with that risk.Austin (38:56):For the X Dapp framework, are you looking to actually be able to offload compute to the wormhole level there? Or is it really just ... The natural extension of this seems to be that eventually there's some sort of state storage on Wormhole that Dapps are able to actually access and leverage with some functionally side chain compute resourcing. Are you guys thinking about that as well?Kanav (39:19):Yeah. The fundamental cross chain thesis is that there are going to be independent, specialized compute environments that attack their own communities, their own audiences and their own apps. And Wormhole is away for folks to leverage state that results from these autogenous environments and compute the solutions on these environments to compose.And you can cut that in a million different ways. You can leverage Solana as a state execution machine. You can leverage Terra as your stable coin asset layer and you can represent this third thing as a NFT thing, or you can bundle them all in. But the Wormhole vision itself right now with all the genetic message capabilities that are out there, in the near term roadmap doesn't need to build an execution layer of its own. It can naturally extend to it. I think you're definitely kind of pointing to something that's relevant.But I don't know if that's the lowest hanging fruit given the capacities that exist in current blockchain compute environment. The vision of course is to make people, Web 3.0 users rather than blockchain users or L1 users. You basically want to deploy resources to the most relevant execution environment with the right community, that's creating the right apps and then expose that to at a higher order to consumers.Austin (40:24):Would you describe Wormhole as layer zero?Kanav (40:28):I’m rather old school, I think of layer zeros as networking protocols and internet backbones and things like that. I think it is maybe a useful analogy for kind of blockchain audiences given how we've very economically can't use the word L1, so I don't have an allergic reaction to it, but it's not my first word of choice.Austin (40:46):What would your first word of choice be?Kanav (40:49):Interoperability protocol. I'm not that creative.Austin (40:51):Yeah. Wormhole is also supporting wrapped NFTs, which is kind of an interesting concept. I think most people don't think of NFTs as something that's been bridged and quite frankly, the numbers on Wormhole on bridge NFTs are quite low compared to the success as an asset bridge or a messaging bridge. What was the original idea of using wrapped NFTs? And why do you think it hasn't caught on as much yet?Kanav (41:20):I think cross chain NFTs as a story are just beginning to play out. So there's about 16, 1700 on the NFT bridge itself. And again, NFTs are also cross chain fungible and composable across environments. They are also part of the X asset framework. And so X assets can mean anything. It can be in rebasing assets like STE, it can be in NFTs. It can be in fungible assets. It can mean anything else, right?The NFT story started to play out as a result of new other ones trying to access marketplaces that supported one or the other chain, right? And so you get to access as new audiences, you get to create experiences with different communities. You get to access different user bases, but we're seeing the experiences get a lot richer. So you see something like [inaudible 00:42:00] come out recently, they got featured on Bloomberg for new cross chain staking program where they have in game elements that kind of change based on cross chain NFT staking that are different experiences with different communities. And much like the asset bridge has that kind of globalization and cross pollination of commercial kind of elements. Cross chain NFTs are globalization kind of culture. And incorporating a lot of those elements across games that live on Solana, that live on Terra, that live on other environments and just creating those kind of richer experiences.And so we're seeing people make NFTs on one chain, come to Solana, fractionalize them, trade them, put them back in, move them over to OpenSea on Ethereum. There's all kind of interesting use case patterns. And so it's definitely been less aggressively adopted than the explosive token bridge or the other generic message applications. But there are still 16, 7,000 NFTs, there are a lot of teams using it for cool and innovative stuff that we just kind of keep up out of the wood works every some time.Austin (43:02):Do you think that's social? Do you think that's technological? Do you think that's just like the ecosystem hasn't matured enough? I think I'm surprised how much ... well, I guess surprises maybe the wrong term. People have a lot of emotional attachment to an NFT, in the same way they don't have an emotional attachment to a Bitcoin. They may have emotional attachment to the concept of a Bitcoin, but I would be upset if I lost my particular Degen ape, even if I got a different one for the exact same value. Do you think that factors in at all to how people view the concept of wrapping an NFT, that it somehow weakens the authenticity?Kanav (43:39):I think for a lot of purists, it does. I think it was just so worthy, right. For the most part, people aren't even going to realize, the large end of this consumers like buying these things, an NBA top shot or air, or any of these other platforms, it's something on the app for them. And eventually it's going to be extracted away as we draw to Eth, we draw to Solana, we draw to wallet, connect wallet, and it's going to be kind of as simple as that. And so we're always going to have purist stakes, but I think that's going to remain within our little chamber here.Austin (44:05):For Jump Crypto in general, how do you view NFTs? There are obviously firms now that are dabbling and market making and NFTs. Is that something that you've looked at and if not, what was the decision not to enter that space yet?Kanav (44:19):It just doesn't take a lot. We are looking at trading opportunities. You are looking about margins, you're looking about what predictive offer you can have, like what the edge you can have on a traders and then how many times you can apply that edge, right? It's just as simple as that. And even if you can get a 30% margin on something that trades a hundred million like week one, I mean, [inaudible 00:44:40] now.But if you have a low volume asset class, even if it has slightly higher edge, and it is harder to predict and more dimensional, this is on a good researching decision. So as that volume changes, we will continue to stay on top of it. And I don't know if these are trading tens of billions of dollars every day, and have really interesting datasets, I'm sure we'll be trading them.Austin (45:00):If the market hundred X in size, you wouldn't be opposed to it, it's just the sizing opportunity issue right now.Kanav (45:08):[inaudible 00:45:08] you can't be the richest man. It's about identifying if there's opportunity and executing all native there is.Austin (45:14):Looking at wormhole, one of the things I do want to touch on is the wormhole hack and exploit that happened a little while ago. It was one of the larger bridge hacks at the time. It was eclipsed a few weeks later by an even larger hack of another bridge, also targeting stolen Eth in this process. I'm sure that activities and projects that Jump has been involved in have had larger losses of money or similar volumes of money just based on the area you operate in. But this is one that inherently to the nature of Web 3.0 is very public. How is that like internally knowing that your core contributors to a project that suffered this kind of exploit, and also that failure is now a public failure, as opposed to maybe where it would've been a private failure beforeKanav (45:56):Building is hard, building in the open is even harder. And building in a decentralized open space where there's a large network of participants, consumers, affected people, the stakes we're playing in, right? That's the stakes that every DeFi application, that every L1 at every bridge and that everything in Web 3.0 that aims to do something meaningful inherently adopts and has to learn to deal with.The hack was big punch in the gut, obviously a big financial loss as well. The fundamental nature of smart contracts is that the code and code can have bugs. And this exploit was kind of deep, deep, deep down in the stack, in kind of like Solana instruction verification account check that was missing. The auditors listed our team that has independently been one of the biggest bug bounty finders in the space missed, and code based at the opportunity to be out in the wide for seven months, kind of had unchecked.The day of the hack, of course really, really rough. Jump is not used to being a public institution. So this was like you said, a very public kind of fallout in nature. I can't possibly have been prouder of the way the team reacted to this incident. We kind identified it within short course of it happening. We pulled the meeting room together, identified the bug, fixed up a batch, managed to coordinate the guardian network to bring it up, bring it down, announce our intent to refill the gaping 320 million hole within an hour of the incident being reported on, and brought the bridge back up within 18 hours to end to end.Building bridges and building cross chain is very, very hard. And that's where the reward for it, building it right, is even harder. You don't even make 320 million decisions very lightly, and this should hopefully signify you how much conviction and faith we have in the code base in bringing it back up in 18 hours. It should tell you about where we think this whole space is going and where Wormhole is going and where interoperability is going and what a core piece of infrastructure in that realm would mean.Security continues to be extremely, extremely top of mind. We have a 10 million bug bounty. We have an internal red team that's basically thinking about breaking Wormhole and our key projects every day. We have multiple audit from [inaudible 00:48:12] with lots of audits going on, pretty intense security review practices, all of which can be found publicly online. And I'm incredibly confident that Wormhole has come out more stronger from this incident. The team has come out kicking and that we're building one of the best and most trusted inter op solutions out there.Austin (48:32):Looking across the ecosystem, let's say over the next 12 to 18 months, what are you personally most excited for and what keeps you up at night? What do you still have worry around?Kanav (48:44):I'm looking forward to a whole bunch of things. So definitely very excited about all the advancements that we are seeing in the succinct proof and zero knowledge space. That stuff is just awesome, it's magic. And I'm just so excited to see all the things that's going to unlock for us. There's a lot of interesting problems in the hardware acceleration space that need to be made to make that possible. There's a lot of problems algorithmically that are kind of being uncovered there. And I think hopefully this conversation has lent on that we have a big infrastructure mindset. When I say streets and sanitation, that's kind of what we think about every day. That's what we're looking forward to. And on what we can build to and contribute to that.Austin (49:19):You said something I got to get a little more info. You said specific hardware to accelerate certain kinds of applications. The only place we've really seen this so far across the entire crypto landscape is ASICs for Bitcoin mining. You see GPU mining optimization, but again, nowadays I wouldn't necessarily even call GPU specialized hardware. It's really commodity hardware at this point that's just deployed for a specific application. When you're looking at the space, where are you seeing actually custom silicon or FPGAs becoming something that it makes sense to deploy?Kanav (49:50):Yeah, I mean, definitely for zero knowledge provers, right? So like two verification times have compressed a lot to the point where it's pretty feasible on most blockchain environments today. But proving itself is still super, super resource intensive. That's where there's a lot of simple math operations that can be encoded into Silicon and into FPGAs or ASICs to speed up the process significantly. And that's where we are seeing a lot of adopt. There's already a lot of people working on this on hardware acceleration using FPGAs, maybe even ASICs on zero knowledge provers.It's a little bit of like it's tough to say when the right time is because there's new changes like algorithmically coming out all the time with the new advances in new papers. And so when you spend a whole bunch of time just optimizing Fast Fourier transforms. And then the next paper makes Fast Fourier transforms not relevant. It's tough to make a decision on when the right time is, but I know there's a lot of work already going on into it. And it's a space that we are very familiar with and that we are also excited about. And mostly, mostly positive stuff on the regulatory side.Kanav (50:56):As of recently I think there's a lot of good faith engagement from regulators around the world on setting frameworks and policies for how kind of all this stuff gets put into place. Outside of maybe China we haven't seen anything very aggressively or handed on cutting off innovation. We even saw India now finally starting to open up. And so I feel more optimistic about the regulatory landscape than I did 12 months ago. We need a new influx of builders to keep coming and building cool experience and leveraging this technology where we're seeing that happen. We need capital being continued to commit to this space where we're seeing that happen.Austin (51:35):The inverse of that question, what are you most concerned about on a macro level for the space still?Kanav (51:39):Asset pricing is of course highly dependent on macro environment and that is unrelated to crypto, right? And there's just like, it's its own thing. And so we'll see price movements on a different time scale. And if you see a very sustained global macro depressed environment, then we're going to see less capital, less builders and less momentum in the space. And I think that's probably the biggest overhang we have today.Austin (52:03):In the long run we're all dead.Kanav (52:05):In the wrong run we're all dead. That's right, so let's keep building.Austin (52:09):Yes. One kind of last question here, I think if you rerun the clock maybe three or four years, the prevailing wisdom in this space was not that traditional financial institutions were going to expand their vision and embrace blockchain and we'd call it Web 3.0 at the end of the day. And you'd have Twitter profile pictures of NFTs, you'd have Jump Trading building software that's open source for a decentralized environment. And we really have seen that that is what was originally pitched as a forked parallel path of economic development.Austin (52:42):It's a little bit more twisty curvy than we thought it was going to be. And there's a lot more integration with traditional companies. As crypto has a thesis about it, that it's moving more consumer, right? Across the spectrum you see more normies getting into crypto in one way or another. Does the existing market of specifically the United States and Europe where you see very few competitors within an ecosystem.Austin (53:07):There's basically only two phone companies. There's basically only three cell phone companies. There's basically only four internet provider companies. Across the spectrum you see very non-competitive markets. When you look at the consumer landscape in the United States, do you imagine that we're going to see similar patterns rolling out there as we saw in the financial industry, or we really are going to go back to that idea of a parallel execution model?Kanav (53:30):Yeah. I'll strongly state that I don't hold a heretical view of this kind of being a completely forked off parallel path that has no relevance to anything that we do today. I think it's an amazing technological invasion that gives us tools to coordinate resources in an untrusted environment. And that's unlocking a lot of magic.Kanav (53:49):But that again bleeds in with the rest of the real world, which is also big and has its own dramatic pieces of innovation and with a whole bunch of other stuff going on. I think one of the most exciting things has been kind of the global equalizer that crypto can serve to be. Yesterday we saw Polygon come out with an integration with Stripe. And these are three kids from India that had no early supporting or backing that kind of boosted the network on their own and are now competing on a very, very competitive landscape with people from every single part of the world that are very well resourced, competent teams.Kanav (54:23):We see [Inaudible] coming from Korea. We see teams from Australia and New Zealand over the [inaudible 00:54:28] guys. We see people from Berlin and the US and everybody competing on the same, not only the similar consumer markets, but also on the same capital markets. And there are network effects that accrue, but not cannibalistic network effects that accrue. That makes me very excited about where the space is going overall. When we talk about integration points itself, it's going to largely depend on [inaudible 00:54:52], right? And that's like an unsatisfactory answer.Kanav (54:55):But if you're talking about financial markets, crypto is already integrated heavily into the financial markets with 15 excellent international venues that are competing, so we already have a fractured environment. That is before the [inaudible 00:55:08], the NASDAQ, the CME groups have made their moves in the space. And they're clearly not going to be monopolies in crypto, obviously, right?Kanav (55:16):If you look at something like a telco and interactions with like cell networks still remains to be seen, whether like decentralized constructions of those kinds of things can be competitive. I mean, building telcos and stuff has such strong network effects and so many economies of scale. And it's unclear whether a Web 3.0 means of accruing that value to a decentralized organization has the ability to accrue the similar kind of network effects and so remains to be seen. But I'm excited to see it play out.Austin (55:43):I always enjoy getting to pick your brain about where these technologies are going and the intersection of a very traditional financial world with this new global system that we've all been building. But thank you so much for joining us for spending some time digging into this stuff.Kanav (56:00):Thanks a lot for having me on Austin. This was super fun and as always, love chatting, so yeah, we'll see you again soon.Austin (56:04):Thanks.

Chris Osborn is the Founder and CEO of Dialect, a smart messaging protocol that powers seamless, on-chain messaging experiences, starting with wallet-to-wallet chat and dapp notifications. Joe McCann guest hosts. 00:49 - Origin Story02:06 - What is Dialect?05:59 - What are the blockers in Web 3.0?07:46 - Why Solana?11:11 - Looked into other ecosystems?13:52 - What is the process to use Dialect?22:31 - Using Solana Pay with Dialect27:22 - In-game messaging28:36 - Dialect's operations and current projects31:03 - Exciting projects in web 3.034:53 - NFTs and Messaging DISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Joe (00:10):Hey everybody. Welcome back to the Solana Podcast. It is Joe McCann here again as your guest host, and today we have a very special guest, founder and CEO of Dialect, Chris Osborn.Chris (00:23):Hey Joe, it's great to be here.Joe (00:25):It's great to have you. So I'm really excited about today's episode because what you are doing at Dialect, I think, unlocks a lot of really interesting use cases in the Solana ecosystem, but first I think it might be useful for the listeners to kind of get a sense of who you are, your background and frankly, how you even got started with Dialect.Chris (00:49):So my background is actually in physics. I did my PhD in Atomic Physics at Columbia University. So this WAs like laser cooling and trapping of atoms, precision time measurements and quantum computing stuff. I learned pretty quickly that what I really loved to do is write software and build technology, so I knew after graduating that I wanted to move to the West Coast and work on some cool technology problems. I actually had an opportunity to split the difference and I worked at Rigetti Computing. I don't know if you're familiar, they're a quantum computing startup and got to work on almost every part of their stack, including a lot of software and technology.I helped lead one of the three teams that launched quantum cloud services, which was like AWS for quantum computing, and that helped me realize that I really love kind of like bridging the gap between hard tech and consumer problems and how do users interact with hard tech, and got the itch to build a startup. So actually I started this company outside of crypto and participated in YC. We were building a consumer investing product and pivoted the company actually last fall or early last fall full force induced Solana and started building Dialect.Joe (02:01):Yeah, that's great. I mean, can you maybe just in a few words, like what is Dialect?Chris (02:07):Yeah, so with Dialect what we're doing is we're building what we're calling a smart messaging protocol for DApp notifications and wallet-to-wallet chat. Those are the first two use cases that we're working on. And the best way to think about it is kind of like a decentralized inbox, a way to enable the messaging primitive between wallets. I personally like to think about kind of like hair on fire burning use cases, the things that people need today, and one of the major use cases here is giving DApps a way to connect directly with their users. And that's through the main mechanism that users identify themselves on the blockchain, which is with wallets.Joe (02:46):So cool. So, I mean, I remember meeting you many, many months ago last year and was really blown away because one of the kind of gaps that I was seeing in a lot of Web 3.0 Applications, irrespective of the underlying chain, was the ability to have like native notifications that are genuinely on chain and not using a service like Twilio or a Web 2.0 or cloud computing context. So the users kind of better understand what Dialect is and can enable, you can kind of walk through maybe some canonical use cases of Dialect?Chris (03:22):Yeah, absolutely. So the use case that got me into it right away like that first just really compelling use case is if you're using a collateralized lending protocol. You lend in token A and you borrow out token B and as prices move, if you become under collateral, the protocol or many protocols will end up liquidating your collateral on an underlying market. And in a world without messages and notifications, basically up until today, a lot of early DeFi users relied on just like a poll mechanism. Like I got to constantly come back to this product and refresh the browser and see how are my positions doing? And there've actually been some like kind of remarkable situations where when there were dramatic price movements, people could see that there was a wallet address on chain that was at risk of a very large liquidation and folks were like, "How do we get in touch with this user? How do we actually contact them and let them know that there's a problem?"And so there's no question that there's like a huge need here. Liquidations were the start, we're now working with projects across DeFi in various capacities, DAOs is another really big use case we can talk about in a little bit and NFTs. So alerts about really important situations, obviously those are kind of like that first use case, but the holy grail with messaging is user retention and engagement. So even if you get beyond emergency situations across whether it's like NFTs and more social, or whether it's DAOs and collaboration, there's just like infinite use cases for technology like this.Joe (04:58):That's really cool. I mean, I agree. It feels like almost every Web 3.0 project or protocol is going to need notifications in some capacity. I mean, I know myself I've been in those positions where I need to add more collateral to a position and I have to keep going back to it, or more recently using some of the structured product vaults that are out there where you can... if you want to say redeem some of your investment, maybe the interest that you've earned, you have to just kind of set a calendar invite.Chris (05:27):That's exactly right. That's right.Joe (05:28):Yeah. So to me that's some friction for end users, but it seems like a solvable problem and it sounds like that's what Dialect is doing. But I'm curious because today in like a Web 2.0 Kind of cloudy world, push notifications, email notifications, in-browser notifications, they just seem so commonplace to implement. So why is it that you think that this hasn't really been a thing yet in Web 3.0 ? What's been kind of the blocker and maybe then we can talk about why you chose Solana?Chris (06:01):Yeah, this is actually a really... This is a super cool problem. The blocker is the following, and obviously nothing's ever truly a strict blocker, it's really just a question of sort of like what are your priorities and what are you working on? So in Web 2.0if you're like a typical startup, you're already running some backend service that's got a database and it's got some synchronous and asynchronous processes. And if you're building in Web 2.0, there's tons of Web 2.0 tooling to support you. And so right into one of those backend services, you can sign up for Twilio, get your authentication keys, store them as environment variables and then anytime there's a specific process where you want to send a user a text message, you just fire it off. Same exact kind of Web 2.0 SaaS system exists for Apple push notifications, Android, SendGrid email, all that. Where things get interesting in Web 3.0 is typically, and especially with like the more really Web 3.0 native projects, whether that's in DeFi, NFTs, wherever, your backend is the blockchain.And there's some basic things that are different with most blockchains like Solana or Ethereum, and that's that most information is public. So you can't store sort of like secret credentials on chain and then in addition, you can't make HTTP requests to some other SaaS. So like the SaaS model breaks down when you start building in blockchain, so if you want to support these use cases for your users, you basically have to like expand your engineering footprint, spin up some Web 2.0 services that perform two processes. One is monitor the blockchain for the events that you care about and then number two is decide that you're going to send messages accordingly, whether that's like Twilio, email or push notifications. So that's part one and then part two, to answer your question about why Solana, and this comes back to my personal journey in crypto.So a friend told me about Bitcoin way back in like 2011. Around that time, I was first exposed to the proof of work concept. It's like easily top five most incredible things that I've learned in my life. I didn't start working in crypto until now, but that had a huge impact on me and I've been following along with everything that's been happening in crypto since then. So heard about Ethereum in 2016 when it... I think it launched in 2016. And what Bitcoin did with proof of work decentralization and then Ethereum did for generalizing compute on-chain and in a decentralized fashion, I discovered Solana in late 2020, I think early October, 2020. For me what Bitcoin and Ethereum did, Solana's proof of history and how it scales technology for ultra fast transaction settlement times, ultra low transaction fee costs, that to me was as impactful. So I see that in the direct lineage of technology.So, that was like late 2020, and DeFi Summer was in full force. I was starting to use more and more technology like more and more Web 3.0 native apps. Over the course of that year I mentioned I was working on a separate project, I saw the Solana ecosystem just absolutely explode. It was like a literal Cambrian explosion. So by the time it was like late summer of 2021, I was taking a hard look at what I was currently working on and then I was looking at Solana and saying every extra week that I'm not working on solana is just a huge missed opportunity. And pulled the trigger and moved full force into Solana. Solana's transaction costs and speed opened up an enormous new design space that is really not feasible if you want to build a truly on-chain messaging system on some other blockchains.So if you're looking at fractions of a tenth of a penny in terms of the transaction costs and then subsecond, you know 400 millisecond block times, that enables a very large new design space. So what I saw at the time was this opportunity to build a whole new SaaS layers. So with Dialect we're building developer tooling, we want to provide this end user experience for developers to build into their own DApps. And when you have any orders of magnitude improvement in performance, it just opens up a very large new space to build in, so to me it was a no brainer. There was no question in my mind. So I've been a blockchain enthusiast for over 10 years, but Solana was that threshold. That was sort of that Rubicon where I just knew this is this, it's now time to build.Joe (10:22):Yeah. I mean, I feel like in other ecosystems, something like this... I don't want to say it's not possible, it just seems like it's impractical. And I think Solana's design where it has this incredibly cheap transaction fee and speed is perfectly suited for something like Dialect and on-chain messaging, if you will. But have you dug into say other chains like maybe something in the Cosmos Ecosystem or even just Ethereum? And did you evaluate whether or not this could be done or was it just kind of like at the baseline look, Ethereum is like pretty expensive for transaction and relatively slow block times, this is just going to work for say push notifications or wallet-to-wallet messaging?Chris (11:12):Yeah, so that's a great question. I would say the following: there are some wallet-to-wallet chat and communication tools on Ethereum and with many of them, what you do is you authenticate with your wallet, but the messages may be stored off-chain somewhere else. And that's not obviously a total deal breaker. In general, I think the authentication problem... I know it's not specific to messaging, but it obviously takes really like a front seat in messaging of who's sending these messages, and the general problem of authenticating with your wallet is just a fun design space. So we're personally really excited to see messaging come online on some other blockchains. If you really want to run a fully on-chain experience where the message source of truth is on-chain, Solana really has several orders of magnitude on a lot of these competing chains.Not that that's necessarily the future that exists long term, it may actually make sense for there to be more of a data centric L1 that stores these messages. And so the choice for us coming full circle on this question is Solana presented an opportunity for us to build relatively small architectural footprint. That means let's just keep as much on Solana as possible. We're decentralized first, we're not storing any messages in say fire base or any other Web2 services, and really provide that great experience, and it's really just a question now of where go.Messaging between wallet is such an important and compelling use case, and I think we're seeing a lot more projects come online now that this problem's inevitably going to be solved in a cross chain manner. We are excited about that future, but we're a hundred percent focused on Solana for now. We also say, I didn't necessarily explicitly say this earlier, but Solana's proof of history concept and the way that it works, some of the first podcasts I listened to about that in summer and fall of 2020, just really blew my mind. So another big piece of it is go where there's just exciting technology, where the developers are extremely talented and everybody's really enthusiastic. For us, there's just a no brainer, we a blast on Solana.Joe (13:15):I hear that very, very often these days, there's been quite a bit of interest from developers; in a lot of cases, developers who have never written an Ethereum app or any sort of other Web 3.0 app or just diving into Solana and loving it. So speaking of developers, as a developer, how do I use Dialect? Can you kind of walk us through the scenario? Is there an SDK? Is there a token I need to have? What is the kind of process if I'm a protocol or a project today that wants or needs on-chain messaging or notifications for my protocol or project? How do I get started?Chris (13:54):Let me answer in two parts. Number one is what you do today. Our messaging protocol is live and audited on the Solana main net, and we have open sourced our protocol and Web 3.0 client we build with Anchor. I really love anchor, it's one of our favorite toolkits we've worked with. So you can import that Web 3.0 client directly into your web app or some other process, some other service that you're running and you can get started sending messages right away. As I mentioned, even for DApp notifications, the primitive is wallet-to-wallet messaging. So in the same way that you might receive an email from a business, some kind of notification they're sending from an email address that they manages the business, the same thing goes here; you manage a key pair that you do your messaging with. So you can import our protocol and just start sending and receiving messages.The main way that most projects interact with our tooling is two-part though, two layers on top of that core protocol. Number one is if you're a DApp and you need to send a notification to a user or a message saying that they're at risk of liquidation, let's come back to this liquidation example. You need to be monitoring the blockchain to detect that there's this event where you then programmatically send the messages. The same thing goes historically with Twilio or SendGrid, you incorporate this code into your services. So like we talked about earlier, you need to be running these off-chain services that help determine that events are happening and to write messages. And we offer open source tooling around this, it's called our monitor framework and our monitoring service, which is our opinionated way about how to host that. And you can then basically spin this up yourself, or you can host with us and you use that to write the very minimal code that's specific to your protocol.So let's say you have some way to query for the users or the wallets obligations, which is a term that lending protocols use, and you can get your collateral health or your risk of liquidation directly from that data. Our monitoring service allows you to fetch that data, basically write the code that's specific to your protocol and then that gets piped into kind of like a reactive framework that we use to determine whether or not to send messages. So this is monitoring tooling that's specifically custom built for figuring out to send a message and it can work very flexibly with other kinds of tooling. Maybe it's like you've got a Kafka messaging queue, or some other kinds of... Some projects actually have fairly sophisticated Web 2.0 infrastructure, but they're still interested in working with us because we handle the hard problem to just making sure at most one and just at least one message get fired off to a user.The second half is how do you surface these messages to users? So today what we're solving, what we're live with are what we're calling in-app notifications. So think about your favorite Web 2.0 product; you sign in, and maybe somewhere in the nav bar you see a little notification bell and it's a button and you can click to see that there are messages or something you need to know about from that product. Today, we offer basically like a single React component. We're prioritizing React, most projects, web apps are built in React, where you can drop that single component into the nav bar of your DApp and right out of the box if a user clicks that notification, they have the opportunity to fully onboard to the notification experience all within that single component. So it's like a model that pops up that allows you to say yes, I'd like to enable notifications for this app.And then once you've done that, you can kind of see what are you going to get notifications around. So it might be warnings about pending liquidations, it might be liquidations themselves, it might be actually more receipt style messages. So it might be an order filled if you're using a DEX where orders fill asynchronously, it can be things around DAO collaborations. So one of the major use cases that DAOs we've been speaking to have been interested in is engagement and retention on voting. So you might receive notifications from a DAO telling you that you have six hours left to vote on a proposal, or that there's a new proposal, or that maybe you're near a quorum on the voting threshold needed to pass or reject a proposal. So there's all these different use cases and really you get that right out of the box directly in your nav bar with this single React component. So that's in-app notifications.What's coming soon and coming back to this question of just the broader messaging thesis, we're launching support soon for email, Telegram, possibly text message, other kinds of Web 2.0 means because the reality is even if the thesis and the vision is fully on-chain messaging, we live in a world where many users rely on and really appreciate getting messages via Web 2.0. So email's a no-brainer, and a lot of projects have asked us to support that so that's coming online very soon. And then Telegram is a little more of like a Web 3.0 native messaging solution that's still off-chain, and a lot of projects have asked us for support on that. So you can think of the Dialect standard as both the on-chain messaging standard, as well as a suite of really out of the box tooling to allow DApps to reach their users however they want.Joe (19:13):What's really interesting about how you're thinking about building out your company and the protocol and kind of the suite of products is that it reminds me of kind of like early days of Twilio. So I wrote a blog post many years ago, probably 10 years ago now about how over-the-top messaging was really kind of this new platform play. We've seen through the myriad messaging apps and then kind of the power of iMessage on Apple and the blue bubble versus the green bubble. I think there's now a regulation coming out of the EU that all these messaging apps have to inter-op with each other. But that took many, many years and I think Twilio really captured a lot of the developer mind share around creating these kind of suites of messaging products and it started with SMS. And so you mentioned something like Telegram, which I think everybody in crypto lives and dies in Telegram. I can barely keep up with myself.Chris (20:17):That's right.Joe (20:17):I've written some Telegram bots and they're pretty easy if you have a fundamental understanding of how webhooks work. Is that something that Dialects will enable? Is that like maybe some arbitrary webhook could fire? Or is it something that needs to be actually he baked into the on-chain program itself?Chris (20:34):Yeah, so it's not actually for support. We want to keep the part on-chain as light and simple as possible and so you can think of these web two channels such as Telegram as really just parallel rails. So you have the detection of an event that a user wants to hear about and that's monitoring data on-chain, and then you have various channels which may purely be in one user's case, "Oh, I just want to get an email, or I just want to get a Telegram message from a bot that's managed by the project." The developer experience around Twilio and Telegram and whatnot are excellent, but what Dialect provides here, if a DApp is interested in reaching their users by these means is you just get it all out of the box right away. You write a little snippet of code that fetches the data that determines if a message needs to be sent, and then you say how you want each message to look and that's really all you have to think about.The user will choose how they want to be gotten in touch with directly through the front end tooling that we provide. I think it was actually you, Joe, who mentioned this to us, that one of the key metrics is time to success. Crypto is moving at just an absolute lightning pace and while every project that we've talked to really wants this tooling, it's never quite the first priority that they have. So what we're trying to do is really make that as simple as possible for these projects to integrate us.Joe (21:53):So let's talk about some of the categories that exist, not just broadly in Web 3.0, but I would argue is probably more suited towards Solana, particularly the payment space. So Solana Pay has launched, there's lot of people building a lot of really interesting stuff with Solana Pay from point of sale solutions to web apps and mobile apps, et cetera. Can you kind of walk me through an example of how say someone that wants to build something with Solana Pay would utilize Dialect. Chris (22:26):Yeah, this is actually a really fun topic. Ever since Solana Pay got launched, the team and I have just been super excited about the messaging use cases there. This is also a good template for talking about our smart messaging thesis, so I'm going to segue from Solana Pay into a broader discussion here, but I would start by saying the following: Solana Pay is a standard for being able to perform transactions, being able to perform transfers between wallets on-chain and there is a very compelling messaging use case here. If you think about some of the standards in Web 2.0 , whether it's Apple Pay for transferring, or Venmo or Square Cash, that kind of dynamic experience of being able to message between users and actually take action on the message. One of our key insights with Dialect is this smart messaging standard we're building toward, and you can think of that kind of like an interactive link preview.In every DApp that you use where you connect your wallet, you have signing privileges everywhere. And so where we're building and this... A few minutes ago I said, "Here's where Dialect is today and the question is where we're going." In this smart messaging future, we're allowing users to send basically interactive link previews and you can think of a transfer request as one of the simplest use cases there. So for example, if you want to send a transfer request by a Dialect message to one of your friends directly at their wallet address, you can send that and then they can take action right in the message, whether that's scanning a QR code that's rendered for them, or it's clicking a send payment message. Coming back to some of the use cases we talked a little while ago about such as liquidation, warnings or DAO proposals and voting prompts, the holy grail in user retention and engagement is being able to reach them and have them be able to take action right where you're messaging with them.In Web 2.0 beyond these app specific use cases, whether it's a Venmo transfer request or similar, most of the time if you get an email, there's a link in the email and you have to click that and go out to another app. And maybe you're not logged in on your phone so you say, "Okay, in five hours when I'm back at my computer I'll take care of this." Or similar with a text message. What's really unique about messaging in Web 3.0 is that we can build a standard where you can take action right in the message. So whether it's Solana Pay, whether it's a vote yes or a vote no on a proposal, or it's a quick deposit to top up your collateral to avoid liquidation, any of those things with Dialect and our smart messaging standard, what we're building toward is that kind of Web 3.0 native future. So the last thing I would say about this is, yes, it's true that messaging and notifications are this really critical missing piece of Web 3.0 and it's just a really known hair on fire problem. When we got started on Dialect, the question we asked ourselves is not just how we fill in that missing piece, but also how we take Web 3.0to a place that Web 2.0 can't as easily go. And this is because our thesis is Web 3.0 is going to reach mass adoption because of exciting and really compelling delightful new use cases that products are going to start to come online, whether they take advantage of universal authentication like we're talking about now, whether they take advantage of composability of sort of the global shared state of all the data existing on a single blockchain, those are the use cases that are going to make it really compelling for the first billion users to onboard to Web 3.0. This is our thesis with smart messaging and Solana Pay is a really key and interesting part of that picture.Joe (26:18):I'll be honest, that is fascinating because one of the cool things about what you're mentioning is that push notifications or in-app notifications become actionable. You can actually do something right there-Chris (26:33):That's right.Joe (26:34):... versus it being this sort of delayed or async process. And so the use cases really open up pretty dramatically because of the fact that these messages are now interactive and you can do things with them.Chris (26:50):That's right.Joe (26:50):And have you guys thought through maybe where this could potentially work in like the context of a video game or even like the metaverse? There's a lot of Web 3.0 games/metaverse type environments being created and I'm curious if sort of in-game messaging makes sense or if it's something that is slightly different?Chris (27:18):Yeah, in-game messaging I think is a fantastic use case, and we've spent a little less time talking to gaming projects. I think just because that's a little early on, as we have say, talking to DeFi, NFT, DAO projects. But one of the things I'm most excited about is sort of the universality of NFTs as assets and all of the infrastructure that's being built around the things that you achieve and the assets that you acquire in-game end up having a life and a value beyond that game. It's really compelling to us that there be interactive sort of like smart message experiences around that content, at the very least. So I think gaming is an incredibly exciting in use case.Joe (28:05):Awesome. Yeah, I could see a lot of really cool integrations being utilized there and they just kind of don't exist today. I mean, frankly, there aren't a lot of Web 3.0 games period, but I know a lot of them are coming online later this year. What about like the traction of the company and folks that you're working with today? I know since you pivoted Dialect into this smart messaging protocol business things have really started to heat up. Can you talk about maybe how many people you're kind of signing up or any projects that are currently utilizing your product today?Chris (28:38):Yeah, that's right. We're talking to a few dozen projects right now across a lot of the verticals that I mentioned earlier. We're going live with a handful of our first projects that we've publicly announced so far. So that includes Squads and meaning on the DAO tooling side, Jet Protocol on the lending side, Bridgesplit on the NFT and NFT fractionalization space. Oh, on protocol Friktion is another project, you mentioned structured products earlier and it's been a real joy working with them. One of the things that we believe is it's best to like dog food your own tooling to make it better. So we've just straight up been rolling our sleeves up to help build out with them, and that helps us get better and better at our developer tooling.Then there's just this other wave, as I mentioned, a few dozen other projects that we can't talk about quite yet, but are extremely excited to support. And to support all these projects, we've also been growing the team pretty quickly as well. So there's a lot going on right now and as we talked about earlier, it's an incredibly compelling use case. This technology has to exist, at the very least receiving an email or a text message or a Telegram message. But where things really catch and where we really have a great time with our conversations is around this smart messaging future that we're building out, and that's when I think folks get really excited about the opportunity.Joe (30:07):Yeah. I mean, I completely agree. It's really hard to imagine a scenario where an app isn't going to need some form of messaging or notifications. And given the direction and the future of the company and where you guys want to take the product and protocol, it seems inevitable that folks are going to be adopting this. So maybe talk a little bit about how you're envisioning the future. You know, you have a very specific view into what you're doing with Dialect, but by engaging with all these different projects and protocols, you can get like an interesting view into what things are happening, what things are coming out soon, and maybe where you see things heading. The space is evolving and changing so rapidly and quickly that it's hard to predict anything, but what are some things that you kind of see in the future not necessarily just for Dialect, but also you Web 3.0 in general and how maybe Dialect plays a role in that?Chris (31:05):Yeah. I think if there were a single theme and I'm not alone in saying this, it's just really what got me into crypto in the first place and it's incredible to see it beginning to happen. I would say the thesis here is composability, so any blockchain that really makes global shared state a possibility. I think it might have been Chris Dixon who said composability is like compounding interest, it just causes this exponential runaway in technology. And the things I'm most excited about and we are most excited about at Dialect is that composability. So whether it's being able to exchange information and perform financial actions between DeFi protocols or it's the financialization that's going into some gaming tools that are coming online, like you said, that rely on some DeFi infrastructure like... To me, this is why it's going to be the sort of killer consumer experiences that come of composability and global shared state that are really going to make for the next big wave in Web 3.0.Chris (32:09):And the way we're interested in that in our own small way with Dialect, and I didn't mention this earlier, is one of our visions here with smart messaging is creating a kind of decentralized inbox. So as we mentioned, our tooling today supports these on chain messages delivered directly to any given DApp where the user enables and then can consume those messages in the DApp itself. But those messages can be consumed by anyone and so there's this other half of the problem that we're working on that's coming online soon, where for example, a mobile wallet could have an entire inbox and messaging section. And now you're talking about no matter which DApps you've enabled, you're receiving a true iOS or Android push notification directly to that mobile messaging experience that you have there, and that's just yet another example of composability. And so, like I said, I'm not alone in being incredibly excited about this but it really is, I think, the kind of compounding developer experience that's just going to create a whole new set of really exciting consumer... Like a new kind of internet consumer experience.Joe (33:18):That's awesome and I agree. I think one of the areas that is no short of discussion in Web 3.0 is NFTs. I've talked about this on some Twitter spaces and other podcasts where right now we're just kind of in the infancy of what NFTs can unlock. You know, there's obviously the art aspect of it, there's in video game assets, et cetera, et cetera. But one of the things that I am interested to hear your take on, and maybe how this correlates to Dialect is NFT is in a person's wallet, it's on chain, but the person interacting with the wallet is a customer, a user, and I think a lot of companies want to be able to engage with their customers and users more directly. So is there a scenario where I have an NFT in my wallet and depending on the NFT mentor or something, maybe it's a brand, maybe it's a company, maybe it's an artist, maybe it's a musician, has a way to either via the NFT directly or utilizing Dialect, be able to kind of communicate with me directly?Joe (34:31):An example I always give is imagine Starbucks wants to airdrop, I don't know, some seasonal loyalty program thing, right? Christmas, Easter, or whatever, spring break, you name it, and it's for people that have this NFT in their wallet and they want to airdrop them something or be able to communicate with them. Is this something that Dialect would unlock or do you think this is something that's more kind of NFT specific?Chris (34:55):To be honest, I thought you'd never ask about this. This is this third part of smart messaging that we are just beyond excited about. It touches on a few different things, but maybe I'll just say briefly that another key aspect of Web 2.0 messaging that I think to many of us feels very broken is this question of sort of like cold inbound and marketing and spam. With Web 3.0's inherent financialization, there is this very natural situation where you can basically tokenize messaging and create markets around how different entities communicate with each other. And on the two extremes there, or maybe let's talk about three, two to three points on the spectrum here. If you Joe and I just want to message with each other, there's sort of mutual opt-in in the exchange of a token and we can just message with each other.Similarly, if there's a business that I really love and I want to opt-in let's say, like you mentioned, I think you said Starbucks, I'll opt into that and there may be some implicit under the hood kind of exchange of a token that allows for that messaging. There's also scenarios where businesses want to get in touch with individuals that they think are high value, and that's a cold inbound scenario. In that scenario, a business might need to actually buy one of these tokens of yours on an exchange in order to engage with you.By financializing that component of cold inbound, I think one, it creates a much more harmonious kind of like cold messaging experience in Web 3.0 that in many ways is a bit much in Web 2.0, but in the mutual opt-in scenario or the messaging is effectively like vanishingly small cost or effectively free. And powering all of this, kind of coming back to your point about NFTs, is the NFT primitive. So this is a technology in an architecture we're exploring right now and it's very likely that NFTs will serve that use case. It's a kind of technology in a use case that we're just like beyond excited about.Joe (36:59):Fascinating conversation today with you, Chris. I really appreciate it. The future's bright for Dialect, the use cases that you've outlined are kind of no brainers, but what I'm really excited about is what we unlock in a Web 3.0 native context for smart messaging. I want to thank you today for joining the Solana Podcast. How can people actually get in contact with you? Are you on Telegram or Twitter? If they want to contact Dialect and get in touch, what's the best way of doing that?Chris (37:26):Yeah, the best way to get in touch with us is on Twitter and our Twitter handle is @saydialect, that's S-A-Y D-I-A-L-E-C-T. We love engaging with the community. Developer feedback, we live and die off of that, and so if you have complaints about our technology, have feature requests, any of that, send it our way. We're also on Discord. We have a Discord community, you can join that from our bio in Twitter. And then the last thing I would say is we're hiring, and so if this technology is interesting to you, we would love, love, love to work with you.Joe (38:02):Well, you heard it here first folks. Chris Osborn, computer scientist in the quantum physics space turned smart messaging protocol engineer and architect. Chris, thanks so much for joining the Solana Podcast. Looking forward to chatting with you again soon. See ya.Chris (38:18):Thank you very much, Joe. It was my pleasure.

Nigel Eccles is the co-founder and CEO of Vault Laboratories. VAULT is a new creator platform that uses the power of Web3 to unlock the next generation of fan experiences. Joe McCann guest hosts.00:32 - Origin Story04:48 - Vault09:47 - Use case of Vault14:38 - User experience in Web 3.018:01 - Why choose to build on Solana?24:01 - BetDEX25:51 - FanDuel vs BetDEX27:41 - Regulation and user experience31:04 - Youth as an inspiration?32:48 - SAMO34:42 - Exciting Projects on SolanaDISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Joe (00:09):Hey everybody. Welcome back to the Solana podcast. It's your guest host once again, Joe McCann. Today I'm super excited to introduce the one and only Nigel Eccles.Nigel (00:21):Thank you. Thanks for having me on.Joe (00:22):Nigel, I want to jump right into it. Can you talk a bit about your background and ultimately, how did you get into crypto or Web 3.0 or however you want to define it?Nigel (00:33):Yes. I've got about 20 years experience in consumer tech, mostly in sports. I'm originally from the UK. I'm originally from Northern Ireland. Around 2000 I was involved in a, I guess a dot com. It was a company called flutter.com as a product manager that I launched them as a betting exchange.Nigel (00:51):Since then I've been involved in a lot of different startups. The one that I launched in 2009 was a daily fantasy sports product called FanDuel. A lot of you if you're into sports, you almost certainly will be familiar with FanDuel because not only is it a very big fantasy sports operator, it's now a very big sports betting operator. Long history, I've always built consumer products. I've always been focused on B2C and trying to innovate and bring new consumer products together. Since then, I left FanDuel about four years ago and since then, I've actually launched three companies that are all in the consumer space.Joe (01:32):Wow. Three companies. When are you going to do something with your life?Nigel (01:37):Yeah. Well, they're all in their early stages. They're all in that promise space so it's exciting, but every day is still... There's still a lot of challenge. They're all still pretty early stage.Joe (01:50):Got you. We'll dive into each one of those in a minute. Can you maybe talk just a little bit about your journey of getting into crypto and then specifically, Solana?Nigel (02:00):I'm not super early. I've always, I've been aware of it for a long time, but 2017 was when I first got into it. Given that I've only ever really been interested in the consumer side, in 2017 I really dived in and was like, "Wow, this looks awesome." I remember reading about Ethereum. I never really had any interest in Bitcoin because I never really felt I had much money. And so I never really thought what's the point? I don't really have much money. Bitcoin to me seemed to be a great place if you had money and you wanted to store wealth. I didn't have any so it seemed mute to me. Whereas Ethereum seemed incredibly exciting so I get really interested in Ethereum. I also spent a lot of time looking at all these alternative coins in 2017. I remember going through CoinMarketCap coin by coin and going, "Okay. That looks totally pointless. That looks all promise, but no technology. That looks like that one above."And really getting down to about 50 and I see chatting to some friends who are in the sector. Or that one looks totally scammy and just being fairly disillusioned. In the end I bought Ethereum and toyed with some of the stuff that was closer to being consumer ready like I think CryptoKitties. One of my former colleagues actually set up Rare Bits, which was an open sea competitor. Which was an NFT product back in 2017. He dabbled a bit, but really at the end of 2017 said, "This isn't even close to being ready for consumers. This is so hard to actually buy an NFT." It wasn't even clear what you would do with it regardless of any other form of transaction or paying for something, it was slow. It was expensive and I didn't see in the short term it was going to get there. I went back to focusing on Web 2.0 things over the following few years. In 2020 then, I started, I used to get interested in NFTs again. Interesting enough the first ones I looked at were Top Shot, which bubbled up very early in 2021 and then crashed again. And Nifty Gateway. Similarly, they had nice onboarding and that both of them you could buy-in with a credit card, but they both were a gateway for me to say, "Oh, I get this now. This is actually pretty smooth." Once I had an NFT, I was pretty beaten by it. It's like, okay. Because the first NFTs I ever bought was through a credit card. Then I went through the whole process of really understanding and trying to get my head around the infrastructure underneath it.Joe (04:30):Got you. That landed itself to probably some ideating on your end. One of these three companies you launched or projects, companies, whatever we call them these days is Vault. Can you talk a little bit about what Vault is and where the idea came from and frankly what's the plan with Vault?Nigel (04:49):Sure. Absolutely. Yeah. Vault is still very new, but we had been working with creators for about three or four years and what we'd been trying to do was to help them find a way to create a small space where they would bring in their very top funds and they would monetize them directly. If you ever read any material from this, [Ligen 00:05:11] is by far the leader here and we were talking to her three, four years ago and what we were trying to do is create this native mobile experience. Native was very important to us because if you look at consumption of media by consumers, 90 to 95% of it is mobile.It's a native app. Whenever you do anything with consumers, they'll always say, "When's the app coming out?" You'd try and probe them and say, "Well, we got a really good mobile web." Then they'd go, "When's the app coming out?" Instead of fighting, we were like, "Look. It has to be a native mobile." We spent several years trying to build that native community, but it's really hard. What we found was it's hard to get people off existing platforms like YouTube, Instagram or Spotify. It's just hard to get them off.Then secondly, it's very hard to monetize them particularly when Apple and Android are going to take a 30% cut. In about early 2021, when I started to dabble quite seriously with NFTs, I realized that actually this was a really interesting technology and we said, "This is a fascinating technology because I as a creator can actually monetize my work. I can actually sell something." Actually, if you think about it, it's much more in the analog world where I can create something of value and sell it. Previously to that in a digital world, it was very, very hard to do that because the person really struggled to buy something. When you could always right click copy something, it was very hard to do.Now with the NFTs, that had provable providence. You had ownership and so we thought this is really interesting. We could definitely use this technology. When we dabbled with the NFTs, what we discovered was that lots of artists were really fascinated by it. Immediately they said, "This is great." But what we also found was a lot of them felt excluded. If you're a graphic artist, you're like, "Fantastic. Finally, a technology that people can discover art." If you speak to the graphic artists, NFT is just such a revelation to them. But a lot of the other artists, particularly music artists were like, "NFTs are fantastic, but it's not very authentic to what I do."If you actually look in early 2021, [Grime 00:07:20], [Stevie Oke 00:07:20] and a lot of other music artists actually experimented with the NFTs, but they didn't really perform that well. Those NFTs are done between 60 and 90% in value from their meant price and a lot... More musicians actually just didn't do them. They just said, "Look. It just doesn't seem authentic. It doesn't seem to be the artist I am and it doesn't feel the right thing for me to be selling to my fans." We said to ourselves, "Well, why should this technology limit the art that could be shared? Why should it just be limited to graphic art?" Also, we thought it was interesting, everyone laughs at the right or they mock right click brigade. But they actually do have a point which is yes, you have ownership, but you have no exclusivity over this content.There's anyone can see it and we thought there was something interesting if, what if we could A, remove the restrictions from the artist and B, create some exclusivity. Maybe only the people who own that NFT can actually see this piece of content. That was basically the background of the idea to Vault. What Vault is, is a platform where artists and some of the biggest artists that are coming on will be music artists would create a vault and they would then make keys to that vault and they would say, "Okay. I'm going to create a 1,000 keys and I'm going to the meant price of $50, a $100, a $1,000." Whatever price they set. That's fully set by the artist.Then those NFT keys act as keys into a vault, and in that vault the artist can put any type of media that they want. That can be music. That can be video. That can be picture. That can be text. It could even be hyperlinks into other things like into merge or into live experiences. But the key thing there is that only the people with that NFT key can actually see what's in the vault.Joe (09:10):That's so cool. You hear a lot in the NFT world about these token gated communities. You're quite literally giving out keys or the artists I should say are literally giving out keys to get access to things that only the folks that have those keys can access to. It's a really cool concept. Have you seen novel or unique things that these artists are doing or is it pretty straightforward like, "Hey, here's me eating breakfast or this is my workout playlist or whatever." What are the interesting use cases you've seen that artists I've come up with in their vaults?Nigel (09:48):Yeah. It's a really good question. Something just before I come to there, the other thing that we've done is we've made it very simple for the fan to consume the media and we've made it very simple for the creator to create the media. On the fan side, typically when you have this NFT gated community, you have to go to the discard and then you have to authenticate via club ladder grip which takes about 23 different attempts. And just in frustration it seems to have worked, although you're not sure. Sometimes the channels show up and sometimes they don't.It's a really clunky experience and I'm not really criticizing them. I know it's a technically challenging thing to do. What we have done is that we allow people to create account that then links to their NFT and authenticates very smoothly. That's number one. The linkage between account and the NFT is very smooth. If they then sell that NFT, we actually know the address to look in and we automatically look and say, "No. They've sold it. They don't have access anymore."Secondly, from the artist's perspective, again, that's a challenge for them. It's like, where do they put their content? What we've done is we've allowed them to add content to this native app that is seamless. Basically, if you can add media to Instagram, you can use Vault. It is literally one click, grab the media, drop it in. On the question of what use cases, we've seen a huge range but I'll give you a couple of examples. One that we're seeing is the artist album drop. When albums are being dropped, now normally they're going straight to Spotify. Sometimes some artists are also doing vinyl because they have a fan base that wants to collect.What some of the artists we're working with are saying, "Actually, that vinyl's $30. Why don't you have $60 premium vault drop, which will not only have the music in it, but will also have some other special things? It will have some of the inspiration behind the music. It will have the cover art. It will have Voice Memos from me. Some all of backstory to the album." That's been a really interesting one. Another one music artists are working with us on is the tour drop. I'm going on tour next month. I'm going to be traveling for the next three months. Both myself and my team will be taking lots of social media. What I'm going to do is every day drop pieces of content from that tour so my fans can actually travel the country with me and see behind the scenes material that they would never otherwise see.That's a really exciting one and we've got a few artists we're talking to about doing that on upcoming tours. Then the third one and a different category which is athletes. Last year college athletes got name, image, likeness rights. Before they couldn't be paid. They couldn't monetize their name. That has changed. But the challenge for a lot of them is like, "Okay. But what do I sell?" We've seen some of them advertise the local car dealership.But they feel it. Again, it feels a little inauthentic. They have this huge fan base and what we've been talking to them and say, "Well, what you really should be doing is creating a vault and showing people what goes into that Saturday game day. What goes into getting to match madness." We're working with a number of athletes now that are doing vaults like road to the NFL. This is how I got to the draft. The training that goes on behind the scene. The interesting thing at a college level is we have boosters on the other side who want to buy the keys.We have a really brilliant market emerging, which is boosters said, "Look. We want to support these athletes and we have these athletes coming into the college. God, well, we'd love to tell the story of what we're doing." That's becoming a nice market.Joe (13:15):It's so cool because I think one of the cool things that happened with Instagram is that when it really started to take off with celebrities and athletes and musicians, it's that fans felt closer to them  because they could see, hey, they're in this tour stop. Or they're just literally eating their lunch or whatever the thing may be. It just felt more personable. What it sounds like, this feels like maybe the second derivative of that where not only are you going to start to be able to see, hey, the behind the scenes of such and such band on tour, but also the spectrum of the media that could be produced and consumed by the fans is huge.Nigel (13:56):Yes.Joe (13:57):One thing I wanted to point on that you mentioned earlier that I think is important is the user experience. You mentioned just authenticating really easily and being able to add content as simple as Instagram. Given the experience you have in consumer related tech, can you talk a little bit about maybe your broader ethos on this?Because I know that certainly with DeFi 1.0, it was hey, we're just a bunch of hackers and academic engineers and we're just creating primitives. But some of these apps are just painful to use and now we're starting to see a big emphasis on user experience because quite literally it will help onboard more people. Can you walk us through that being at the forefront for Vault and even potentially the other products that you're working on?Nigel (14:40):Absolutely core. The co-founder of Vault, my co-founder at Vault also co-founded FanDuel with me. He was our head of product design and user experience. He had leveraged from the design of the product through to customer service. He's a world class designer. There's no way, two ways around that.What he brings to it is just a completely smooth flow. We want to get millions, hundreds of millions of people into crypto, but we want to make it a smooth experience. And we think that one day, yes, maybe everybody does self-custody, but that won't be their first experience. We have to give them value that isn't just coin goes up. It has to be something that is cool that like me, I go, "That's cool. I'd really actually like to learn and understand the underlying technology and what else it does."If we look at what Vault works, we've actually enabled in our payments. People were like, "I didn't even know you could do this with Apple." We're like, "You can." They're not opposed to this. What happens is a creator creates a vault. They set a price. Let's just say they set it at a $100 a key. It can't go as low as 20. One of the beauties about Solana is its low transaction costs. Things shouldn't cost hundreds or thousands of dollars.If somebody's a fan of a band and they want to buy a vault, they should be able to buy something for $20. We could price it as low $20. The user can either buy with Solana. We give them the option with Solana. Or they can buy within in our payment. And that in our payment is two clicks.Most people have their credit card already in their phone and suddenly they are owning an NFT that is built on Metaplex, built on Solana that they can then take off platform at a later date and self-custody. But they can have the full experience of owning that NFT and seeing the content without ever touching Solana or ever buying crypto. Without ever installing a wallet.Joe (16:36):Amazing. Yeah. Isn't it weird how people just want things that are fast and cheap? Such a novel concept.Nigel (16:45):Yeah. There's a very good book in usability. It goes back a few years called Don't Make Me Think-Joe (16:50):Yeah. Great book Nigel (16:50):... and it's perfect.Nigel (16:52):So many times people are like, you give them options or give them this, they're like, "No. Just make it real easy."Joe (16:58):Make it super easy.Nigel (16:58):If you can give them a straight line for them to get to where they want, the number of people you'd on-board will be several magnitudes higher than if you make them learn every step along the way.Joe (17:09):I totally agree. I think this may get to my next question around why Solana. It seems probably patently obvious at this point, but given that you have this experience in consumer tech, given that you built FanDuel or were co-founder with FanDuel, I don't want to diminish the massive team that brought this to market and maintains it.While you were evaluating Web 3.0 related tech, and this is not meant to be a layup question. But you look at Solana versus some of the other ones and it's not that these other chains are bad, but when you're trying to design an experience that is seamless and as friction free as possible and using the principle of Don't Make Me Think, what was it that made you and your tech team say, "You know what? We're going with Solana because user experience is going to be so much better."Nigel (18:04):Yeah. It's a good question. It's funny the level of maxiness on Twitter. We have gone all in on an L1, but we've tried to be very clearheaded objective viewpoint because we're betting millions of dollars that this is the right decision. We're investing in an L1 because we think that this is going to be the best platform for us.If it was a different one, we would totally have gone that different route because we can't be religious about it. We don't have the money to say, "Hey, we're going to invest in L1. That's not going to be the winner but for some reason we're going to do that." We started the process and even today we continue to look at other alternatives. I regularly look at Polygon. I regularly look at Arbitrum. I look at Avalanche. I look at NEAR because again, we're not religious. What led us to Solana though, was a number of factors.Obviously the obvious headline was fast and cheap. But not just fast and cheap, but actually that being it was designed to be that. That was the criteria around how it was built. That was important to us because we knew that if in three, four years time that it got more congested, there was more demand, that the core team wouldn't be going, "Well, that's okay. We are fine with that because other things are successful."We felt that there was a commitment for the core team. Though fast and cheap is core to this product, we're not going to the core to this platform. That was really important. The other factors we felt were that even at that point and this is early 2021, it had good momentum and that again was important. We didn't want to make a technically great choice, but all the momentum was going another direction and everything over the last 12 months has continued to convince us that was the right decision.Nigel (19:56):We also were impressed by this core team. Raj and Anatoly were straight on very first call. Somebody who's come from Web 2.0. Personally, I thought that was great that we can reach out to somebody and say, "Look. We're having issues with this." They've been incredibly supportive. I thought that was a huge factor as well.Then the last thing I'd say that I've noticed about Solana is that I think there's a much stronger design ethos in Solana than I've seen in the other blockchains. I don't want to say it isn't bad, but these other ones. But some of the blockchains I've been on are, I think I cannot understand how they've made these design decisions. I think some of it is a laziness about EVM. Which is like, well, it just works. It's EVM compatible so people will figure it out. I think Solana has gone down a slightly harder road, but it has forced people to say, "No. We're going to design this for humans."I guess that handicap in a way has actually improved it. Something like Phantom, it is 10X better than MetaMask. Without a doubt I use MetaMask every day and I'm always still fascinated that for example, NFTs that I've sold six months ago are still in my wallet. I think there's a setting somewhere where I could change it to take those out. But the idea that they don't understand that would be something I would want natively is weird. Those are, it's four or five major reasons. I think there's still a very, very large gap. We made the decision. We committed about 6 to 8 months ago. But since then it's only got stronger the thesis.Joe (21:23):Yeah. You bring up a number of points that I try to bestow upon a number of the founders of startups and projects that I'm advising is, look, you don't have to be religious about your technical solutions or choices. But I do think it's important to recognize that, hey, if your application or protocol is super successful, are you going to have to do what actually Infinity did and build your own scaling solution?Are you willing to staff that or do you have the resources for that? Do you have the desire to do that? I think the second aspect is, and again, this isn't a NTL2 conversation. It's that in my view, when you add an L2 to your technical architecture, I have this running joke that the reason it's called an L2 is because now you have two problems. It's not just the L2 that you're building on, but you also have an upstream dependency on the L1.I think a lot of the technical decision making early on is critically important to understand in the case that you do have this wildly successful app or protocol. Furthermore, to your point, Solana made some intentional design decisions that added some constraint around the protocol and furthermore, the applicability of the protocol.I think, we're still early days-ish with what's possible on it and we're definitely have been pressure testing the network quite a bit. But I think longer term, this is currently going to be the chain that's going to enable those types of truly immersive rich internet experiences that users are accustomed to on mobile apps and Web 2.0 without having to have all these additional complexity. I take your point a 1,000% with MetaMask and I take nothing away from that team. But at the same time, Phantom has brought user-centric design to the wallet and that's super important for onboarding and more importantly for the apps that will ultimately be connected to those wallets. I hear you a 100% on that.Because I know we're coming up on time pretty good, I wanted to switch gears quickly to talk about BetDEX. Because this is actually how we met. We were introduced by a mutual friend. He told me about your background and he told me that you were considering building on Solana and it was a fascinating idea. I said, "Would love to convert him to build this on Solana." Can you talk about what BetDEX is and what you're excited about BetDEX for? Then also again, maybe the design decision as to why you chose Solana.Nigel (24:05):Yeah. BetDEX is a sports betting protocol. The way to think about it is there's something like $2 trillion bet every year on sports globally. But that $2 trillion is basically split among tens, maybe even hundreds of thousands of different sportsbooks. We take FanDuel's example. FanDuel is quite a big sportsbook, but all the money they take, they're the counterparty. They take that counterparty risk. All the money that DraftKings takes or say some of the other ones, BetRivers takes, they all take that counterparty risk.If you're one of those smaller sportsbooks and somebody Mattress Mark comes in with a million dollars, you can't take because you can't take the counterpart risk. The way that BetDEX imagines the world is says, "Well, what if all of those sportsbooks could basically share their liquidity in a central pool?"Now, prior to crypto they probably wouldn't have wanted to do that because who would own that platform? What the governance would be. There will be lots of different challenges there on that actual protocol. Well, what BetDEX works as is, because it's going to be a decentralized protocol which will be owned through its token holders which may be many of those different applications, they then can pool their liquidity into a central exchange.And so someone betting on FanDuel could be in effect counterpartied with somebody in the UK betting on a completely different website and they don't actually need to know that. Basically, BetDEX is the glue that's going to plug together all these different sportsbooks that gives us global liquidity pool.Joe (25:40):Super cool. Given your obvious experience with FanDuel, how would you juxtapose the two like FanDuel was for this type of a world or environment, and this is how BetDEX is different?Nigel (25:54):Yeah. They're actually very different. One day my aspiration is that FanDuel would use BetDEX. They don't have as immediate a need because they're a big sportsbook so they don't... Mattress Mark comes in and they'll say, "I'll take that liability." The way we want to see it is, we'll actually build the very first application which will also be called BetDEX. That's a licensed sportsbook in Malta that will take bets from over a 100 different countries. Unfortunately, not the US. Certainly initially.But basically what will then happen is we will actually opensource that code and say to other operators, "Look. You can also build your own application. In fact, take our code. Put your own logo on it. Put your own brand on it and then you can interface with BetDEX as well." Then existing operators like DraftKings, like FanDuel can say, "Wait a second. There's this huge liquidity. Why are we managing all this risk ourselves? Why don't we pull some of our liquidity in here? Maybe I carry 90% of the risk of the money coming in and I just blow 10% onto this exchange." BetDEX is really a protocol and FanDuel really is an application that then would use that protocol like all of these other sportsbooks.Joe (27:01):Got it. Very cool. You mentioned something that hits home for me as an American that once again we are unfortunately geofenced, if you will, to a lot of the innovation that's happening in crypto and Web 3.0.Nigel (27:14):Yeah.Joe (27:15):Given your experience with FanDuel and certainly setting up BetDEX, can you talk a little bit about the policy risk? You mentioned a 100 different countries and how do you navigate that? Because the sports betting regulations in say the UK are very different than they would be in say New Jersey. Maybe even different they are in South Africa. How do you think about managing that? Again, not sacrificing the end user experience for folks that are using BetDEX.Nigel (27:44):Yeah. That's a very good point. Largely the regulatory issues set at the application layer, are very similar to... AWS typically does not have to deal with betting regulations. It's the application that builds on top of it. BetDEX is very simple. It's just their protocol it's up to those applications that build on top. For example, BetDEX the application is regulated in Malta. We are going through a very long process with the Malta's Gaming Authority and I was on the call with them yesterday going through my source of wealth and they want all my bank details. I've been fingerprinted. That's a process.That's a process that happens at the application level. Basically the protocol just works with those applications and so it's agnostic to do that. It's the applications that deal with the regulation.I will say that with FanDuel before we went through a lot of regulatory issues with FanDuel as a fantasy sports product. Then becoming a sports betting product. I'd say my personal view in the US regulatory process is, it always gets messy before it gets better. I see that with crypto as well. I'm actually probably one of the few crypto regulatory optimists in that I see what's happening today and some of it is ridiculous. A lot of it is through lack of understanding, but some of it, I think it is genuinely vested interests. Acting in their vested interests.But I also feel that like fantasy football was, crypto is just too popular. Means too many people have it. It's too beneficial to consumers and it brings two things to politicians what they love, which is money and votes. I am very bullish longer term, but there's going to be speed bumps on the way.Joe (29:29):Yeah. I totally agree. I think you and Sam at FTX are definitely regulatory optimists. I am cautiously optimistic. But I do believe that there's a growing momentum, certainly in the United States about bipartisan support for candidates who are pro crypto. I think this is a very real movement that's happening in DC. I know there's lobbying groups. There's super perks being set up. I agree with you. I think that there's going to be some bumps along the way. There will probably be some blunders and bureaucratic mistakes if history serves as well.But at the end of the day, I think that to your point, it's so popular nowadays and the rebranding of crypto to Web 3.0 which now encompasses things like NFTs, which is bringing culture in the crypto. Which is bringing video games into crypto. Which is bringing fantasy sport and sports betting into crypto. It feels we're on a path towards this reaching some consumer safety slash normalcy. I guess the next question that I had was, if I'm a kid nowadays, I know you have some kids. I have a son, but he's much too young to even be using a computer.One of the fascinating things that I think about kids these days is that the concept of a video game or the concept of art or the concept of a sport is just so different. Can you talk a little bit about maybe how even just conversations with your kids or your view on the youth is influencing some of the decision making in what you're doing with the projects that you're helping launch?Nigel (31:09):Yeah. It is very interesting. I've got three kids and they're all gamers and they're from 17 to 28. It's a broad range. It's interesting how they're discognitive, I would say. Obviously discard is prevalent in crypto. I'd say that they're all very familiar with NFTs. It's not such an alien concept to them that I think it is to people maybe my generation.It's really you spend money on something that's virtual. They have that experience. When they're gamers, I think they're little skeptical of NFTs and games like a lot of gamers are because I think they see that historically a lot of the games companies have used innovations like this to, not to make the game experience better, but to actually make more money.They look at them a lot of times and say, they like NFTs in their own right and they're interested and they've all bought and sold them. Because they look them and they say, "Okay. These are load boxes. This is another way to get money from me for something that I probably should have got in the first instance." That's been really interesting. They are very natively digital. I think that's what's very clear that a large part of their life, a vast majority of their life is digital. And so the concept of a digital life is something that's totally new to that.Joe (32:25):Yeah. You and I were chatting at one point in Lisbon actually at the Solana conference and you had mentioned something along the lines of how fun it was for your kids to be sending SAMO to each other.Nigel (32:38):Yeah.Joe (32:38):And how it's this meme coin on Solana, but it was just this fun experience because they're not going to be sending each other hundreds of dollars in USDC, but hey, they can send each other hundreds of SAMO and it's this cool experience.Nigel (32:53):Yeah. I'm unashamedly a SAMO enthusiast. I think you are as well.Joe (32:58):Oh yeah.Nigel (32:59):SAMO and Dogecoins are fun and they're popular. As someone who's tried to build lots of consumer businesses many of which have not been successful, popularity is hard to get. While they don't... Dogecoins don't do a lot today, that popularity I think is incredibly powerful. I'd say that BetDEX, we deliberately have been working with the SAMO community and we've done some fun things with them because they have something that we really want as a company, which is popularity. We definitely want to do a lot more with them and I'm very bullish in SAMO. I'm actually quite bullish on Dogecoins in general which is, it's very rare that you get something that level of popularity. That they don't figure out something to do with the... I think it's a very strong community. I think it's got a long way to go.Joe (33:44):Yeah. I agree. One of the most fascinating things I think that's occurred over the past couple of years specifically with the GameStop saga is that internet culture is a force and it doesn't necessary really have to equate to some business case study or some scientific proof for something to work or be popular or have utility. That's one of the most fascinating things about crypto to me is that the internet culture around it and how it supports things that on the surface appear to be maybe trivial in nature, but there's a huge community behind it and there's something to be said for that. I think maybe the last question I'll ask because I know we're coming up on time is, given the crazy expansive growth we're seeing in Web 3.0 and particularly in the types of applications on Solana, what are a handful of the projects or applications that you're really excited about now?Nigel (34:47):I think a few things. I think Phantom is an incredible wallet and I think they have a long way to go. I'm very bullish on that. I really think that's going to be critical onboarding people onto the L1. In terms of NFT projects, I have a Monkey. I'm incredibly impressed by that community and I've joined a lot of NFT communities and that one is just... It's so hard to keep up.Joe (35:12):I agree.Nigel (35:13):Yeah. I think they've done an amazing job. I do think there will be a bit of a... By verification of ones that clearly could become like that and ones that don't. I think a lot of entities at the moment are sitting in this nether land of, are they going to maybe get there or not? I think when it becomes apparent, prices will reflect that. I think that's really interesting one. I'm very bullish on the Monkeys. I think it's a great community. In terms of games, it's still very early. I'm really interested in Game Fire. I think NFTs could be really interesting on games.Filling games is hard though and I feel that a lot of these games are all have an amazing game priced in. Even though no one's seen a line of gold or... And so that does worry me. I feel there's going to be a lot of failures. The only one that I hold a bit of is Panzer Dogs. I've actually played their demo and it's a pretty cute game and the studio has evidence of building good games before. I'm quite excited about that one. I've liked what they've been dropping.I am very nervous in general about the whole Game Fire. I think that 2022, it might be the year that we discover in crypto that building games is hard and building games with NFTs in them is just as hard as building games. Those are probably the major ones. I do think that games is going to be really important though. But it may be more games like the Cops Game or Wolf Game, which is on Ethereum. It may be more games like that, that are not... Or even Loot. Loot was a fascinating project last year. Obviously it lost a lot of steam. But new game format where the community is actually core in building the next stages like I just gave you the building blocks and we build it, I think there's a lot to go there given that Solana is priced at a level where a much younger audience that doesn't necessarily have a lot of money can innovate.That's where I would be more excited as opposed to triple-A games porting over and suddenly their skins which weren't really worth anything anyhow, suddenly are tradable assets. I'm not as excited about that. I'm more excited about games that are weird that we don't really understand right now coming up organically.Joe (37:22):Yeah. I think that's a fair assessment. In almost any startup boom cycle, you see people just trying to innovate in myriad different directions, which is awesome. But ultimately the ones that have something truly innovative that people can gravitate towards are going to be the ones that really make it. Right now it's up for grabs.I'm always on the space like you are in general. I think that the caution that you're hitting is worthwhile, but man, there's a lot of really cool stuff out there. I will tell you, a lot of the game developers that I've been meeting with that are launching games are seasoned game devs.Nigel (38:02):Yeah. Yeah.Joe (38:03):They just see this as a way to like, hey man, I always wanted to have an Indy game studio or do my own game and this is a means to facilitate that. I think the key though, to your point is how are we going to integrate these things in a way that feels it's accretive to the game?What's fascinating about your kid's view of being skeptical of these things is very wise because what we don't want is just things to be bolted on. We want them to actually add value to the experience. TBD on that. We still got lots of time to see when this is going to pan out.Nigel (38:36):Yeah.Joe (38:36):Well Nigel, this was awesome. Where can people find you on the internet, Twitter, or Telegram or wherever you're comfortable with?Nigel (38:43):Twitter's the best place. I'm Nigel Eccles. I'm fully docs. You'll see me. I'm a nice little red monkey. Yeah. I'm @nigeleccles on Twitter.Joe (38:51):Amazing. Well, you heard it here first folks. Nigel Eccles, man, has so many projects and companies. We couldn't even get through them all. But thank you so much for joining us on the Solana podcast and we'll see you guys next time.Nigel (39:04):Thank you.

Tristan Frizza is the Co-Founder & CEO of Zeta Markets, an under-collateralized DeFi derivatives platform, powered by Solana and Serum. Matty Taylor (Head of Growth at Solana Labs) guest hosts.00:26 - Origin Story03:08 - Winning the Solana Hackathon05:59 - What is Zeta?08:49 - What's appealing about options?11:17 - Why is Zeta more successful than other options projects?16:44 - Using open-source primitives vs. building20:15 - The front-end24:22 - Mobile user experience28:49 - Rapid Fire Questions: Anonymous Crypto teams30:21 - Rapid Fire Questions: The Metaverse31:18 - Rapid Fire Questions: Insurance in DeFi34:40 - Rapid Fire Questions: Singapore36:12 - Rapid Fire Questions: Sleep38:27 - Rapid Fire Questions: Solana DISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Matty (00:09):Hey everyone. Welcome back to the Solana Podcast. My name is Matty. I'm the head of growth at Solana Labs. I'll be guest hosting today and we have a special guest Tristan from Zeta. So welcome.Tristan (00:20):Thanks for having me on Matty.Matty (00:22):It would be great to know just a little bit about yourself and maybe how you started your crypto journey.Tristan (00:27):Yeah, absolutely. I can give you the long and the short of it. So I think I started getting into crypto back in the day, probably in 2017 when I think a lot of people got into it during the last ball run. And that was mostly just speculate on coins, looking what was going on in the ecosystem. DeFi didn't really exist yet at that point. And I feel like a lot of people were still grasping at what is the real use case of crypto at the moment, other than this buying these coins and seeing the moon. Didn't feel like there was a real kind of engineering need for it or some kind of real product market fit. And so that's kind of why I tape it off a little bit after a year in that space, just kind of checking the things out.I went back finished my degree, actually ended up doing a bunch of courses in distributed systems and computing, because I started getting interested in the whole blockchain side of things from the engineering standpoint, it was like creating your own coding up your own proof of work blockchain, which I thought was really cool and just understanding the fundamentals of Bitcoin. And then I think over the years I took a bit of a breather on it. I unfortunately missed DeFi summer, which I was pretty firm about. And then coming back to it, I'd been hearing so much about smart contract programming, what you can build in this kind of new DeFi Boom and what was going on there. And so, I came back into the space after having worked for roughly like two years as a data scientist, kind of in the Bay Area.I think I was a little bit tired of the remote work kind of grind there, even though I enjoyed my job. And so I decided, hey, in my free time over Christmas, I'm just going to go and learn how to program on solidity. And so I made a few kind of smart contracts learned what was up there. Randomly was just putting together a DeFi idea, looped in some of my best friends from kind of more of a trading and finance background, we decided to put our brains together and just be like, "Hey, what can we build in this space?"And then yeah, after throwing around enough ideas, I think we ended up settling on something that was really cool. We thought the derivative space was somewhat untapped, especially options seemed like such a huge market, but no one's really done it. And randomly, we reached out to Dom, fellow Australian, and then we basically, he put us in touch with Tolley and Bartos, and after talking to them a bunch and reading the whitepaper many times, I got really sold on Solana and I've just been developing on it since.Matty (02:40):Nice. And if I remember correctly, you guys were the winners of the Solana Season Hackathon, which was extremely competitive. I think there were like 13,000 plus participants, which I believe is the largest hackathon, not only in crypto, but ever in the technology space. So it would be great to just hear like how you guys worked through that whole event and what you guys came up with coming out of it.Tristan (03:10):Yeah, absolutely. So that was definitely a tough experience and an interesting challenge as you mentioned. Yeah. 13,000 people to compete against. And that was really when we were finding our feet in the crypto space, not having as much of a network or I guess like a reputation being new builders in the space and I won't go too much into it, but we went through a team split and stuff during that kind of time. So it was a really tumultuous period. And so, we just thought, "Hey, we got to give this hackathon 110% and do what we do best. Like we're all engineers and X traders. So we got to build man, because that's what we're really good at. And that's how we can prove ourselves. So we went into that.I pretty much quit my job, I would say two days before the hackathon started to give it 110% as did like a couple of the other guys, and then we just went in there pretty much worked out of the same apartment for three weeks, I would say, putting in 16 hours a day. So we must have worked over a hundred hours a week, just ridiculous hours. It was pretty much like wake up, code, go to bed. Which got pretty tiring by the end, I was pretty exhausted, but we pumped out a lot of work and we built out this very early stage binary options, MVP platform of which is very far cry from what we have now. But, it was amazing to smash that out in three weeks, learn Anchor from fundamentals, still in the process of learning Rust at that time.And then whipping together a front end, we ended up getting the product out, which was fine and it was a little hacky, but it worked. And then we ran into so many infrastructure problems. We didn't fully understand or appreciate the difficulty of RPC Nodes and trying to service all those requests. So our front end got rate limited crazy. So to actually get it out there on Devnet that people could use it, we were like, we have this funny photo where it's six laptops side by side, all hotspoting off different Wi-Fi hotspots, just so we get different IPs so we don't get rate limited on all of them. And then we were all doing what's called cranking, to process orders on the back end, all through these mini distributed cluster of computers in the same room. That was an awesome experience. And yeah, it brought the team together, we pretty much got a lot of our friends to come in who were our colleagues and then we hide them off the bat. And then we grew the team pretty quickly to seven or eight people straight off the bat to hackathon.Matty (05:28):Wow. That's insane. I didn't know that story about running your own cluster of computers to not get rate limited. That's amazing. And so I think you mentioned your initial idea in the hackathon and what you worked on initially was binary options, but that's not exactly what's in the product suite today For Zeta Protocol. So maybe just walk us through one, why didn't you pursue that idea and two, what is Zeta today? What is the actual product?Tristan (06:01):Yeah, absolutely great question. So I think with binary options, that was never really the plan for us. We didn't want to box ourselves into that very niche vertical. I think they have a bit of a bad rep in traditional markets. They're kind of banned in a lot of countries because I think they are a little bit of a degenerate product to be honest. It's kind of glorified betting. And so we wanted to move away from that. We want options that people can actually trade properly in a sophisticated manner in financial markets and Hedge Exposure and do all these things that you currently can't really do in crypto markets. People tend to just go bulls long right now, a 100x leverage and either get liquidated or they become a millionaire. So we're like, there's probably some in between where people can be a bit smarter and this is pretty much what all the pros use on Wall Street and all these other places pro traders are trading options and other derivatives.So we're like, this is a great element to have in your toolbox. So we straight away from, I think binary options, even though the reason we did it was because the math is a ton easier and it was easy to implement. So we got that out there. It proved that we could build something like this. And then we backed away from that. We went for Vanilla options, which we think are far more interesting. There's far more market demand. It's like a multi-trillion dollar industry in traditional markets. People use it all the time, super popular. You even see people getting into it from more user friendly apps like Robinhood in the US, has just blown up in popularity. So we're like this clear market fit. And then now we're trying to, I think historically we've been seen as just purely an options platform, which we were for a period of a couple of months, but now we're really broadening our focus to all derivatives, which is really exciting. Having everything cross margin and viewed under the one umbrella platform, I think is really cool and always building into creation. So what we have right now is futures and options. So we are the first one to offer dated futures on DeFi, I'm pretty sure. Even across Ethereum, I don't think anyone offers it, which is pretty interesting. Everyone seems to go fully PERPs, but we do futures, we do options, which is nice because you can kind of hedge out using the futures for your options. And then we're going to be looking to list stuff perpetual swaps as well. Probably broaden it into a bunch of other categories for derivatives based on demand and what's feasible to build on chain. But really we think the options are pretty limited and trying to build out a whole suite of trading products that people can get dug into.Matty (08:21):That a great overview. I guess kind of double clicking on one of the things you said, which is options are really popular product in institutional, traditional finance. And even now thanks to Robinhood of making it a great user interface for retail to even participate in options. Why exactly is that the case? What is so appealing about options that it applies to both audiences?Tristan (08:50):I think for more casual users, I think the payoff structure is just very appealing. I can't demonstrate it here on the podcast, but essentially you have unlimited upside. So as if you were to get a PERP or hold spot, if Solana rips to a thousand dollars, you're exposed to that whole upside, which is really nice to see. But the cool thing is your downside is essentially capped. So if Solana tanks, you only ever lose what you put up for the premium, which may be a hundred dollars or something or other. So it's almost like you're buying this insurance. You've got unlimited upside, limited downside, which is in stark contrast to say, you buy a PERP and Solana tanks a lot. And then suddenly you've lost a ton of money, you get liquidated, which is pretty tough.So I think that's pretty cool. It's also options are inherently cheaper than spot as with like most derivatives. That's why they're more efficient. That's why people trade PERPs because it's easy leverage, I guess, with options they're inherently kind of under collateralized, you're only paying a fraction of what you would for the actual Solana coin is a spot asset. So that's pretty nice. And then I think from the institution side, and hopefully you're going to start seeing this more from the DeFi user side as well. I think it's a really good tool for hedging risk and this is their primary use case I would say in traditional markets. And you can almost think of it like you're buying fixed insurance on your portfolio. So what you'll do is say, I have a net long huge position on Solana or some other coin, and I want to protected on the downside.I'm just paying a small amount of money essentially to buy put say, and so if the market does tank, I've got this nice thing that's protecting my downside. I think those are all really appealing things. And you can start to pair up a lot of these different options so you can buy calls and puts, and then you can build these very interesting payoff structures. Things like straddles, which are kind of this V-shaped payoff where I'm basically market neutral. I'm Delta neutral. I don't have an opinion on where the market's going to rip up or rip down, but I just know it's going to go a long way in one direction. So you essentially start speculating on purely volatility, which is an interesting new trading paradigm that I don't think a lot of people do. So you might be unsure, I don't know where the market's going to move, but I know it's going to move a ton and you can start placing bets on that, which is really exciting.Matty (11:04):Yeah. That's really interesting. I mean, Zeta is not the first project to try to tackle options and bring it to a bigger audience in DeFi. Why do you think previous attempts that this haven't been quite a successful?Tristan (11:18):Yeah. Awesome question. And this is really what spurred us to start in the first place. We were looking into this early 2021, we spent a good month or two, just not even coding that much, but just surveying the landscape, seeing what was out there and where we would necessarily fit in. And so I think at that time, pretty much nothing existed on Solana. There was what? Serum, Bonfida, Raydium had only just launched. It was very early days, but obviously most of the competitors, or people in that landscape were on the eat side. And so I won't name any platforms, but there were a couple out there. They're mostly these one sided AMM pools, which basically all they do is sell options. And so that's not really satisfactory. You're not doing the buying and selling. You're forced into one.And whenever you are placing your capital into this AMM pool, you're a forced seller all the time. So basically you have no choice whether you want to sell the option and you always get done at really poor prices. It also requires people to have pretty good pricing to make sure they get a good deal for their LPs. But from what we saw with some of those platforms, they've priced them really poorly. You have this parameter called implied volatility that you will have an opinion on or put into your pricing model. And I remember the founder of this one protocol was updating it once a week. Whereas, crypto's very volatile, change is intraday. So, if you looked at the gene analytics dashboard, a lot of the LPs were just down 20% to date, which was like, why would I put my money in this pool? It's just losing me money consistently.Matty (12:46):Yeah.Tristan (12:47):And then there were other nice ones that were more like orderbook based, which I think were cool. But the only problem was Ethereum, gas fees were crippling, you try and put on a call spread, it'd be like $200 in fees. And I'm like, that just wipes out all my PNL. I've got to be a whale that's putting on this massive trade. Otherwise, any kind of smaller fry, just going to get completely priced out of the market. And their liquidity was just nonexistent. They've got one strike on their orderbook that had two trades on or something like that. Everything else was just blank. So I was like, there's no way that I'm going to trade on this willingly versus like Deribit or some other kind of options exchange out there.And so I guess the way in which we're different, we're obviously built on Solana, so you get the really nice performance aspects of the network. A big sell for us was being able to use Serum. So the decentralized orderbook infrastructure, which is a feed of engineering there and powers pretty much all our markets, which is pretty incredible. And something that we've tried to do, I guess the four main points we've tried to hit capital efficiency is super important. So we want people to be able to put on positions without having to go over collateralized or fully collateralized and put up a ton of capital, which makes it really inefficient to trade. It means like, hey, I can't open a lot of positions. Suddenly, I've tied up all my money in this one position. And so this is really bad for individual users and especially market makers. Market makers need to put on 50 different positions across all different markets.So that makes it really tough for them, makes it really inefficient to trade. And if you don't have market makers who can trade efficiently, you're just going to have not very liquid markets. So, that brings me into the second point. We want to aim for liquidity, obviously trying to onboard these market makers. We have two dedicated market makers, which is really cool. They're providing liquidity 24/7 and kind of quoting our markets, which is really exciting. The third point is user friendliness. I think options scare a lot of people and derivatives in general, can be scary, because they're a little bit more complicated. But they're nothing to be scared about. And we're trying to bring down that barrier entry, we've seen what other platforms like Robinhood have done in terms of making it a lot more user friendly, building stuff like a mobile app and having more explainers in product.So we've taken some notes from that. We've tried to build a really intuitive trading interface first and foremost. So people can go in there and it somewhat makes sense on how to trade. And it's not this really opaque, confusing Excel spreadsheet looking interface, like you get on some other platforms. And we just really want to lower the barrier to options and make sure that everyone's able to access them and try and use them. And then the last bit is I think safety is really important because they are a volatile product and like options, prices can change quite a lot because they're kind of non-linear in nature. We want to make sure that users are protected. They're kind of managing risks, so we've got like a lot of safe margin parameters at the moment. So people can't get too over levered and then it's getting liquidated really easily.And we also have this internal risk engine. We have what's called a Mark Price or our internal fair for what we think these options are worth these updates pretty much every block. So half a second, essentially it's based on the fifth Oracle, we update it really quickly. It's kind of calibrated to trades and other things that happen on the platform. So it's meant to be really reactive and we basically built this because we don't want prices to drift off what they actually should be. And then people just get randomly liquidated for no reason when they shouldn't be. So far it's been going pretty well. We've had barely any liquidations. I think people have been pretty happy, but always improvements to be made.Matty (16:05):Very Cool. One of the things you touched on was how you're starting with Vanilla options and you're interested in more perpetuals and maybe other derivatives and creating this suite of a variety of products that folks can use and you need cross margining across all of them. How do you decide from a product standpoint, when to use other open source primitives, maybe you can use Marginfi for cross margining or another protocol DeFi primitive for futures, contracts. How do you decide what you guys build versus plugging into this open source composable ecosystem that already exists on Solana?Tristan (16:47):Yeah. This is a really good question and saying we've been grappling with for many months. I think it does come with a set of trade offs and we do have to put our heads down and think about it quite a lot. I think in the early days we were really looking to integrate with one of these linear trading platforms. So anything that's like PERPs or spot or futures. So, obviously talking to teams like Mango and a bunch of others out there on integrating because we're like, "Hey, we need these futures," and we didn't necessarily want to build them ourselves. Because it was extra time. The one thing that's slightly tricky with early composability is so many of these platforms and protocols were changing every week. So it was like trying to hit a moving target.Their code base is changing how they're doing stuff and we're like, we're also changing and trying to be agile. So in the early days that was a little bit tricky to kind of integrate Mango margins, their stuff's a little bit differently to how we do it. So it's really hard to consolidate and do a cross margin across two things. I know Marginfi's trying to tackle this now, which is why we're trying to work really hard with them and trying to integrate because I think it's such a cool product. But yeah, for example, with those futures we realized there's a clever trick where essentially if you treat a zero strike call, it's more or less a future. And so that was something that we could just pretty much chuck straight into our framework and pretty much pop out futures within a day's worth of work, which is pretty cool.But now in the future we're really focusing on composability that's a massive thing for us. So working with say, some of the borrower lend platforms, I think they've got nice functionality and it allows us to do a multi collateral, because currently we just do cash margin for stuff, if we want people to margin with SOL, they can kind of borrow cash on their sole or something rather. And then yet now there's this whole ecosystem of derivatives apps that they are building on top of futures and options. And so we're really trying to service them. So you've seen these DeFi options vaults really blow up in probably the last month or two. There's this whole popping ecosystem of these now whereas, if you were to look at this, maybe like three, four, five months ago, there was pretty barren. No one was there.Everyone was telling us like, hey options have no product market fit, no one cares about it. And now you've got Katana, you've got Friction, you've got like tap a bunch of others. You would've seen the news. We just brought over Ribbon Finance from Ethereum and we helped them launch on Solana, which to my knowledge is the biggest EVM kind of project to move over to Solana properly, which is pretty exciting. So yeah, we're just trying to service this ecosystem and really composed with all the projects that are trying to build up on us. And you've got like five hackathons happening now almost concurrently. You've got like serum convergence, a bunch of cool stuff came out of there. That looks really exciting. You've got this Solana global hackathon, which is coming up shortly and a bunch of others. So very exciting times.Matty (19:33):Yeah. A related question and you answered some of it, but Zeta, it seems like at its core, it is a protocol and you want external developers to be integrating with your protocol so that they can build things like structured product, things like Ribbon or Friction or Katana. But at the same time, you do have a really nice front end that you guys have obviously spent a good amount of time on, how do you view that piece of it where you are a developer platform in a sense, because you're composable with all these other systems that could plug in and provide value to the underlying protocol. But at the other end, how much work do you put into your front end to make it a trading destination for end users?Tristan (20:18):I think we started very much from the singular mindset of let's build this really amazing exchange ourselves and then have realized that, hey, we only have so many hours in a day and this is quite a grand vision. And you really get this exponential payoff or this nonlinear scaling when you start integrating developers from the community, people start building on top of you and you start growing a bit of an ecosystem. I think Serum's like a really great example of that. Obviously they've got this great orderbook, but now it's used by 50 plus projects. It really scales pretty amazingly. And it's like this core primitive in the ecosystem. And so we want to offer that because we've spent like six months trying to engineer this really complex and sophisticated options and future's protocol. We don't want people to necessarily go through the pain of figuring out how to do under collateralized trading and margining and settlement of options and all the pain points that we've had there.And so we want people to leverage that, build cool things. But at the same time we needed like a front end. We want people to be able to trade. I'm not expecting people to whip up type script or get a CLI going and start placing trades programmatically. That's not going to really appeal to the majority of users so it was us coming up with a really sleek web app. We also built not a mobile app, but you can access it through a mobile browser and we're going to integrate that obviously with Phantom mobile, which I think will make for a really nice experience. But yeah, other than that, we've been focusing hugely on DevTooling. That was kind of a pivot in our focus from, we've built this exchange and it works really well internally.And then I think I pushed pretty hard from our side to focus on composability and how we integrate with a lot of other projects. And so that was releasing a typescript SDK, which basically all the market makers and programmatic traders use. It just makes their life a lot easier. And a lot of people don't necessarily want to click trade through our platform. So if you're running a market, making bot, doing all those kind of essential functions, then that's really convenient for you. And then something else I wrote, which is our kind of like Rust cross program in vacation library. This is basically what the vault projects and all these other guys have been bugging us for months for. And I kept basically pushing back on guys like Katana and just being like, "It's coming, we're focusing on the platform. We're trying to get that out then I'll kind of service you guys once it's ready."And so ended up kind of doing it in parallel. I'm like these guys are pretty important to our strategy, we really should be supporting them. So ended up just writing out that client. I even built a bit of a sample vault implementation just to make it as frictionless to move over as possible. And they've kind of taken that and run with it. And the feedback that we've gotten is everyone's like the developer documentation is really good. It's easy to use. They don't even need to ask questions. So it scales well for us where I don't need to get on a call for two hours and walk them through how our stuff works. They just read the docs, fork it over, start running it, make their own changes. And they've got a product working within like an hour, which is pretty amazing.Matty (23:10):That's awesome. One thing you also mentioned was mobile, which is interesting. I mean, yeah, for those who don't know, Phantom, the browser extension wallet has released an iOS app recently and getting a ton of downloads and it's getting the ecosystem thinking how do we optimize for mobile? Obviously part of the promise of DeFi, is that there's billions of people around the world, they have smartphones, they maybe don't have access to first world financial infrastructure. And so if they have a smartphone and they have a Phantom wallet and they can get some funds into the wallet, you get access to this next generation financial system. But on the other hand, and maybe that works well with simple things like I want to get a loan or I want to make a trade or invest in a stock.Matty (23:56):But when you're talking about using pretty advanced derivatives, whether it's futures or options, screen space matters. You just envision the Wall Street trader with 17 screens loaded up. How do you think about that? Are people, do you think going to be trading perpetuals and stuff from their mobile phones in Indonesia? Or how do you see that of playing out?Tristan (24:25):Yeah, definitely see it happening. To be honest, I think I went through a period where I used to pretty much exclusively use binance and FTX from my desktop computer. And then it got to a point where I just got too lazy and it was so convenient on my phone. If I just hear like, this coin is probably a good buy now, I'll just kind of check it on my app and go and place an order. And it's super frictionless. It's super easy to do and very convenient. So I really like that. And I think what spurred us was kind of a twofold thing. One is seeing what our audience was and what people wanted. And obviously it's a global audience.If you're looking at the whole span of things, a lot of people do use mobiles actually, which kind of shocked me because I came into this being I've never used a DeFi app on mobile and I don't think I ever will. And then I looked at what our discord statistics were. We put out actually like a survey or two, how PM guy wanted to do a survey and figure out a little bit what our user base was. Turned out like this huge proportion of people, I forget the exact percentage, but were accessing and using primarily from mobile.Matty (25:31):Interesting.Tristan (25:31):And I think that tends to be probably more of a third world geography type thing. People tend to be very big on the mobile phone stuff. We were like, "Hey, we can't ignore this customer segment. There's clearly like a fair bit of demand there. And this is something that we should probably cater to." And it was really good from the design side. So this second part was we obviously want to simplify, but still have functional options. We don't want to simplify to a case where it's like click one button and it does stuff for you. It's like, we just want to make it intuitive and easy to use without making it unnecessarily complicated.So we're like, "Let's hide stuff like Greek exposures and all this stuff in options. That's like probably for the pros and it's probably overkill." And so we're like let's design for mobile first, which is actually feedback from Josh Taylor, from the Solana team. The designer there gave us a bunch of good feedback of design for mobile first it'll force you to be really efficient and think about screen real estate and then go back to the web one after that and then you'll probably have a much simpler or more compact information dense kind of screen there.So that worked really well for us. We kind of rolled with that, we had these two apps. We actually kind of split it up. We didn't want to have necessarily the same exact experience for both web and mobile, which we had initially. And I think our binary options won. It was just like a clone of both, but we realized, hey, we're going to have different audiences catering to both. Probably the more pro traders are going to get on the web app so we're going to have essentially the options, kind of the layout of all the options. You've got a lot more kind of parameters and knobs to look at. You can look at like open interest and probably we'll add in like Delta and all these other things that I think the pro traders really appreciate.But when we're looking at the mobile app, we gave the normal interface and we put in other stuff, which is useful from the price. And you can kind of get these little metrics, like what's the probability of the option finishing and the money. And I feel like that's a lot more tangible than I just look at an option and it's priced at $2 or 70. And I'm like, what the hell does that mean? Whereas if I'm like, "Hey, this has a 20% chance of finishing in the money," then that makes a lot more sense to regular users. And we changed the flow a little bit as well, where it's like, if people aren't really comfortable placing options, we made a very simplified flow, which is like, I think the price is going up or the price is going down, which kind of caters to the people who are only familiar with these up-down perpetual products.And that basically auto fills out your kind of, I'm buying a call or I'm buying a put with some nearest to expiry, some other parameters. So it kind of takes some of the decision load off people. Because otherwise people come in there, they're like, "I want to buy an option. I don't really know what I'm doing, but I've got to put in things like expiry, I've got to select the strike and then I've got to select all these different parameters. I've got to buy or sell it. Which one do I do? I don't know. It's kind of a lot of mental load." So we are just trying to minimize that for people.Matty (28:15):Nice. That's awesome. So maybe the last section here, we can go through some rapid fire questions. So I listen to this podcast from Tyler Cowen, who's an economist and professor in the United States. And basically how this is going to work is I'm going to say a word or a phrase, you're going to say whether it's overrated or underrated.Tristan (28:37):Got you.Matty (28:38):And then you can give a brief definition of why you think it's overrated or underrated. So, I'm going to say something first, a word and it's just going to be rapid fire. We can talk a little bit about each. But, you ready?Tristan (28:49):Yep. Let's do it.Matty (28:50):All right. Anonymous crypto teams.Tristan (28:53):I think underrated.Matty (28:54):Why is that?Tristan (28:54):I think they do pretty good work. And I think coming from a background in traditional software engineering where people care a lot about credentials and things like that, I think what you should really be measured on is your meritocratic thing where people just do good work. And I think people go out there in the crypto ecosystem, they don't make a big fuss, but they launch these protocols. And I think people do really good work and they don't need to have a Stanford CS background or something, although to contribute to the ecosystem. So it's really nice and refreshing to see people who might be self taught in crypto. And a lot of people are, I think they take it on their own initiative and they go out there, build amazing products and change and push the financial narrative forward or whatever they're building the crypto ecosystem. So I'm pretty bullish on those teams for sure.Matty (29:39):Out of curiosity, why didn't your team go anonymous?Tristan (29:43):Most people in the team I think are pretty anonymous and want to stay that way. I think it's me who's had to be the doxed individual on the team. But it's more like, you want to do these speaking opportunities or go and publicize or get the name out about your protocol. And I think it's very hard or at least for me it was tough to do that. People don't necessarily take you seriously, especially when you're trying to raise capital or do other things, people don't really... That doesn't fly with a lot of people when you're trying to talk to people from more traditional industries, they laugh it off as a bit of a joke. So I don't mind too much from my perspective, I'm pretty comfortable with it. But yeah, at least we have a little bit of a mix.Matty (30:24):The Metaverse.Tristan (30:26):I think overrated. I just hear it is this buzzword, you hear it from everyone, especially guys like VCs and other people. I hear it from a lot of my, I hate to say it but normie friends from outside of crypto. That's start to become a bit more of a tagline, but especially in relation with NFTs, this is something that everyone gets into in the space. And I think that's good to broaden adoption and onboard the next billion users, but I still don't have a really good understanding of what exactly the Metaverse is. And now I'm seeing all this stuff.Matty (30:55):What is it?Tristan (30:56):I don't know.Matty (30:56):I don't even know.Tristan (30:57):No, one's got a definition. It's just this buzzword that gets thrown around and now I'm seeing Facebook rebrands to Meta. You've got this corporate BS coming out and we're going to build the metaverse and I'm like, I don't really want to be part of Zuck's metaverse necessarily. So I'm a little bit bearish on that.Matty (31:14):Yes, I too do not want to be a part of Zuck's wonderland. Insurance and DeFi.Tristan (31:22):Definitely, I think underhyped. People go to the really quick and easy stuff to understand. And obviously NFT is a nice bridge gaming stuff like that I think is really cool. And not to downplay that. Then I think something, the narrative for DeFi is really strong. We're building a new financial ecosystem. If you're looking back at what's happened in traditional finance, obviously there's been like decades of innovation stuff. I feel like that's kind of slowing down and is not really suited to this web enabled world that we live in now. So there's kind of obviously this Web3 meme that everyone throws around, but I think it is genuinely true and it's going to be a bit of a paradigm shift.Even now, I try and open a new bank account or do a cross-border payment or something although it's a huge pain in the ass. There's so many things and steps you have to go through, it takes forever, you get clipped on fees on absolutely everything. Whereas, I remember the first time I opened up a Solana wallet and I just sent someone USDC, it's confirmed in a second, pretty much. I paid a fraction of  cent in fees. I'm like, this is incredible, nothing beats this. And I think Anatoly brings that great statistic of 20% of global GDP just literally gets dedicated and used up by just moving money around and having all these middle men take commissions on things. Unlike, wouldn't it be incredible if we all got a day back in our lives that we didn't have to work if the whole financial ecosystem was a little bit more efficient and more transparent.Personally, I really like it because having worked in the software industry where open source is pretty king there. And the only reason anything works is because people have built all these libraries and other things underneath that all build up. And you can build your application in 10 lines of Python now. And this is kind of like, doesn't obviously happen in traditional finance. You've got all these firms who guard their secrets, it's world gardens. And now you've got this transparent financial ecosystem where everything's, majority stuff is open sourced, it's composable, people don't need permission to go and place and execute orders through Zeta or build whatever their protocol is, their default product on top of us, just go ahead and do it. It's a piece of public infrastructure.So I think that's pretty awesome. And I'm super excited when we live in this world where everything can talk to each other. You're actually earning productive yield on your assets and not the 0.2% that I probably get in my bank account these days. And then following on from that, I think derivatives are pretty cool. I think when you look at any financial ecosystem, you've got a few stages of where you're going through. So, we started with the simple token swaps, then you're going to these borrow lend protocols, then you're getting more into PERPs and leverage. And then I think the last piece of this derivatives puzzle is just trying to get to options and then on the very end of the spectrum, you're starting to get to exotic options and this crazy stuff and you're seeing a few protocols popping up for that. So it'll be interesting to see how it plays out, but I think it's such a natural fit. And yeah, when we started this, we're like, it's such a obvious play that this will take off and we've already seen perpetuals swell to multiple billions, if not more of volume on centralized exchanges, even stuff like dYdX is just blown up massively all of last year and this year. So yeah, I'm super bullish on that. And I think it's under service still. I think it's just going to grow more and more. And if you look at traditional markets, derivatives eclipses spot by 20X or something although it's just huge.Matty (34:42):Singapore.Tristan (34:44):I think under hyped right now. I think it's still fairly under the radar. I think it's a pretty cool part of the world where it's like a nice melting pot between western and east. So it's cool. I think being around here and seeing that it's still an English speaking country, but you get exposure to that kind of side of the world. It was just kind of convenient for us as well because it's that whole kind of APAC time zone. And so far it's been pretty enjoyable. I think there's a really, really fast growing crypto ecosystem. So it's still behind. I would say the US, is kind of the leader. I think all the main people are there in the Bay Area or New York building cool stuff. You're definitely to starting to see more people move here.I think it's a big crypto hub and I think kudos to the regulators for not just trying to outright ban things and trying to have a little bit of a conversation, which I think is pretty rare when it comes to crypto. You have everyone trying to shut it down and label it as this kind of like, this is some black market thing and people are using it for all these nefarious operations, when you have actual legitimate builders trying to build awesome financial infrastructure that will hopefully change the world. So yeah, I'm definitely see like more people moving here. I think hopefully growing a little bit of a Solana footprint, we'll have this Singapore Hacker House going and hopefully a more longer term installment and looking forward to having more startups around.Matty (36:05):Yeah. Completely agree. Huge fan of Singapore. I've been there handful of times and I've always had a really good experience there. So okay, next one. Sleep.Tristan (36:15):I think under hyped for sure. I have a lot of friends, probably more in the kind of banking sphere who are just sleep is for the weak type mentality. They're like I did sleep three hours and go back to my desk job like Goldman Sachs and then just do all my stuff there. And they're like, who needs to sleep? Doesn't really matter. They have fucked up sleep schedules. I've read a couple of books on sleep. I think there's that classic, like Matthew Walker one, on why we sleep and a bunch of other good ones and yeah, it does seem pretty critical. I know at least myself, when I get less than six hours of sleep, I'm super grumpy and just have a lot of brain fog and cannot think straight. And when you're trying to code up smart contracts and Rust, I think you need your mind to be performing pretty well.So we have a bit of a weird sleep schedule going in our team somewhat, we're trying to service 24 hours of the clock. And even though some of us are in the same time zone, say we just have to like stagger our hours. So I'm personally a bit of a early bird. So I try and get off earlier and I enjoy the early hours because I tend to get very tired at night and can't problem solve. Whereas, I'm fresh in the morning. Whereas some other guys in the team, especially on the engineering team, love to pull the late nights and be up until like 3:00, 4:00, 5:00 AM. So, it kind of works, but we're around on the clock. So if a market maker or someone throws a fuss and the platform's breaking, we're always there on call. But I think sleep in general is super underrated. I think it's pretty important in the long run, you want to be getting your six to eight hours.Matty (37:43):I asked this question because I think you had a pretty infamous tweet and I think it was, "Peak crypto living." And it's just a picture of a rug and a ma and a mattress on the floor. I just wanted to get to the bottom of this.Tristan (38:00):That's right. My sleep is terrible. That was when we moved into a new place and I pretty much had no furniture. We bought a wide screen monitor before we bought a bed. We were working super productively, but then I would go up to my room and just more or less sleep on a yoga mat on the floor, which was maybe not the most comfortable thing, but I got by it for like a week and then managed to buy a bit more furniture. I have at least a basic bed now. So my sleep has improved incredibly since then.Matty (38:26):Nice. And this will be the last one. Solana.Tristan (38:30):That one's a hard one to say. I think if you were to ask me last year, it would definitely be under hyped. I still think it's under hyped. I think people have been fighting it and being like, "Hey, this isn't a real chain. It's overblown. It's VC chain bad or something." Although people are kind of always trying to put shed on it, which I don't think is justified. And I look at those people now and I'm like, "Clearly you haven't used any of the apps that are on the platform where you have no appreciation of what the people are trying to build." Because I think being, I wouldn't say an insider, but at least like a builder in the ecosystem, you're like, hey, there are a lot of really cool teams building cool stuff. And there are so many products yet to be launched.So I still think it's in the period where it's under hyped and we're going to have just so many more Solana apps just because it can scale and we're not going to hit these really crappy limits like you hit it on Ethereum L1 where suddenly everything is costing an insane amount of money. So I still think the space has so much room to grow and the way that Solana is built, I think does scale pretty nicely. I think it has definitely gotten some hype towards the end of last year. I think it did feel a little bit toppy, I think in crypto in general and going to break point and there was so much hype and so much crazy sentiment going around. Everyone was feeling really good because their bags are getting pumped and people are in Solana 200 plus dollar territory. And there's this whole NFT thing going on, you've got to listen to announcements from founder of Reddit and founder of Brave and stuff.And you're like, "Wow, this is mainstream adoption. What's going on? Solana's going to infinity." And then the whole market nuked and then kind of brings you somewhat back to reality. And I think now is probably the best time for builders when price is a little bit suppressed. People can kind of put their head down because, I got to say, end of last year was pretty hard to concentrate on just pure engineering. There's a million different distractions going on. So I think it's nice that things are a bit more low key now and it's a bit more of a healthy growth trajectory.Matty (40:20):Yeah, for sure. This is definitely Solana Season from my perspective, because this is the best time to build applications, I think. Yeah. Really happy that you guys are in the ecosystem. I'm really excited that Zeta is now on Mainnet. And yeah. Thanks again for coming on this show.Tristan (40:38):Awesome. Not at all. My pleasure.

Ahmad & Danial Abbasi are the co-founders of Syndica, a Web 3.0 blockchain infrastructure company focused on the Solana ecosystem.00:35 - Background in Crypto02:09 - Why Solana over other platforms?04:10 - User Experience and Web 3.006:16 - What is Syndica?08:54 - Syndica and Web 3.012:33 - Syndica’s focus on infrastructure14:36 - Differentiating from other providers16:55 - Syndica and the data18:29 - Their user base20:03 - Plans on offering validator services?22:05 - Best practices for building on Solana24:49 - How should new developers approach web 3.0?28:16 - Storage33:03 - Interesting projects in the ecosystem37:53 - Solana Hackathon39:19 - What would you love to see built on Solana? DISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor.

On a special episode of the Solana Podcast, Sergey Vasylchuk (CEO, Everstake) talks about Aid for Ukraine, a DAO created by Everstake and endorsed by the government of Ukraine and Anatoly Yakovenko to support Ukraine during the ongoing crisis — and how it came together on Nation.00:38 -  Intro02:51 - Origin of the initiative / How it works06:25 - Ukrainian government receiving FIAT currency 09:13 - Banking, a legacy system10:04 - News on the ground12:39 - What can people do to get involvedDISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Austin (00:09):Hello, and welcome to a special episode of the Solana podcast, I'm Austin Federa. Today we're joined by Sergey Vasylchuk, who's the CEO of Everstake, but we're actually not here to talk today about Everstake. We're here to talk about aid for Ukraine, and the situation in Ukraine and the project that Sergey and a bunch of others from the Ukraine and connected to the Ukraine have launched. Which is a fundraising effort to help raise money that's urgently needed for the government and for people there. Sergey welcome and thanks for joining us today.Sergey Vasylchuk (00:39):Yeah. Hi guys. Thank you for listening and thank you for helping us in this difficult situation. And yeah,the  situation in Ukraine is quite terrible. So we have been protecting our country for close to a week and we are struggling with one of the biggest armies in the world. But we still resist and sure, we'll win soon. But this will need... It's not just a magic maker, many of the people trying to protect their country, military are dying, military are fighting, the civilian are also trying to do all they can. And generalization is that every citizen of the Ukraine, it doesn't depend where he is located and what he can do, they do something. I do not know anyone who just sits in the idle and observes the news. First, probably two days for me was shock. I cannot believe what has happened. I was just stuck to the news and seeing what is going on, calling some relatives, asking what I can do to help and what's going on? It's just shock. And I was stuck, but sooner or later, I had the conversation with Anatoly Yakovenko from Solana, he is originally Ukrainian. He asked me, "Hey guys, what is going on? How are we going to help you? Let's do something." I said, "Yeah, I cannot sit and cry, and wait and I need to do something." And it was the case when we started to understand that we need some impact. And that's why we decided to start this activity.Austin (02:17):So the process here that's been running on is there's Ukraine.soul, which is a Bonfida name routing layer address, that routes to a wallet that's controlled by a MultiSig Dow on Solana. You can go to nation.io/dow/Ukraine, you can see this there too. There's about $1.45 million contributed so far, as well as several NFTs from projects that will also be sold and liquidated to generate funds here. There's a lot of different efforts, raising different kinds of crypto to aid the government and the people. What was sort of your thought to do this, to start this up? And can you talk a little bit about how the country's actually involved as well in the government?Sergey Vasylchuk (02:59):Well we have quite an unusual ministry, which called Ministry of the Digital Transformation. It was created a few years ago, and many of the politicians were skeptical and it was a bit like late in the day. It's just few guys from the IT ground. They will not change nothing. But for the least two year guys made the great application. We probably have the digital ID have digital, driver license, have the digital vaccination certificate, whatever. So it go digital. The many of the services, the country are become in our smartphone. And those guys are quite trustworthy and respectable in our community. They just start to accept the donation, in any form of the money that is available. And you should understand that currently there is marshal law in the Ukraine and central bank put limitation that is hard to transact in the foreign countries, foreign currency, sorry for us is Euro a dollar.So for example, I cannot transfer some USD to any other recipient outside, Ukraine. And many of the volunteer organization need to pay because, for example, night vision, like equipment or other stuff is outside Ukraine. So crypto become the obvious things to transact probably the only without the bureaucracy without need to go to the bank because, it's impossible to go through the bank in the middle of Ukraine is war is real war. So why crypto is obvious why government` and Montesquieu is because I was asking for many of partners asked me how we can help you. And I said, Hey, just donate. Many of them were skeptical. But what the source of this donation who are controlled those money, can you guarantee us that this money will be controlled by some legitimately people?And yeah, it was a good question. I was calling the guys from this ministry that the digital ministry and say, can you help us to make it more legitimate? Hey, make some, posting the Twitter with this other, they say, yes, of course we can, we can do. So I take some of the guys is deputy of the ministry, which have provide his own Solana key to the Montesquieu. I also call him like few respectable companies, founders of these companies in the Ukraine who are well known. They also provide their keys and we create the Montesquieu with like 60% of the threshold and linked our Twitters to each of the keys to be transparent. So everyone see who is signing, what is signing and is blockchain is totally transparent. You can go to this nation now, which like Solana and see our dow and see what is going on.Austin (05:56):Yeah. The multisig is also, I mean, if you just think about the logistics of operating in a war zone, you don't know who's available to sign a transaction at any specific place. So having it split up into a multisig that has a proportional threshold requirement just allows the whole project to be much more nimble. So, funds that are create are, are collected into the, this Dow they're they're then going to the request from the government is pretty much to receive Fiat currency at the end. Is that correct?Sergey Vasylchuk (06:25):Yeah. There is two problems here. Problem one is there marshal law with restriction. Problems two that currently in the Ukraine, there are not much exchanges, which are able to transaction the, in the hryvnia or in the foreign currents that we need to convert. And if there are some, they are not very scalable and sometimes vendors, don't have the crypto. So we trying to find the way to make it sustainable, unlimited, out ramped solution to be able to liquidate crypto and to put this to the account and second issue here that also people need to know that we are spending money , in the right hand, in the proper proportion and so on. So, and you should understand that the only trustworthy for the everyone, outside the Ukraine is government. So government is resisting, is successfully resisting for the biggest army in the world.So, you can put the there, reputation, yeah this is guys who are saving us. So that's why, we are going to you to build this unlimited gateway and put money directly to the central bank. Why central bank, because they own entity who is able to transact freely with outside the world. And they have special account, which were opened recently to all donation for the military operation, for the humanitarian operation, whatever. And we going to fund those accounts. After we try this to the sound scale amount, not significant amount. I believe that 1 million is not significant amount to have the impact in this strategy war, will we try to advertise this solution for the wide, for the wide audience? I want to build these something that would allow like every, every crypto holder, like down the Bennett from the, his size, it'll be hamster or whale, to donate any impact, as easy as $1, the 10 million, this is something that we going to build. Probably just tomorrow.Austin (08:35):Yeah. That's I mean, that's great to hear. And especially the ability of crypto to step in here and be a transfer medium that works 24/7, 365 days a year, even with the restrictions of having to get to Fiat currency at some point, it means that at least, you know, what's in the account and you're not waiting on banking hours in order for this to happen. And I think there's, there's probably also a safety component too, where people can donate in a more anonymous fashion compared to having to donate with a credit card or an accountant transfer. If, they themselves are in a situation where it may not be safe for them, maybe they're inside of Russia and they're actually still donating, you know, to something like this.Sergey Vasylchuk (09:14):Yeah, sure. Is just the new tool, the new generation tool, in our company, in between us, we call banking legacy system. So for us, the new finances, blockchain and everything that comes with the bank is legacy. So, but yes, sometimes we need the bridge become the system. But obviously for me, crypto is the new generation and this market for the 10 years. And, I am a 100% crypto guys, and this is how I can be useful for my country.Austin (09:39):So there's a real asymmetry of information here, as far as the media's been reporting that many people who are in Ukraine are not able to necessarily always get information out. And it's a little bit hard to understand. What's always going on over there, especially for someone like me, who's in the United States. What have you sort of been hearing from, from friends and family and colleagues about the situation there now?Sergey Vasylchuk (10:04):Well, I'm on the ride every minute. So you and understand, my parents stayed there. My sister stayed there. My friends stayed there. Everyone who stayed there, the males putting the guns and protecting the territory, female trying to be helpful with volunteering with the medicine, with anything. Even kids try to do something, but it's not possible everywhere. After the five days of trying to win our nation by the fire contact, Russia, understand it doesn't work. And now they try to use rockets, ballistic rockets, missiles and to hit our civilian cities. So what is going on Kharkiv is currently is bombing, like Kyiv is bombing. Zhytomyr is bombing. So they try to scare the people. One thing that they don't understand that they just bring more hate and angry, not the scary.So we are the nation that we unite against the enemy. We have the problem with 214, they took some of the territory and those situations, the country was weak. So probably they tried to use the same approach, but it doesn't work right now. So each strategy is a full scale war, with 1,000 of the deaths, with a civilian, with a 1,000 the death of the military and with the damages of the infrastructure. So it's not a movie. It looks like a movie, but this is real life that currently where Ukrainian are facing.Austin (11:52):And, and just in the last few days, the, I would say that the international community has moved very slowly, but they, they are moving especially financially to have there be real consequences for this in terms of freezing foreign assets from the Russian government and imposing stricter restrictions on it. Do you have an idea? Do you have a sense of the magnitude of the need right now that Ukraine has that both from the inner, like there, there's obviously there's donations that people can do. There's also Congress people, they can call there. There's other political actors that they can call. What are the right steps for someone who's trying to get involved beyond just donating?Sergey Vasylchuk (12:36):Well, the biggest problem for the Ukraine is our sky. So we have not advanced systems to protect from the missile and rocket. And, if somebody can close our sky, no chance for enemy to win us. So all current attacks are away from the sky. So if anyone could call the congressmen, the government and impacts something that the vest could close our sky, be sure that we will resist. We kick the earth and we go away. We go away from, from our territory, we hitting this, just fighters, just because the excellent pilots, but our is limited. So the more, just the more weapons, the more something that protects our sky will help us. Probably we do not need anything more from the point of view, if you want donate us, like donate, but you should understand that sometimes this money will be useless if they will not go out to like some specific like direction.So for example, Kharkiv, they need medicine, they need everything, but there is no logistic around because, everything is destroyed. No roads around. So the best way is to contact some volunteers who live in some specific places, which have, have the access to the some logistic and have the context with civilian military to ask directly, what do you need and what you want to have. This is why we also want you to interact after the building this crypto gateway to the central bank, we probably will try to onboard for, for the big exchanges, for the crypto exchanges funds, who will be able to make this direct support. And after this, we'll be able to send the crypto to liquidate the, and the exchanges and to help this way.I know many of the suppliers, like a, already a certain crypto, because some of the solutions probably FTX a Coinbase base, make it quite seamless transactions. So they send the invoices probably in the US dollars, but, we're receiving this in the form of the crypto. Some magic happens inside the exchange and guys receiving the Fiat and the more these guys who been born with the crypto, it will be more of widespread and something that you would call adoption. Unfortunately this mass adoptions go in such situation as a war with the thought that will goes organically. No, it goes in the extremely situations.Austin (15:17):Well, Sergey thank you. Thank you so much for joining us today. We'll have to have you back to talk about Everstake at some point, which is something I've been meaning to do for, for a long time, but this obviously takes priority today. If people are interested in learning more in helping out, you can go nation.io/do/Ukraine. That is connected to the same backend as the SPL governance program. So you can also just donate directly on chain at Ukraine.soul, which will accept any SPL token and any NFT as well.Sergey Vasylchuk (15:46):Yeah. Thank you guys for listening to me, please try to donate something to support like our survival. Thank you, Austin. Thank you Solana community. You are amazing. Please contribute something. It'll be your small, but very important and impactful contribution to save Ukraine as a nation. Thank you guys.Austin (16:04):Thank You.

In this episode, Dan Albert (Executive Director), Lily Liu (President) and Mable Jiang (Board Member) discuss the role of the Solana Foundation in advancing the Solana protocol and ecosystem with support and initiatives around the world. Austin Federa (Head of Communications, Solana Labs) guest hosts. 0:43 - Intros / Roles3:13 - The appeal of working at the foundation level07:48 - Establishing scope for the foundation12:42 - What’s working in the ecosystem?20:01 - From the ecosystem to the foundation21:21 - Growing Solana in new markets33:50 - Shared Ownership of the network36:21 - Predictions for 2022 in crypto and web 3.0DISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Austin Federa (00:10):Welcome to the Solana podcast. I'm Austin Federa filling in as guest host today. We spend a lot of time on the show talking to founders and builders in the space, people building on the Solana blockchain or otherwise involved in the Solana ecosystem. But today we're actually going to be talking about a different component, which is the Solana Foundation. Today with us, we have Dan who's the executive director of the Solana Foundation. We have Lily, who's the president of the Solana Foundation and Mabel, who's one of the board members of the Solana Foundation. Welcome to the Solana podcast, guys.Lily (00:39):Thanks for having us.Dan (00:40):Great to be here.Mabel (00:41):Thank you.Austin Federa (00:42):All right, Dan, let's start out with you. Tell me a little bit about what the Solana Foundation's role is in the ecosystem.Dan (00:49):Sure. The foundation is really here to help foster the growth of the Solana network and really the Solana ecosystem kind of in broad strokes at the highest level, what can we do to make sure that the Solana network continues to grow in the most kind of sustainable and decentralized manner as possible? And how can we provide resources and help the community grow to onboard the next or the first billion users to the Solana ecosystem and crypto in general?Austin Federa (01:24):Lily, what attracted you to the Solana Foundation? And how did you get involved in it?Lily (01:30):Well, I've been in the crypto ecosystem for a little bit and I must confess that in 2018, 2019, I actually spent a good bit of time being a Bitcoin maxi. And then I even was part of Little Bitcoin Book and which is not to say, sometimes I feel like people in crypto are a little bit maybe too tribal, which is not to say I don't love Bitcoin. I still consider Bitcoin to be king. But when I took a little bit of time out of crypto, when I came back to crypto, I started just using a lot of the apps that had sort of emerged out of DeFi Summer and I was totally floored by using Raydium in April. I really could not stop talking about it for just about a month because it was very squarely Web 3.0 but it felt like Web 2.0 and it was just so obvious to me at that moment that this was going to be how the next billion people, if we were going to get a billion people into crypto, anytime soon it was going to be on Solana.Solana to me is just such a unique combination of being technically so innovative but at the same time, really understanding that to bring people into the ecosystem, it has to be a good experience. And sometimes for your end user, it really just is as simple as saying, "It's fast and cheap." And that's why ethernet is just better than 56K modems. And sometimes it just has to be that simple to the end user if you're going to appeal to a billion people.Austin Federa (02:48):Yeah, I completely agree with you. There's been so many of those moments I've sort of heard over the last year of people just trying something on Solana and having this experience of, oh, it just works. It's fast. It feels like a Web 2.0 application but it's delivered in a fully decentralized way. Just based on that, what was the decision in your mind to, tons of people have that experience, they go build something, they go work for a company building in the space in terms of a service provider company. What was the sort of appeal of something that's more at the foundation level?Lily (03:19):To me, I think that, I come from a background where I spent a lot of time, I originally started working in more traditional industries. I worked in McKinsey, I worked at KKR and I kind of fell into Bitcoin back in 2013, 2014, which at the time was not a very obvious thing to do. And so for me, I think one of the things that I maybe add to the ecosystem is helping run effective organizations and thinking about sort of how to scale a commercial kind of go to market strategy and having been in the ecosystem for a little bit. And so for me, what's always attracted to me to crypto and Web 3.0, is these kind of new ultimately end user experiences that you enable for, not just those of us who've been kind of nerding out over technical sort of minutia left and right but really making that accessible and available.Lily (04:17):Some of the things that I'm really excited about facilitating through the foundation is kind of new markets growth outside of the US, outside of Europe, outside of the parts of East Asia that are already very familiar with cryptocurrency. And to me, it's so clear that if these types of applications, call it DeFi or sort of more metaverse or social or NFTs are going to take hold, then it's most likely going to start on Solana first. And so just being a part of that and sort of making that more accessible to a broader rate of people is really what's exciting to me.Austin Federa (04:51):And Mabel, you tell us a little bit about your path to becoming a board member at the Solana Foundation.Mabel (04:57):I think among all the people here, I probably joined the board the earliest. I joined when the board started, the foundation started. That kind of history just goes back to when I think before the token launch of Solana happened to that Anatoly and Raj, they were in China and in East Asia. And then that was even before my time joining Multicoin. I met them, obviously at that point it was 2019 and then it wasn't really easy to raise fund for sure. But then we kind of just happened to hang out a lot in Shanghai, in Seoul. I think another places like Beijing and whatever. And then we spent a bunch of time over those three weeks and then talked about, oh, how do I think about or how do we usually think about go to market strategies for public chains? And then how do people really differentiate one smart contract from the other?When they go back to San Francisco, they ask, "Can you maybe write us some sort of expansion or kind of go to market plan for Solana in East Asia?" And I did that. That was right around the time when they're forming a board for the foundation. And then, that's also around the time when I joined Multicoin. They invited, it's like since you're part of the ecosystem and then you are pretty unique kind of position compared to some of the other board members, are you interested to kind of help Solana Foundation or raising the Solana awareness in a global sense? I was like, oh, that was really interesting in a differentiated way to contribute to the ecosystem so I said, yes.Since then, that was start of 2020. Since then over now, I've been doing quite a bit of things, always related to those lines, raising the awareness for Solana in China specifically because that's where I'm sitting. And also in some other places in Asia and also try to just kind of talk to different projects in multiple different ecosystem. And obviously now it's a multi chain world and then people would have different trade offs, like when to choose different things. But when they learn about Solana and learn about why they're optimizing certain things in the design, they're always willing to try it because back in 2020, there aren't that many people know about it. I think the first step really is just to having people understand how the system works and whatnot. I've been doing quite a bit of those. I think that's kind of my experience involved with Solana Foundation.Austin Federa (07:31):And Dan, as you kind of think about your role as the sort of executive director at the Solana Foundation, how do you define scope for an organization like that? What are the sort of things you're thinking about when you're thinking about initiatives that the foundation is engaging in or things the foundation is not doing and shouldn't be doing in your view?Dan (07:52):Yeah, that's an excellent question. Really, I see it as two primary areas of focus with kind of the overarching goal being broad growth of the network and the community itself without an eye towards turning a profit for the foundation. This is a nonprofit organization. We're not taking any equity investments or really taking the position to be picking winners. There's plenty of incredible innovation that's happening on Solana, lots of competing projects, lots of new stuff. And the foundation really wants to position itself to support, really talking how to provide support equally for everyone in the ecosystem. And so one of the primary thrusts, one of our main operational kind of focus points these days is really on growing the network itself from an infrastructure standpoint. That's really been my personal area of focus for really a long time now is how can we get the most number of high quality validator operators, the most humans running the most number of nodes, be it validators or RPC nodes, which serve as the API endpoints or API gateways for applications using the Solana network?And to that end, the foundation has rolled out a number of programs, really leveraging kind of the foundation's holdings of tokens, which are really allocated to grow the community and grow the network. Kind of as I see it, I don't know, maybe a bit of a personal tangent here. I originally started engaging with Solana in early 2019. I was working on the engineering team at Solana Labs and it was early stage startup. We hadn't even launched the Testnet yet, just kind of scrappy early days, trying to get everyone to understand and hey, proof of history is a real thing. We're really going to prove out this tech. And one of the things that was really hard was trying to get people to run validators. A lot of our early stage validators that helped us launch Testnet for the very first time and get Mainnet off the ground were a lot of them came from the Cosmos ecosystem.And so, we have a lot of these kind of OG longstanding validators who really helped get the Solana network off the ground came from standing on the shoulders of giants. The Cosmos ecosystem brought so much innovation to the proof of stake universe and kind of where this ties back to, in early days, myself and a couple of the early labs employees in true startup fashion, we were actually working out of one of the co-founder's basements and we hand built some of the first bare metal validators to run on the Solana network. Ordering parts on the internet, showing up in a bunch of boxes and just going forward kind of hacking on the hardware, trying to see how much performance we can squeeze out of these individual machines.We went and installed them in a data center here in the Colorado area and those nodes are still running today. Some of them are pointed at Mainnet, some of them are Testnet. And that was sort of the, I don't know, the genesis of, at least for me personally, a lot of my personal investment in seeing the growth of the validator ecosystem on Solana, having kind of physically hooked up and bootstrapped some of the first ones. And now having transitioned earlier this year to take on this role at the foundation, we maintain a program for anyone who wants to run a validator, can engage with tier one data centers all over the world that the foundation has. We've really kind of went to bat for our validator community and helped a lot of these infrastructure providers understand that, yeah, it takes a lot of horsepower to run a node on Solana and it can be hard to get your hands on some of these machines.And so in working with some of these execs at some of these older school, I'll say more traditional telco or infrastructure oriented companies, helping them to understand the value of what a powerful and secure and distributed Solana infrastructure ecosystem looks like, that's really been an exciting kind of growth track, I think for the foundation in helping to bring more hardware online and helping more people to learn to run it and get more nodes running and keep the network flying.Austin Federa (12:16):Yeah, I love the parallels to the Cosmos ecosystem being a validator ecosystem being early, early supporters of that because of course, Tendermint is also notoriously computationally intensive and runs better on bare metal than cloud so it seems like a very natural validator group to bring over in the early days.Lily, from your view, as looking over the ecosystem, what are the parts you see that are working really well in the Solana ecosystem? What do you see are areas, be it tooling, Dan talked a little about infrastructure, areas in which the foundation can make a difference in help evolving?Lily (12:53):What I think is going quite well right now is a lot of the interest in the energy and kind of the inbound on various stakeholder groups within the community. I think there's a lot of excitement from a general audience also because it's very accessible to a general audience. Again, as we were saying earlier, if it costs dollars versus hundreds of dollars to mint an NFT, that's a very meaningful difference to many people. I think general awareness has been amazing. I think there's a lot of increased developer interest and accessibility. And if you look at sort of the hackathons that we've had, probably every two or three months, three or four months in the ecosystem, the number of sort of people who are new to Web 3.0 that are starting with Solana, I think is really impressive and has grown tremendously in a very short period of time.We want to continue to extend that in various ways. And we've got a number of ideas as to sort of increasing the accessibility to even a retail audience, putting out sort of better documentation, better tooling to continue sort of onboard both maybe existing Web 3.0 developers who might be building in solidity or on sort of an EVM type environment. As well as, increasingly there's pretty substantial influx of folks coming over from Web 2.0 and thinking about where to get started and are starting off by making choices between essentially now it's really solidity or Rust and Rust, implicitly sort of Solana. And so I think that we can continue to invest in various ways of sort of helping people start within the Solana ecosystem. And I think that because Solana has grown so quickly in a very short period of time, there are also sort of ecosystem tools that are catching up right now.One thing that we hear a lot about is kind of indexing within Solana is something that we can probably improve as a community, data analytics on Solana, given that a lot of the applications are very sort of more consumer retail audience oriented is something that I think is also, actively being worked on. And so those are of the sort of near term things that people are thinking about. Obviously with the pretty tremendous growth of the ecosystem, also making it easier for people to run nodes, have access to baseline infrastructure. That's also something we've invested tremendous resources on through data center partnerships and it's known that Solana some higher hardware requirements but we've invested a lot to try to take down those various barriers. Those are some of the things that we've been thinking about.Dan (15:38):Yeah. And I would actually just kind of add to that. Some people do like to kind of harp on the interesting hardware requirements or high end hardware requirements for Solana. In the broad scope of things, when kind of the history is written about at these sorts of things, it's like, this is going to be something that's in a number of years or maybe even just a couple years, it's going to run on whatever machine you want to plug in to your home. We do have some validators that are running infrastructure out of their home. Some people choose to run in data centers. Some people do, God bless them, choose to run it in the cloud. But I think to Lily's point regarding the incredibly rapid growth of the Solana ecosystem, I think one area where we're really starting to dedicate more resources, particularly me personally and from the foundation side is on helping more people understand what Solana infrastructure really looks like.We've seen Tremendous resources and the developer relations team has put out incredible resources for new developers for Web 3.0 but the kind of tooling and community knowledge base of what does it take to run a good validator? And what does it mean to run a validator? Why should I care? I think it has a little ways to go in sort of advancing that narrative a little bit. In particular to lower the barrier to entry from, oh, you must be a sysadmin or a DevOps expert to, what I'd really love to see is all of these Web 3.0 teams and Web 3.0 app developers who are having a great time enjoying Solana and building on Solana, also participate in running the network that they so appreciate. I'd love to see more community buy in of teams that are vested in their project being built on top of a working Solana to help Solana run.What we've seen, even in just the last couple weeks or so, a number of these sort of NFT based Dow communities that have popped up on Solana over the last six months or so have started really taking this message to heart and are launching their own validator, which is just really cool to see. I know, I think Monkeydow claims the title of first Dow to launch a validator on Solana. I know the Degen Apes and the Degen community have also launched. And so it's just really cool to see these communities that really organically popped up around people enjoying NFTs and collecting these cool RNFTs that kind of blew up on Solana this summer now really starting to take a stake in the consensus and ownership and management of the network itself. And so I'm really excited to see that to start happen and really something I want to hope that the foundation can foster. And it's just something I also am excited to see the community really kind of taking it into their own hands more.Austin Federa (18:39):Yeah. I kind of love that, that it's so easy, even a monkey can do it. Is kind of the tagline there.Dan (18:47):It's perfect.Austin Federa (18:48):And the other, the Degen Apes, which are famous for having probably the least technically successful NFT launch to ever have been done by any organization have now their own validator. It's a good testament to how far we've come.Dan (19:02):It was incredible. It was such a struggle. There were all sorts of technical issues, like with the Metaplex standard had recently rolled out. They had various challenges with the mints and it was this saga that we all kind of watched unfold on Twitter and on all these channels over a number of days. And I got to give them credit. There were frustration, there was joy, there were tears. And it came out with one of the most unique, strong, enthusiastic communities on Solana having kind of gone through the fire of this rocky birth that was the minting process. More power to them. I just thought it was just so cool.Austin Federa (19:48):Yeah. I love how that all gets constructed. Kind of, along those lines, you Dan, you came initially from Solana Labs, you were one of the early engineers in the ecosystem. You're now working at the foundation. What's that transition been like? How closely do you still work with people like Raj and Anatoly? What's that relationship like?Dan (20:08):Yeah. I think the working relationship it's really interesting. There has been obviously, Solana, the whole network was built and originally launched, all the code came out of Solana Labs, where Raj and Toly run the organization. And they're obviously major players in the Solana ecosystem. This is the vision and the hustle that they've really brought to the table has been instrumental in kind of getting the whole community and the whole Solana ecosystem and the tech stack to really where it is today I think. Where we relate from the foundation is as sort of industry peers, I would say, sure, I talk to Raj and Toly, I talk with a lot of the ecosystem teams, I talk with our board and Lily and so many people that have an interest in Solana's success on the broadest terms and that's to really what the foundation is here to foster. As we continue to grow and expand and evolve our kind of working relationships with a lot of these organizations, I think just continues to evolve and expand.Austin Federa (21:22):And Mabel, looking at, you mentioned a bunch of the work you were doing was helping grow Solana in new markets. Can you talk a little bit about that? And I think, a lot of people, especially who are not working in the region, there's a lot of information around whether cryptocurrency is going to be banned in India or China, sort of how do you view some of those approaches?Mabel (21:44):Yeah, definitely. I'll answer the first part of the questions. I think it's going to be pretty much the same line as what Lily and Dan just mentioned but I'll kind of carve out those into details. I'd say, at the beginning you are also, you definitely need to engage a lot of these staking facilities but these people here it's quite differentiated because many of them are running the mining pools, meaning the proof of work mining pools. I remember back in the days, in 2019, 2020, we were talking to a bunch of those and happened to be that a lot of those are just crashing their wifi in the office. It's pretty funny. But at the same time, Dom who's from Solana Labs, we're trying to age of all of these mining pools and then we're just giving out some of those GPUs.But I think that's in the past. Now a lot more validators are actually starting from East Asia. I think there's some problem with in the past, with your location being far from the US so that's it's harder because Amazon cloud and whatnot but I think basically there's what Dan mentioned earlier, I think this will be a problem that can be solved in the future. I thought that was a pretty interesting thing to bootstrap at the beginning. And then the other things like wallets and non-custodial wallets, custodial wallets, because I think for East Asian crypto, you can never kind of ignore the centralized parties and players, especially I think in the past 24 month all the way till the next 12 month or whatever. I think a lot of those custodial wallets, including some of those exchanges, it was a lot of very pivotal work to try to engage them to support Solana, to support STL, USDC, USCT and a lot of the other stablecoins. I think, those steps that we were able to achieve in the past year in order to get a lot of these centralized exchanges to support those, I think that's also pretty interesting.Mabel (23:50):I think the other thing is that you just generally need to go to wherever because like back in the days in 2 18, 19 and 20, not that many groups are fully aware of how Solana works or even if it's like in Rust, I think people here I'd say safely were more familiar with things like Polkadot than Solana back in the days. Talking to some of those developers and just telling them, there's a few different options and then go to some of the hackathons or just developer meetups or even just the Rust China conferences, and then to promote about it. Justin Stery, he spoke there. A lot of these engagement opportunities definitely helped over the past two years for Solana to really get the writers here.I think that work still continue. And I think I believe that there will be a lot more application focused developers coming over, given from the history of Web 2.0, you see a lot of your infrastructure was built in the West but then application wise actually quite a few of them came from the East. I think, for Solana, for anything that's building on top of the smart contract platform, we could probably spec on the same track. You'll see a lot of people are going to build on top. Now once all of these are available.I think one interesting thing is that for things like wallet, you have Phantom for browser because I think in the West, people are pretty used to using browser wallet but I think here in the East, you also need something that has really good user experience and people like to go mobile first. And that's why Slope Finance, which is one of the leading mobile wallet for Solana in China, they were doing really well because they understand the user behavior and all of those to deliver to the specific audience. I thought this is like quite interesting how you will need to focus on specific areas, the same thing for East and West but then you want to make sure that people get to have the best culturally fitting choices for them so that way you can actually get it around.And then to answer the second part of the questions, so I actually the other day had a tweet about similar lines. There's a lot of Web 2.0 venture capitals and then some of the other funded funds, they're trying to deploy money and then we're asking it's still East Asia or some of the other places around still relevant because of the policy. The way I read this is that crypto is really global. I understand that there's certain restriction for developers to issue cryptocurrencies in China or in some of the other countries. However, I think the language circle and then user behavior, what I just mentioned was always going to be something more pivotal than the actual restriction. These people will move to somewhere else in Asia but they will continue to build. And then for people who want to use the kind of user experience for those products who are sitting here.I think crypto liquidity is global but user experience is always regional. And I think, if you're growing an ecosystem, you can't ignore that. I'd say I'm still bullish. And I think people are recognizing some a lot of those things are just better built on Solana because it's higher performance. And then at the end, it's just about how you make sure that you are compliant to the place that you are at. And then not definitely go with the compliance part but then also not hindering yourself building.Austin Federa (27:23):Lily, Dan, do you have anything to add on growth in new markets and that process?Lily (27:29):Yeah. On new markets, we started to invest in building out the ecosystem in India, back in June and July. And it's no secret, there's extremely large both user bases and also developer communities. I think in the most recent hackathon, after the US, the second largest contributor of developers, developer submissions to the hackathon was from India. And I think Indonesia was in the top four as well. And so I think as we continue to look to Eastern Europe, for example, Latin America, Africa, some of the early narratives as to what applications would be unique and sort of the 10X type of functionality on crypto, have been talked about and written about for years, if not decades. And for example, payment applications Which become supercharged when you take DeFi functionality, global liquidity pools and they make that adjacent to an actual you potentially consumer transaction.And I think that that to me, it's very clear that that's going to happen on Solana first. And so, what I'm particularly excited about is some of those seemingly sort of everyday type of transactions but those actually becoming very unique when you, for example, can take a stablecoin and have a Venmo feeling type of transaction or a WeChat pay feeling type of transaction but it's actually fully decentralized, fully on chain and also comes with a potentially a suite of financial services that are kind of baked into the ecosystem adjacent to that. I think those are the types of things that are going to resonate hugely in emerging markets, in new markets. And those are some of the things that I'm excited about maybe exploring in new markets.Austin Federa (29:10):Yeah. I do love how sort of culturally infectious the crypto mindset is. That to use a network, you also have to be an owner of the network and that the success of the network and the success of you as a user are tied in a way that they're really not in the setup of a stock corporation or something along those lines. You can sort of think of these things in some ways as giant digital co-ops that are all working towards this goal. It's really interesting to kind of hear that. And I'm really curious to see in the future, how that starts influencing culture. I think we're already seeing crypto just barely start to influence culture and that might take off a bit in the future. Be interesting to see.Lily (29:54):I think it is. And I think what's under the surface with crypto but what rapidly rises to the surface is that it's been talked about, written about philosophically for a very, very long time, this whole idea of a veil of ignorance, that your opportunity set is determined in large part sort of where you're geographically born today, rather than you know who you are as a person and what's in your heart and what's in your mind. And with crypto, you sort of have this radical accessibility. It's almost sort of radical equality if you will, in a way that we haven't really observed in a long time. And so I think that's really upending in so many different ways and that for me is a big part of why I continue to be interested in cryptocurrency. And also why I think Solana is really going to be at the forefront of that because all of those sorts of ideas, the accessibility, the sort of the very concept of why Web 3.0 is important and where people are most likely to get started on that today is the sort of general awareness funnels.People will hear about Bitcoin. They'll learn about Bitcoin. They'll learn about store value and people will resonate with that. Your average person will resonate with that because it sounds so much like digital goals. But then once they start to learn about Bitcoin, they're like, okay, I've bought it, I get it. It's kind of like gold for the digital age. What's next? Well can I do DeFi on Bitcoin? Eh, no, not really. Lightning, we've been talking about it since 2015. Soon.And then very quickly from there, people move on to, okay, well here, well that's really amazing. These sort of new applications. And I have some friends who bought NFTs and then they click a button and it's a $100 later. Gosh. Oh, that was painful. And I think that's kind of what a number of people have gone through so far. And so people sort of get onboarded to why this is important, why this is really sort of very exciting and part of the future. And then eventually what I've seen is so many people sort of end up with being in the Solana ecosystem. I guess what I'm excited about is accelerating that and maybe making it a little bit less of a circuitous journey.Mabel (31:59):I have a story to share related to what we were talking about here. I think, I now all of these protocols are starting to talk about Shopify type of experience, which is you have an underlying protocol and then you just have different ends. You just host a different way. It's actually not just for the cultural purpose. One story was shared by Roneil who's the co-founder of Audius, last week with me. He was saying that he realized because Audius is actually not, I think the main front end was not allowed in China at some point but then somebody actually set up a separate front end that's actually and filter out and then based on whatever the local compliance should be let a whole thing run. That front end actually works.He was exactly kind of explaining to me how he was amazed by Audius should be the underlying protocol and then it should be determined by the front end itself on the ground, what to feature versus not. And everybody can have their own choices. That's a freedom choice. Nobody's going to question that. I thought that was like really amazing. It's definitely beat beyond just kind of I think this is really relevant to what we were talking about earlier because I think for Solana, it's the same thing, a lot of the things. It may not be compliant for a certain reason in the region but I think at the end it's about the front end. It's not about the protocol. The protocol should be permissionless. Anyone else can just do whatever they want but for the ones that you want to make it work for a certain region, you can just do that. I thought that was really, really amazing and very unique about crypto.Austin Federa (33:30):Yeah. I love that, that sort of view that because of the financial incentives with crypto, you can decouple the application layer from the protocol layer, that those two things can be separate. This is in some ways, this is the dream of Twitter. We had this glorious few years where there were all these Twitter clients and then it all got, because the app engine was introduced, it all got consolidated down to twitter.com and the Twitter mobile apps. And RIP all of our favorite Twitter clients from back in the day. I love that, that the way this technology is built, it allows you to really separate those two things at origin, as opposed to having to think about the business models that support that over the long term.Dan (34:09):I would actually add, I think there's interesting things happening, both in the decoupling of that, like you said, the application and the protocol there but also an interesting sort of coupling there kind of to Lily's point about this shared ownership of the success of the project. And that's really this kind of shared ownership of the network is really the kind of core underpinning, this core idea that underpins this idea of staking on a proof of steak network. Which is your success is tied to the success and this really the security of the network. And what we're starting to see now are applications and DeFi applications, particularly stake pools that have recently launched on Solana that really bring the ability to participate in the shared security and shared ownership of the network to the application layer.There have been a bunch of community launched stake pools. There's some private stake pools. The foundation is in the process of transitioning its entire treasury over to stake pools, which are really this, I think we did a whole podcast episode on this recently so I won't belabor the technical details here but basically it gives people an easy way to enter and exit from a liquid position, which is actively helping to secure the network via staking to various validators in the underlying smart contract. But what I think is really interesting about this is we're starting to see these public stake pools that pop up, Marinade Finance, JPool, Socient, Lido and a few others that are really bringing the application experience, that really slick, fast, fast and cheap promise of what does it feel like to just use a useful service built on top of Solana and oh, how cool that a normal user can transact in these stake pool tokens rather than unstaked SOL.And I think we recently saw the first, there was an NFT sale or an NFT mint that was accepting stake pool tokens, a staked SOL positions, rather unstaked SOL. So we're starting to see this adoption of people who are not only just developing apps and playing around on the application layer but also recognizing that there's tremendous value in sort of moving the denominator of how we transact value on Solana to be pegged to the participation of securing the network itself.Austin Federa (36:40):Yeah, that's a really great point. Looking forwards, Looking into this year of 2022, what are the things that you see in Web 3.0 and crypto that have potential that could become trends that are going to advance and increase? I'll kind of start out. One of my big ones that I think is we're going to see a lot of the sort of tech-ish companies adopting decentralized Web 3.0 technologies as a competitive advantage to compete with a lot of vertically integrated companies. I think you're going to see a lot in payroll. You're going to see a lot in merchant payments, concert tickets. These companies that don't have platform scale are going to look to Web 3.0 as a competitive advantage. And you might see that role into the rest of the ecosystem. Dan, I'm curious kind of what your thoughts are. And we'll just go around the room here.Dan (37:30):Yeah, I think your spot on there, Austin. And I think one of the things that's really going to help unlock that is these sort of higher levels of abstraction of developer tooling and more sort of almost enterprise API access, if you will, to provide a more Web 2.0 like interface experience that someone could just plug in and it's Solana as a service. There's your SaaS for 2022 and it's instant settlement in stablecoins on Solana but no one needs to worry about the fact that it's a stablecoin on Solana. It's they integrate this API and the money transfers or the token transfers from merchant to customer or vendor to seller, whoever, immediately. I think that starting to see people using crypto and using blockchain without realizing that they're using a blockchain technology.Austin Federa (38:22):Lily, what are your 2022 predictions?Lily (38:25):I think industry wide I'm with you that Web 3.0 is going to become the starting point rather than sort of the periphery. I think that we're well on our way where Web 3.0 is going to sort of foment this decentralized center. And I think that there's a few things that are sort of going to happen alongside, in my perspective. One is this kind of movement towards multichain slash interchain future is just accelerating. I think that there's a few sort of different consolations within the ecosystem. There's clearly sort of the EVM world which we're going to have a connection to through Neon EVM. There's a lot of sort of obviously energy within Solana. There's some other, IBC, we talked about Cosmos a little a bit is probably another sort of approach within that and then connectors within these.And so I think there's various foci that are going to emerge there and increasingly there is going to be sort of those sort of layer ones are actually, I think, going to be abstracted away over time as they probably should be when you talk about sort of appeal to your average person. I think that another theme that I see emerging is as more institutions want to get into this and compliance with existing regulatory frameworks, institutional KYC and tooling to allow institutions to participate in decentralized liquidity pools, which I think is going to be pretty exciting. And so that's where the existing world is actually going to start getting onboarded in earnest into Web 3.0. That's going to be quite interesting.I think with that, there's a big theme around a sort of identity and privacy and on chain identity and having a little bit more control over your data on chain is another big thing, the theme that's going to evolve. And then, certainly in a consumer area, I think that NFTs went from being a very analog sort of digital representation of physical art and have now morphed into basically being the entry point into sort of Web 3.0 communities and metaverse and these kind of almost new communities, dare I say civilizations that are starting to sprout online. And so those are some of the from the more institutional to the more consumer, I think there's just so much happening out there. That's all really just going to continue to develop at a rapid pace in 2022.Austin Federa (40:49):And Mabel, what do you see for 2022?Mabel (40:51):Yeah. I'd like to maybe talk a little bit more about the application as in the middleware layer. Especially the crypto native ones. We've seen a lot of DeFi activities, 2020, 2021 for on Solana specifically because people like how fast transactions are like. But I think what's more excited, also something that I've been spending a lot of time thinking about and then exploring is that the actual kind of Web 3.0 application experience, what does that mean? People have been talking about metaverse so to speak for a long time but the things people can do beyond finance is never really happening before but I think there are, we've seen from a lot of the recent hackathons that you'll have address to address IM protocols, you have some of the Web 3.0 social graph where you can just basically have the relationship you with another person.And then another, some of the other things open C collections or some of the other things that you did. And then you also have things like on chain credentialing protocols. All of these, we are seeing them happening on Solana. And then with all of these composable, with each other, you can actually see that you have relationship between people in a game, for example. Or when you bootstrap a new application with the social graph, you can you customize the front page that you push to the users based on the social graph because like you have all those data. Obviously what Lily said about privacy preservation was very, very important. You don't want to share everything, which kind of it's kind of against the purpose but I think the idea is that for Web 3.0, you own the data.You are the one who approves the blockchain or whoever else to access your data of all eth and you control whether you approve someone to be your public connected contact. And then things like on chain credentials, you can prove, what are some of your achievements based on the contribution off chain. At this court discussion or things like whatever you've provided liquidity in the past for certain period of time or you just basically voted every single time in the community snapshot. All of these become your kind of on chain resumes or on chain badges that can later on help whatever you prioritize into a community. It's the such thing we call gated community. I think all of these are coming together. We're going to see actual consumer experience available on Solana. I thought that was extremely exciting because I think with all of these enabled, people will have no difference of experience compared to some of the other Web 2.0 application experience. I thought that's going to be very huge.Austin Federa (43:35):Well, thank you all for joining us today. It's fun to talk about some of these things that are not quite as pressing, as user facing that developers aren't picking up and doing but are nonetheless integral to the network and it's growth and its future. And I think it's really fun to talk with the names and some of the people behind the Solana Foundation. Thanks for joining us today.Lily (44:00):Thanks for having us, Austin.Mabel (44:01):Thank you.Dan (44:02):Great to be here. Thanks a lot.

In this special Payments episode of the Solana Podcast, Austin Federa guest hosts a conversation between Jeremy Allaire (CEO, Circle) and Sheraz Shere (Head of Payments, Solana Labs). They discuss merchant payments, stablecoins and Solana Pay: the newly released, open, and free-to-use payments framework built on Solana.00:45 - What is Circle?03:35 -  The use case for stablecoins and the mechanisms to build them09:34 - Solana Pay13:42 - Integration of USDC and Stable Coins18:45 - How could Solana Pay become mainstream? 25:27 - The Solana Pay toolkit27:39 - Can businesses operate without a bank account?30:05 - Looking at Data Privacy in Solana Pay and Circle 34:35 - Hopes for Solana hackathon outcomes00:39 - Intro01:51 - pencilflip’s background03:30 - Working at facebook vs. web 3.007:31 - How pencilflip got into crypto08:52 - Views on NFTs10:45 - Getting into Solana15:29 - Experience working in lower level17:56 - What was his method to learn Solana?21:01 - What’s the hardest concept on Solana?23:53 - How fast did he move from Rust to Anchor?27:35 - Building on Solana33:24 - Advice to people moving to Web 3.0DISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Austin: (00:09)Hello and welcome to the Solana podcast. I’m Austin Federa guest hosting this week. Today we're going to be talking about stablecoins, USDC and Solana pay. So we're joined today by Sheraz Shere, the head of payments at Solana labs and Jeremy Allaire, the CEO of Circle. Welcome to the show.Jeremy: (00:27)Thank you.Sheraz: (00:27)Thanks Austin.Austin: (00:28)Great. Well, let's start off with Jeremy, talk a little bit about Circle. Can you tell us a little bit about what is Circle and what's its role in the US DC stablecoin?Jeremy: (00:37)Sure, absolutely. So Circle is a global financial technology firm. We operate a suite of services to help businesses take advantage of digital currency in payments and treasury applications on the internet, which is all really a mouthful. But specifically we have a couple of really critical things. The first is we operate a stablecoin market infrastructure as we call it called USDC, and we'll talk, I know more about that, but USDC is a dollar digital currency that is an asset backed or fully reserved digital currency that can be used for payments and settlement on the internet. And it's already used really, really widely in the crypto economy.And so we run that infrastructure and provide that to businesses institutions, and through many, many of our partners out to tens or perhaps even hundreds of millions of end users that interact with USDC. And then we also operate a suite of services for companies to have payments and treasury management and other things that are needed to integrate this into the way that they operate. So almost like a crypto native bank account for businesses to store and transact, and then alongside that a broad set of API products.So basically Circle APIs that connect the existing fiat system, credit cards, bank accounts, bank transfers with stablecoins, with the custody, security, blockchain management, and other things that are needed to use that and integrate that into your own application. So lots and lots of fintechs, startups, companies like building on those APIs to kind of integrate stablecoins and fiat in their applications. So hundreds of companies use those and those are the key things that we do. And we've been growing with other products in what we call to treasury services. So Circle yield, which is a stablecoin yield product, which has been growing really fast too.Austin: (02:50)Yeah. I want to get into that kind of in a minute. So stablecoins, they're foundational to a lot of how DeFi has been enabled over the years. So there's lots of different applications for that. Sometimes it's just as a common transacting layer between multiple currencies. There's lots of different applications for it, but as you mentioned, there's more and more sort of enterprises and traditional companies, as well as fintechs that are in that space that are looking to use stablecoins in their business operations. At the same time, you have a bunch of DeFi Degens who are sort of the original core audience for a stablecoin. What does that decision making process look like at Circle when you're trying to balance such a diverse user base?Jeremy: (03:33)Yeah, it's a great question. And sometimes I'm asked "What's the use case for USDC," and my answer is sort of "What's the use case for a dollar?" Well, the use cases are incredibly broad, and we see that actually today, we see people who are making personal point to point payments internationally. We see people making micropayments for digital IP through NFTs, and at the other end you see institutions that are using USDC to settle half a billion dollar bilateral trades. And that's a pretty broad range of use cases that are out there. I think more importantly, conceptually when we built USDC and you can go back and read the original white paper behind it. And the idea of fiat backed digital currencies, our ultimate belief is that what's needed is a sort of protocol layer for traditional money on the internet.So you can have dollars and euros and pounds and yen and other currencies that just function on top of the internet, the same way that other protocols support the exchange of information and communications. And if we had that, and we could use those protocols at the speed of the internet with the cost efficiency of moving data, which is what I think blockchains hold that promise, Solana's executing really well on that, but hold that promise, that it could really unlock the storage of transmission of value to be a kind of commodity free service on the internet. And so ultimately our belief is that anything that any person or household or firm might need to do in the digital economy on the internet could be done with stablecoins.And so we definitely expect that to grow. Now, when we got started, it was anchored in what I call crypto capital markets. So it's anchored in market participants that, for all the work that they do and all the assets that they might be interacting with, they're all digital assets, and they all move at the speed of blockchains, whatever that is and the efficiency of that. And so they need their dollars to work the same way, and so that kind of gave demand for payment and settlement mediums that could kind of work at the speed of those markets and those blockchains. So, that was a good bootstrap use case, and that's really what brought a lot of this into existence. But now the way I like to describe it is stablecoins are both protocols and money formats. It's a protocol that works on top of a blockchain with assurance and security and finality settle a transaction, but it's also a particular representation of value of a dollar or a Euro or whatever it is, and protocols and kind of formats our network affects businesses.And so the more people who have that, the more valuable or more useful it becomes, and the more products and services that are plugged into a protocol, the more useful and in utility that exists. And so we're now seeing the spillover of the use cases go into everyday businesses more and more everyday businesses saying, "Wow, this is a very, very efficient medium. It's very inexpensive, it's very fast, it's secure. I know it's final and it works globally." So we're certainly seeing that pick up. And at Circle, as we think about use cases, we really believe that the acceptance of payments in a business context using digital currency like this is going to proliferate pretty significantly in the coming years, because it's got so many attributes that are superior to existing electronic payments methods.Austin: (07:12)Yeah. And so you touched on something that's really interesting, which I think everyone thinks of USDC as a protocol, but unlike most organizations that have launched a protocol, the underlying token of USDC is USDC. Its whole point is it does not fluctuate in value, it does not go up, not go down. It stays solid at an equivalent of one US dollar. But Circle, it obviously for-profit organization, what are the mechanisms there that actually allow you to run a business as an organization that has created USDC?Jeremy: (07:48)There are a lot of pieces. So the first is today USDC is approaching 50 billion in circulation, and Circle administers and reserves those assets. And so we generate income from that, from that $50 billion we generate income. And as that grows to be a hundred billion or 200 billion, we'll continue to generate income from that, and certainly in a rising rate environment, that's significant. The second is we run a whole set of, what we call transaction services and treasury services, and those are services that we charge fees for. So transaction services are taking traditional fiat payment methods, using our infrastructure to do blockchain, native, custody, and payments. And so those are kind of usage based and scale up kind of like a Stripe or equivalent type of transactional service.And then we also provide treasury services. So people who want to lend their USDC can lend their USDC in a self-service way through our platform, and get fixed term fixed rate returns on capital on USDC, and we generate a spread income from that as well. So we're building out this sort of suite of commercial services that are globally available increasingly, and that provide a lot of incremental value. So those are several buckets as well, that are really helping us scale our business.Austin: (09:14)So we were talking about transactional services. Again Sheraz, You have been intricately involved in building and launching the Solana pay protocol. Can you give us an overview of what that is, and how stablecoins are an important part of that system?Sheraz: (09:29)Sure. Yeah. So Solana pay is basically a new blockchain based merchant payment system. It's open, permissionless, and decentralized, and it's premised on enabling merchants to connect directly with consumers in a peer-to-peer fashion with no intermediaries. And it's really premised on the notion that merchants would accept stablecoin like USDC. Most merchants, unfortunately for crypto natives, don't really care that much crypto per se, they care about running their business. And that's why having stablecoins, US dollar denominated stablecoins are critical, because what this affords us is the ability to move digital assets at speed and cost of the internet, as Jeremy mentioned.So for Solana pay, what we're really trying to do is enable for merchants, things like instant settlement, near zero cost transaction processing, and something that's really important is the removal of intermediaries. If you think about it from a merchant perspective the most important thing a merchant does is collecting payments and engaging with their consumers with commerce, but there's a lot of friction tied to enabling payments of and commerce. And with friction comes intermediaries and with intermediaries come cost and the loss of control. So if there's one headline for Solana pay, it's really about giving power back to the merchant for the most important function, which they do.Austin: (10:48)So can you talk a little bit about that? Payments is obviously a many billion dollar industry globally. There's some big name that have reached some pretty astronomical valuations nowadays based off of providing credit card payment processing solutions and that sort of thing to e-commerce and non e-commerce business. What's the sort of difference of approach here? How would you compare something like Solana pay to a company maybe like Stripe?Sheraz: (11:15)Sure. Yeah. And Stripe, I would say that the removal of intermediaries doesn't mean that a lot of the traditional payments companies don't have a role to play. The actual act of moving a digital asset from a consumer to the end merchant, that's the piece where there isn't need to be a friction, right? So with the Solana blockchain and a stablecoin like USDC, the movement of digital currencies from a consumer's wallet to the merchant wallet should happen like an email going on the internet, it should happen instantly with no cost. However, once a merchant has accepted a USDC stablecoin or settled in a stablecoin, there's a lot of interesting services that are needed to be done that merchants typically don't want to necessarily do themselves. So setting up token accounts, doing treasury management, reconciliation, integrating into legacy bank accounts.So there's a lot of work in the core stack of post settlement of payments that traditional payment companies can be involved in. The protocol itself is just trying to simplify one component of payment processing, which is the most critical one, which is that the transfer of value between the consumer and the merchant. One of the interesting things that we're building on the spec is the ability to also have a bidirectional communication. The benefit of having a true peer-to-peer connection between a merchant and a consumer and not having an intermediary is that this allows the merchant to, for example, send digital assets back to the consumer. So what this could look like is something like, let's say you buy a new shoe, using this protocol the merchant can send you back an NFT of that shoe into your wallet, which you can now take into the metaverse. Just an example, but illustrating why the notion of a peer-to-peer, a true peer-to-peer interaction between a merchant and a consumer can open up a whole new set of new things.Austin: (13:09)So Jeremy, Sheraz was talking there about one of the pieces of the stack that Solana pay is trying to solve, that payment from a consumer directly to a merchant. You in Circle work with companies that have extremely complicated payment flows that are trying to bring USDC into. What are some of the areas that integration has been easy and straightforward for these companies, and what are some of the areas that are still challenges for enterprise adoption of USDC and stablecoins?Jeremy: (13:37)First of all, just to say, as you know, we're really excited to be supporting Solana pay. And we believe that the problem space here is a really critical one, and solving this problem of how to build a better connection between an end user and a business and building beyond just the underlying digital asset transfer and solving some of these problems is really, really critical. The way I would kind of answer the question is there's sort of the base layer of you've got a blockchain and you've got addresses and wallets and you've got this settlement finality mechanism of moving an asset like USDC as well. And that part is kind of fairly low level.Jeremy: (14:27)And so businesses that want to use this as a substitute for say, a card payment, they can implement that out with Circle APIs, they can take Circle APIs and they can automatically generate new addresses automatically for each payment. They can then track that payment to a given payee. And then they can collect that and store it in USDC, or they can sweep it out to their bank account through an automated API that pushes a wire or other things. So there's like critical kind of behind the scenes treasury kind of infrastructure that's there. The problem is most end users, they don't really necessarily know what all these things are. And so I think being able to introduce things like having metadata associated with a payment, such as what the price is, what the product ID is, any other kind of merchant information that would be needed to kind of tie that payment to a commerce transaction, to be able to have of follow on interactions that are associated with that payment.All these problems are I think really important and become things that people expect, whether it's through a traditional legacy payment mechanism, like handling something like "You sent me the wrong product I need a refund," is like the most common, or some loyalty mechanism that maybe is inducing me to want to use the payment instrument. And so how can I use a blockchain to provide that loyalty mechanism as an inducement as well, building a stronger connection between say the business and the user?And so I think the pain points are more that there's incremental value that's needed for both the end user and the merchant to kind of bring this to a point where it's a superior payment, medium to legacy payment rails. And so those are the kinds of things that we see, but certainly the getting started piece is there. There's so much low hanging fruit. And I think so Solana pay is a really good start at hitting some of the low hanging fruit and creating a way for wallet creators. And then folks like Circle on the other end to make this a little bit more seamless for all the parties.Sheraz: (16:41)I would say that if you're a developer, a founder, or even a legacy payments company, there is a tremendous amount of interesting stuff to build. We just kicked off a hackathon and we have a payments track in that. And as Jeremy mentioned, the protocol itself is pretty low level, it's pretty basic if you look at it, right, it's just a very simple... The most native transaction on a blockchain is moving value from one token account to another token account.And we've put some specifications around that to put in like transaction identifiers and things like that. The real innovation is really going to come thinking about what are the new features that can be built on top of this. Now some of this will look like traditional commerce things like offers and loyalty, but there's a whole new set of commerce related features and consumer value props that have yet to be discovered. And I think that's what's really interesting is that there are going to be new businesses built on top of these protocols that will leverage the power of the blockchain. Because this technology opens up, again a peer-to-peer connection between a merchant and a consumer, eliminates the need for intermediaries, and now it gives power back to the merchants. So both the customer relationship, the data, and power in terms of controlling costs.Austin: (18:00)Sort of to push on that little, payments has been the killer feature of blockchain since blockchain became a thing, but there's been no real successful blockchain payment systems that have really emerged. I think the closest is there are some exchanges where you can get a debit card that allows you to spend out of your exchange account, but that's still a custodial relationship with the exchanges holding your tokens. The places where USDC and other stablecoins have been really successful is not on the payments level as much as so far has been on that sort of collateralization level or within the DeFi space. So Sheraz what about both Solana pay or Solana is actually making this a useful place for payments to actually go mainstream?Sheraz: (18:48)So yeah, absolutely crypto payments have been tried before. I mean, it's been talked about ever since maybe the pizza example. The problem is the traditional approach to crypto payments have been settled with several problems. So the first of all is that merchants don't want to settle in volatile currencies, right? With some edge cases aside, most merchants say, "I want to settle in US dollars or something that is the equivalent of a US dollar." Second is that the blockchains in the past have taken minutes or longer to settle, and that just doesn't work when you're trying to complete a transaction right? On an e-commerce site every second, that delay is more card abandonment, so waiting minutes for a transaction to settle just doesn't work. And then blockchains, transaction fees that exceed the actual cost of the item that you're buying just doesn't work.So to alleviate all this intermediaries came in and said, "Okay, great, look, I'll remove some of this friction for you. I'll exchange the Bitcoin and settle with you in US dollars. Oh, and by the way, I'll take on some of the risk of settlement taking 10 minutes. I'll give you an instant authorization and I'll just settle with you 24 hours later, and I'll eliminate some of the fluctuations in network fees. And for all that trouble, I'll charge you 100 basis points." And then it starts to feel and look a lot like traditional payment systems where you've got an intermediary, there's a lot of friction and a lot of cost and an intermediary is saying like, "I'll simplify all that for you, and I'll charge you a hundred basis points. And by the way, I'm the intermediary between you and your end customer."And that's really, well from what I've seen, what the attempt at crypto payments have done. What's different now is a couple of things. So one is rise of stablecoins and specifically USDC as a US dollar backed stablecoin. And then the Solana blockchain technology that has the speed throughput and low cost that eliminates a lot of that friction. Right now you have instant settlement, you have costs measured infractions of a penny, and you have throughput. You're not dealing with congested blockchain networks.And then the other thing is we now have a growing interest in crypto, there's tens of millions of wallets out there. People are more and more kind of normies as we call them, I guess, are dabbling into crypto. And I think you're going to see two kind of mental models, right? One is I buy crypto for speculation and investments, but I think more and more people are going to realize like, "Oh, I can use this for transactions. There are transactional currencies that I can use that provide me utility." So I think there's the combination of all of these factors coming into place with these new technologies are kind of going to give crypto payments a new shot in the arm.Jeremy: (21:36)Yeah. And I would just add to that just at a high level, I think one thing to note is stablecoins and public blockchains have achieved an astounding amount as payment system. I mean, these are decentralized infrastructure, running globally, supporting literally trillions of dollars of transaction throughput, and supporting pretty material volumes that have grown, and including in a wide variety of payment use cases. And we see that all the time, the number of businesses that are just signing up for Circle accounts, because they want to use USDC as just a payment medium outside of the markets themselves. And so it's a pretty amazing achievement, and that's happened in a very short period of time. I think there's many, many thousands of products and services that have integrated USDC.It took like 50 years to get to like 10,000 issuers, which are people who have integrated the visa credentialing. And so the adoption of these standards is happening at a really fast rate, which ties into the other piece, which is there have been a number of things that have been really necessary. I think one has been regulatory clarity, people being comfortable that this form of dollar is as good as an ACH dollar or a credit card dollar in terms of its usefulness and its legal clarity. Businesses knowing that these are legitimate financial infrastructure that they can rely upon and build upon. The other's been, as we've talked about here already is just the reality of the economics, the unit cost of transaction, the speed of a transaction, and through platforms like Solana, we're seeing that be solved for.And so I think what we're seeing is many more businesses, large merchants, traditional digital wallet companies who have large installed bases of consumers who want to wire up these protocols. And I think it's not just that they want to wire them up because this is a way to pay businesses. They want to wire them up, because these are interoperability standards that make it possible for digital wallets everywhere to kind of share value with each other, which is kind of moving outside of walled gardens and into the open internet of value. And so we're seeing all those kind of combined with each other and those are all mutually reinforcing factors that will then I think have more and more businesses saying, "Why don't I just add this as a payment method?"Sheraz: (24:00)As Jeremy said, I think in payments more broadly, tremendous traction and use cases and international remittances B2B. My view is a little thinking more about specifically about like retail, consumer emergent payments. And I think there's this open question that I keep hearing is like, "Well, we can't use USDC to buy milk." Well, we ran a physical point of sale transaction using so Solana pay and purchased a gallon of milk. So we're happy to share the video of that, but wanted to demonstrate how simple it is to use this currency and set up a small mom and pop with our in-store web app.Jeremy: (24:40)I mean, it reminds me of when the web was taking off and it was like, "Well, you can't use the internet to do this, this and this." And people are just wiring this stuff up and it's going to become something that's just so extraordinarily common and every business will be... they'd be idiots not to take digital currency payments as an alternative to the things that they do now, just like they would've been crazy not to set up email accounts or let customers contact them through the web, or through an online forum or through a Facebook page or whatever. It's just, these are just going to be, you have to do this if you just want to be a native internet business.Austin: (25:15)Look, the Internet's great, but all I can buy on amazon.com is books, and I can do that at my local bookstore.Jeremy: (25:20)Yeah. Right. Yeah. Yeah.Sheraz: (25:22)That's right.Austin: (25:23)So Sheraz, when you're talking about this tool kit for Solana pay, what is actually live now, if someone is interested in actually setting this up for their business and enabling people to buy a gallon of milk with USDC, what's that toolkit look like, and how could they get started?Sheraz: (25:39)Sure. Yeah. We have a physical point of sale client, which is a simple web app. It's a very dead simple onboarding experience as well. We have an e-commerce SDK as well, so if you have your own website, the tooling is there to support both QR code payments and browser plugin. And we have a great set of partners that are working with us to both distribute these tools and help us build the future of this protocol and specification.We have integrations with a set of wallets, FTX, Phantom, and Slope and others on the way. You know, part of the goal of this is that this is the first at bat at the first inning. We've built some of these tools to provide some reference implementations and tooling for people to start building, but there's a whole roadmap of additional things that we want the community to build with us.Jeremy: (26:53)Yeah. And we're super excited at Circle to support this. And we see getting these kinds of standards adopted in more and more wallets, it's great to see. And I think we're hoping that standards and efforts like this can get adopted in many, many other kind of crypto native wallets and other digital wallets that are kind of coming online to support USDC payments.Austin: (27:15)So, Jeremy, with this sort of front end component where you can now receive payments and USDC via Solana pay there's a whole series of other tools you're talking about, whether it's deposit into accounts for merchants. How soon of a future do you think it's going to be possible for someone to run a business, and make payroll and accept payments without actually having a bank account?Jeremy: (27:39)I think we're getting really, really close to that. I think with a Circle account, we provide businesses with the ability to open an account, it's got multi-user support, and administration so you can have multiple employees or people in your finance department using it. It provides on chain payments across multiple blockchains, it provides legacy bank payments, so if you need to get money out into legacy bank accounts, you can do that. We have a pretty exciting roadmap for new things that we're going to build there, so that kind of interoperability with legacy payouts is important as well. And then you have the ability to take your working capital and put it into yield. And so as you collect payments and you have working capital, you can deploy that and generate high interest rates on your USDC.And so those are things that are there today, and there's obviously a lot more that can be built out there. We have a pretty exciting roadmap for things that we're building. We want really any crypto native business clearly to sort of make this their global financial account for their startup or their growth company, but more and more traditional companies as well, who are getting into this who want to use this as payments infrastructure, but then will tie it into some of their working capital management and treasury management.And then underneath that is like any developer that really has something they want to do custom, everything is just a platform. Everything's a set of APIs that you can build on. Developers can automate all the different rails. They can automate how they store and move funds. They can kind of control all of that in a very, very fine grain way. And so while there is like that self-service experience, but a lot of startups want to kind of do this unique to their business so they can automate more and more of it. So we think this year is going to be a year where these types of hybrid digital currency bank like products are really starting to take more and more hold.Austin: (29:33)Yeah. So, sort of along those similar lines, the existing payments rails and industry is one where a lot of it still runs on data collection and data marketing as a way to help subsidize the cost of running a lot of those rails, right? Whether it's American Express offers or whether it's something like a company that actually is tracking purchases that are made in-store and using that to do marketing through direct mail or other means. How does data privacy play in both with Solana pay and Circle, and how are those things part of your decision making framework?Sheraz: (30:08)I think one of the most important aspects of the whole notion of the peer-to-peer transaction and removal of intermediaries is that now when you're accepting as a merchant, accepting a payment through this per protocol you're not necessarily going through Google or Apple or MasterCard or Bank of America or some other intermediary, right? You have a direct connection with that consumer, and because of that you're not potentially losing data. You don't have third parties accumulating all of this data. And the beauty of this protocol is that it's open, so any merchant could take this. We're not pushing an end solution down anybody's throat, this is an open decentralized protocol. Any merchant could take this and build the equivalent of the Target Red Card system, which is a very popular solution that Target built or the Starbucks closed loop payment system.So I think the most important thing is that if merchants have control over commerce and the protocol is open and they can kind of craft on top of it, it gives them much more control over their data. We also have under development APIs as part of our core token program that can provide additional layers of data privacy. So we have a confidential token API that's under development. And there's a lot of technological solutions that can be built in to give either the consumer or the merchant more privacy, or whatever level of privacy they're interested in, but the key is they have control, they're building it in the way that suits their business needs.Jeremy: (31:41)One of the principal benefits of digital currency and stablecoins and public blockchains is the higher degrees of privacy and security that they afford. And I think that's something that people value and it's inherent in the architecture of these cryptographic forms of money and that's really key. And so we merely provide ways to interact with that infrastructure, and so we don't really stand in any specific data around users in that way. And even new technologies that we're working on in digital identity are designed to use cryptographic proof of identity, not pass around a whole bunch of PII. And that's going to be really critical as you start to marry digital identity with payments, with merchant behaviors. How can I, as a consumer present myself and prove to a business that I'm a legitimate individual that's been compliance checked, and make a payment to you without bleeding all my PII to you, and for me as a business to say, "No, I know this is not a drug trafficker or a terrorist or what have you that I'm transacting with," and have those settlements be fast and secure and final and private?So I think those are really, really important things. At the same time I think that the building blocks of crypto give us new tooling for incentivizing customer relationships in new ways. NFTs and commerce are really powerful, powerful phenomenon, which we're seeing early experiments in. But I think for businesses that want to entice customers to give them more information or have a more direct relationship and where that information exchange can be valued in some way, I think NFTs create a really interesting and powerful way to do that. And that's something that can be direct between the consumer and the business and not something that's, again, bleeding all that information and out to other networks that are repurposing that. And so I think there's a chance to rebuild customer loyalty, incentives, loyalty marketing, and secure privacy preserving payments in a way that's superior to what we have with existing electronic payment systems today.Sheraz: (33:58)Yeah. It's like being a founder or an entrepreneur in 2000, right? Think about all of the things that needed to be built then and were built. And we are just on the starting point of this. So I think it's an exciting time to be an innovator and a developer and a founder and an entrepreneur.Austin: (34:20)I love that vision for the future. So, one last question before I let both of you two go. Riptide, the Solana global hackathons going on right now, if there's one thing that you would love to see a team build coming out of this, what would it be? And Sheraz, we'll start with you.Sheraz: (34:38)Sure. I mean, there's a bunch. I think one thing that could be really interesting is what does buy now pay later on chain look like, right? So we have so many crypto users that are sitting on SOL, and other assets that they want to hold that right, they're hold all that. They don't want to use that for transactions. So how could we enable so someone to purchase from a merchant using Solana pay, over collateralize their SOL holding and just buy now pay never? Use your staking rewards to pay for the purchase, call it buy now pay never. That's one example, that one could be really interesting.Jeremy: (35:18)I think we're excited to be part of the hackathon and putting forward some of our APIs that can be worked in conjunction with Solana pay as well. And so, I mean, just generally, we'd be very interested in seeing people who are building wallet experiences that are geared towards payments, whether it's a P2P payment or a person-to-merchant payment in particular, but really building experiences that are optimized for that flow, as opposed to being a DeFi Degen, or trading. And so I think those kinds of products that combine person-to-business and person-to-person payment experiences that abstract away some of the complexity, and then do that around these standards, I think we're super, super excited about that. And we're obviously excited to see what comes out of the hackathon. We're investing in a lot of companies now, and so we'll be watching really closely, because this is a space that we'd love to be investing in as well.Austin: (36:20)Well, Jeremy Allaire CEO of Circle Sheraz Shere end of payments at Solana Labs, thanks for joining us today.Sheraz: (36:26)Thank you, Austin.Jeremy: (36:27)Thanks. 

Vasiliy Shapovalov (Tech Lead, Lido), F.P. (Co-Founder, Socean) and Ella Kuzmenko (Product Manager, Stake Pools & Delegation Program, Solana Foundation) chat with Anatoly about the complexity and game theory surrounding stake pools, decentralization and censorship resistance.00:10 - Intro01:38 - Collaterals, maximizing censorship resistance07:40 - APYs and investors09:31 - How to get penetration across DeFi14:58 - Governance in a liquid stake pool18:23 - Automation vs. programmatic on-chain governance20:44 - Factors in selecting validators29:27 - Growing the validators set32:21 - Stake pool token in DeFi35:09 - Liquidity fragmented between too many pools41:01 - Who controls the network?44:46 - Increasing decentralization00:39 - Intro01:51 - pencilflip’s background03:30 - Working at facebook vs. web 3.007:31 - How pencilflip got into crypto08:52 - Views on NFTs10:45 - Getting into Solana15:29 - Experience working in lower level17:56 - What was his method to learn Solana?21:01 - What’s the hardest concept on Solana?23:53 - How fast did he move from Rust to Anchor?27:35 - Building on Solana33:24 - Advice to people moving to Web 3.0DISCLAIMERThe information on this podcast is provided for educational, informational, and entertainment purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.The information contained in or provided from or through this podcast is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice.The information on this podcast is general in nature and is not specific to you, the user or anyone else. You should not make any decision, financial, investment, trading or otherwise, based on any of the information presented on this podcast without undertaking independent due diligence and consultation with a professional broker or financial advisor. Anatoly (00:10):Hey folks. This is Anatoly and you're listening to The Solana Podcast. I have a super exciting episode today, it's all about Stake Pools and decentralization and censorship resistance. And I have a group of guests that I'm going to let them introduce themselves, just to make it a little easier. So Ella, why don't you start first?Ella (00:29):Sure. Hey guys. Ella, I'm a Product Manager of Censorship Resistance at The Solana Foundation working on Stake Pools and the delegation program.Vasiliy (00:39):Hey. I'm Vasiliy, I'm tech lead at Lido. Honestly, I think that the person who should be here instead of me is someone, of course like Felix or [Uto 00:00:49] or maybe Brian, but they couldn't make it, so I'm here instead as a second best option.Anatoly (00:58):Awesome to have you. We'll take the second best.FP (01:03):Hi, guys. I'm FP. I'm co-founder and CEO of The Socean Stake Pool. Nice to meet you guys all today.Anatoly (01:11):Awesome. So censorship resistance Stake Pools, I've been pounding the table on this for two years as the most important thing and proof of stake networks, because I have this crazy belief that if we have liquid staking as collateral and DeFi than financial analyst to analyze systemic risk and these things, we'll actually prefer collateral that maximizes censorship resistance. And that is a crazy thing, because it would tie incentives for maximizing censorship resistance in the network to its actual use and primary use being DeFi. Is this real or not? Is this going to happen?Vasiliy (02:00):I probably got some experience to tell here because we were in production longer, not on Solana, but in general, longer than most liquid staking pools. And I can say that it's less pressure to decentralize than I thought it would be on one hand. On the other hand is much more pressure than we usually have as a stake provider, as node operator. I come from a stake provider, P2P.org that is pretty big itself. So about 4 billion stake of fire down depends on phase of the moon, the day.And people who usually stake, there is the kind of weak, very weak, but it's a prisoner's dilemma when people are incentivized to stake with best node operator. And when there is no clear best, they go by brand but there is a number of pretty good node operator that people are incentivized to stake with because these good node operator don't lose the mistake and give them good profits and stuff like that. And basically it leads to centralization because they are not incentivized very much to the centralized stake. And it's probably on goodwill and many stakers don't give enough thought to goodwill, but stake and pools always do. Basically, they're professionally obliged to do this and better holding up to hold the node operator accountable.I think in Lido, we have a better monitoring system for node operator around for us. And most of the big stakers like changes and funds and stuff that we're monitoring people who stake for us way better than most stakers. And I can say that the trade of is real here, when that liquid stake can token hold us, are not putting a lot of pressure on us, but they're putting some and we are well equipped to react to that. And we would honestly welcome more pressure on this front.Anatoly (04:14):So, Ella, has this been easy to convince people that censorship resistance matters or is it like they're just learning about it for the first time?Ella (04:24):Yeah, that's an interesting question. I think I definitely would second what Vasiliy was saying about how it's surprisingly harder than you would think. People definitely will follow where the rewards are. And I don't think that is surprising. I think there's an interesting opportunity for Stake Pools to play with that idea and give rewards while also touting the benefits of censorship resistance. So, "Hey, we will give you great rewards, but you can also get governance tokens and you can help us build the future together."And I think there's an interesting way that you can frame that discussion where you don't really have to pick one or the other. And I think to put a maybe crazy idea out there, I think we're only seeing the beginning of what can be built on top of Stake Pools. So it's pretty standard to take your Stake Pools tokens and you go stake them and then you earn some additional yield there. But I don't think we've really unlocked the potential of realizing that the underlying asset that you're staking will continue to accrue value every epoch and you should be able to build crazy financial things on top of that, that actually give you way better rewards than staking with an individual validator will ever do.And as the product person, I just put crazy ideas out there and wait for other people to build them. But I think we're at the very early stages of that. And so I'm super excited for a year from now, what crazy things people have built, where the rewards are actually way sexier in Stake Pools. And you don't even have to care about censorship resistance by the fact that you participate in Stake Pools, you will be helping that. So that's the future that I'm really excited for.Anatoly (06:09):What do you think FP?FP (06:12):So the first question was, what do we think about the efforts towards decentralization and I think we're getting there, but I think it's still early days. If you add all of our Stake Pool operators together, we may have 10 minutes all between us and that's less than ever stake. That's less than one validator. So there's still a long way to go. And they charge 8% fees. What's going on? So definitely it is not a rational choice. It's more of a possibly just like inertia sort of thing.And then I would say, to me, there seems to be a little bit of a trade off between Stake Pools and decentralization. And what I mean by that is even between Stake Pools, there are Stake Pools that decentralize more and there are Stake Pools that decentralize less. And in some sense, there is a trade off here because if you stake with too many validators, then you don't get good APY and people don't want to stake with you. And of course, if you only stake with the best ones, then you're not really doing your job as a stake pool. So there's a little bit of a delicate balance here, but I like what Ella said in the sense that there's interesting financial instruments you can build on top, which should make the APY discussion, it just falls out.Anatoly (07:30):So the APY is between all the pools and validators are pretty close. They don't really deviate by more than like 10%. Do investors actually optimize for that right now or participants? Are they actually looking at that or are they making a decision once and not even thinking about it later for months on end? What kind of behaviors do you guys see both as a normal stake operator and a pool operator?Vasiliy (08:00):As a stake operator, I can say that there is a lot of people who absolutely look at returns. We usually, when we go into network, we prepare profit reports for them and show them they are staking with us and we get better returns and stuff like that because that's one of the points that node operator can actually differentiate on. And there is not a lot of them, basically. We offer the same service to people.But as a liquid staking protocols, there is a lot more of thing that can be a differentiator, way lot a lot. The node operator selection is one thing. Other thing is the opportunities to use your stake token in DeFi and CeFi and financial use for it. And this stuff beats these 0.1% point difference squarely. People don't care about the 0.1% point difference. But when they can actually use your token in 10 more protocols than the other person. So I think like, that's going to play as a serious factor way, way in the future, not for the few first years of stake, the liquid staking.Anatoly (09:20):So this is the difference between stable coins. Is how much penetration they have across DeFi protocols or exchanges even. Do you think exchanges are going to start having liquid staking like Lido, so Lido token?Vasiliy (09:38):Yes. I know it'll happen. It's not the matter of I think, I know it'll happen. It'll be inevitable. It'll start with smaller changes that don't have capacity to develop their own stake, liquid staking and don't have the network effect to make it a good option for people to use their exchange liquid staking. And then it comes to basically everywhere, I think. There is a pretty serious trading volume on liquid staking tokens right now and it's growing bigger month by month. So eventually, it'll be stupid not to waste them.Anatoly (10:19):FP, is that what you guys are most worried about or most working on? How do you get penetration across DeFi?FP (10:26):Yeah. I think so. Something that worries me is a lot of the protocols giving out emissions and the TVL is growing and all that. But I just wonder how much of it is organic growth because Stake Pools are very different from AMMs like ORCA or trading Texas, Mango where whereby in ORCA, they make their revenues from you doing stuff, from you trading or doing stuff. But in a stake pool, you want to do nothing. I mean, what we want our users is just literally put the SOL in us and just do nothing.So it is a little bit of a different incentivization. And I wonder whether these incentives are sustainable, because look, if you're chasing the people who are farming short-term yield, these are not the people that you want in your stake pool anyway. You want people who are in it for the long haul. So I'm a little bit worried about this.Ella (11:17):Yeah. To piggyback off of that. I think something that's uniquely interesting for Stake Pools that is not true for staking to an individual validator is yes, you want them to just hold their stake tokens in your pool, but you also do want them to participate in the broader project. And what I mean by that is when you have of governance tokens, you have the ability to actually impact where the project will go. And you have the ability to be active in a way that you can't be, if you are, let's say, in CeFi buying an index fund from Vanguard. They're not going to ask you, "Hey, do you have opinions about where Vanguard should go next?" And I think similarly, if you're staking to an individual validator, like sure, they might be earning you great rewards. That's very important, obviously. But I think at some point, everybody gets to a point where they say, "Hey, more rewards would be great, but what I really want is a community."And so I think Stake Pools that lean into this idea of, hey, we're going to give you this governance token, yes, hold your tokens. Do whatever you want on DeFi. But more than that, tell us what you want to see in the community and where you want the future of this project to go. I think that's a very unique power to Stake Pools that will organically grow. We just have to figure out how to market that in a way that's appealing to people who are institutional investors, retail investors, total crypto newbies, who don't even know what a Dow is. Don't know what governance tokens are, don't know what a stake pool is. So there's a lot of work to do there, but I think we have our work cut out for us because it lends itself to this very unique dynamic between all of the stakers.Vasiliy (12:56):The way I think about that is it will be a lot more market driven than participation in governance doing. People are usually who are staking as node operator and provided most of them, don't care to make governance decisions. You can actually look at how it will works with Cosmos and other proof stake blockchains, where governance is a part of staking. And you can see that most people don't vote apart from how they validate the votes, where they do.They select basically a company that is aligned to them or maybe select the person that give them best returns. And then they don't take a look at governance usually. That's not true for all people, but that's a clear majority that delegates the governance power and it'll be pretty much the same with Stake Pools with liquid staking protocols. They won't be able to even to connect with most of the holders of the staking tokens, because they won't be like passionate enough to connect back, to understand what they want. So it'll be very indirect.There will be staking pools that gouge some of the governance decision from stakers, but not from all of it. Not even from most of them, like from 10% of them, by volume and not by number. By number, it'll be like probably not 10% like about 0.1%, but they will take much more or maybe about the same pressure from protocols that uses staking token from the stakeholders in the blockchain ecosystem that don't use a liquid staking token by important like develop teams, develop clients and researchers as an ecosystem and stuff like that. And liquid staking pool will be a nexus of governance that will try to combine all this pressure in the single direction from stakers, from protocols, from major participants in the ecosystem.Anatoly (14:58):What is governance in a liquid stake pool? What is the function of it for the community that owns the token? What should they be looking at?FP (15:08):First and foremost, the delegation strategy. I think the community needs to decide the delegation strategy. I don't think this should be left to the founders or the creators of the stake pool. It should be democratized. I think another thing is fees. So I think the community should decide the fees that a stake pool should charge. And the last thing I would say is, we would like a lot of the associated infrastructure to be run by the community as well.So for instance, the program, the upgrade authority is already given to the community. Treasury decisions are already given to the community, but there are still things like the front end or paying for a custom RPC note and things like that right now is centralized. And we would like that all to be on chain eventually. So I think that's all quite important.Vasiliy (16:02):My thought here is that the role of governance in a good liquid staking protocol is to drive itself to extinction. So it won't be easy or it won't be fast, but essentially liquid staking is walking in the outermost part of the security of the protocol. It touches the most important parts of the protocol like censorship, resistance, and decetralization and security and all of that. And if it gets a significant power in this parts and if it's not credibly neutral, it's like a great thing.It should be credibly neutral and you can't be credibly neutral for long when your governance is overpowered. It's a natural thing for all governance to take too much power and use it in not a great way. So it basically has to, in order to be accepted by stakers and ecosystem as a ligand liquid stake protocol. The ligand part of staking, it should be self-depreciating to a point that where governance power are time locked and very light and mostly algorithm driven.Anatoly (17:27):This is interesting point because I think the goal of governance of a layer one is also to obsolete itself. Is how do we build the structures? And part of the reason of building out Stake Pools was because the foundation was running its own delegation program. And it really felt like why don't we get the community to do its own delegation programs. And then how do we get zero to one thing working, how do we now go want to earn? And that's always a way to disintermediate yourself from the governance work and then eliminate it all together. I think it's interesting that like inherently there isn't a drive to eliminate it from the community. We just want to push it out of the foundation and have you guys figure out what does that fine line between automation and having everything be programmatic to on chain governance?Vasiliy (18:32):Well, not yet. It's a work in progress. We are working on maybe systemizing the ways we can... What inputs do we have, is this programmatic governance, to understand where we can get the signal from, what we can use as a strong signal. We can't get rid of the governance entirely. We can just make it in a way that... Well, like I said, the role of governance in the mistaken is to take all this input from protocols and ecosystem and stakers and the outside water is large and fabricator of consensus out of it.So part of this can be automated because we can have the signals in bits and bites and we can use algorithm to aggregate this signals into party of decision maybe. Right now, we're looking at stuff like what is objectively good characteristics of a node operator for example, for selecting node operator like up time and special risk and the reputation that is proxy by amount of stake can all the other protocols that they are staking.And this is a strong signal. We can look at like time of operation within Lido, which is roughly correlate with reputation and outside Lido as well. We can look at stake as preference and the stake token can hold the preference to understand what they want, which is also a proxy for reputation, which I don't have. The things I don't have a good solution for getting into account, what people who run protocols think and what people who are major in the ecosystem think, because it's not directly correlated to a stake in stake pool. And we don't have a good way to get these signals yet, maybe ever.Anatoly (20:29):You guys like Lido and FP have two different approaches from what I can tell in terms of building out the validator set and the delegation strategy. FP, what are your thoughts on this? What are you guys driving most as the number one factor in selecting validators?FP (20:48):So I think it's important not to have a white list of validators because I think this is exclusionary. I think it's important not to dictate what fees validators should charge, because I think fees are only important in so far as they affect performance. So in some sense, we don't want to control validators. I think we shouldn't. We shouldn't dictate how validators... That being said, of course performance over time is very important. I think if not the most important. Yeah.And the other thing I would say is, the decentralization, obviously we shouldn't be staking to nodes that are in the MSG, they have too much stake or nodes that are in one of the data centers that is in the MSG. So one of the top three data centers. But that being said, there also a middle ground. You don't want to spread your stake among, let's say, 600 validators, for example. And the reason why you don't want to do that is because then you can't make a meaningful difference in decentralization. You want of do want to reward validators that are doing well, that are also out of the security group. So yeah, I would say it's a bit of a balancing act here.Anatoly (22:13):Vasiliy, you guys have a totally different approach. I'm excited too, why did you guys come up with that system? And what is the Lido way?Vasiliy (22:19):To expand a bit on what the system is, we've got a wide list of node operator that run with Lido and charge the same commission and get the flat amount of reward. What the reason behind this, the whitelist selection is done by basically a peer review. We've got a lot of node operators, already validating Lido in different protocols in Ethereum, in Terra and now in Solana. And we have a submission process where people submit, they want to stake for Lido and we get the node operators. They took a look at them at the setup they have and historical performance in Solana and other blockchains, especially in Solana and stuff like that. And community participation and select that the next five or so participant of the whitelist when we need to expand.The why we do that because we want to have good stake distribution that will be good for Solana and that's not the best, but it's easily achievable way to do that. Because that way we can guarantee that node operator are good because they're selected by the community of node operator essentially. And we can guarantee that they have enough stake to run the operations and have enough profit that say that. So they really want to keep this good business going. That's a good business for them. That's what they want to do. They are not arranged by scrap. They are paying their DevOps engineers handsome salary and stuff like that, so that they can afford to be honest.It's not great in the sense that it's a process that allows us to select the distribution folks, but it doesn't allow people to come in fresh and grow. And that's not great. But as a temporary thing, when there is a good community of node operator that are just like not selected yet, it works, I think very well.FP (24:36):I think part of the reason why Lido does it is from what Vasiliy said, it's meant to make sure that the node operator are reliable and performant. And I would put forward that there's a very easy way to look and to see if a node operator is performing, just look at their API. So in some sense, I mean, I don't want to make any implications, but I believe this peer review process is a bit nepotistic. It's like if you're in our secret cabal and if we know you and and we like your DevOps engineers and blah, blah, blah, then will onboard you. Of course, that's not the case, but it's what it seems like.Anatoly (25:15):This is the most controversial Solana podcast we've ever had.Vasiliy (25:21):I wouldn't say that's not true. It really does not allow newcomers to come in easily because there is a community of node operator that been through thick and thin via market, like Greeks through this days, when we all worked like in the red four years, that was what happened. We used make way less money than we earned, like with P2P, which was a pretty big one even this time. Like I said, it's not great, with this process, we can't get in people who didn't build this reputation and track record and stuff.What I don't agree with you that you can easily estimate how good is node operator, but looking at their performance, that's just not true. That's not how you estimate a node operator. You don't only evaluate performance. You also evaluate tailor risks. And tailor risks, you can't evaluate by performance. You should understand that these folks have bus factor of more than one. They don't have a single guy running all this stuff because if this guy gets sick, your validators get stuck.You should understand that they will stay up at night when there is an upgrade. You should understand that if there is a via market, they will stay to the blockchains they're running and they don't all run on Hetzner. So because that's, at least used to be the easiest way to get APR is to run the same data center as everyone. That's how skip rates they used to work in Solana.There is way more nuance in selecting a good set of node operator than just looking at performance. The geographical distribution, the jurisdiction distribution, the track record, other blockchains, which runs the reputation and community participation being in discord or running projects for Solana and stuff like that. There is way more stuff about node operator that is not easy to understand from just on chain metric. On chain metric is like the 20, 30% important stuff of choosing validator, because there are a lot of validators with good on chain metrics, but there are differentiated by stuff that is not seen by most people at all.Ella (27:44):I would say if somebody is staying up all night to make sure that their validator is running and they do restarts within the first five, 10 minutes, they're going to have better rewards. So I would say, it's more than 20%. I agree that being decentralized and being in data centers that are different from other people are doing community projects is super important. But I do think that rewards are a good proxy for how active the validator is actually running their node.Vasiliy (28:13):You can say that, that's a prerequisite. If you have good bad performance, you're not a good validator. That's true. That's not what makes your excellent node operator because excellent node operators run explorers, for example. And there are certs basically, for example. You can't say that this guy has the same performance cert, so they're as good. That's not true.Ella (28:35):But I mean, I would say there are maybe like 10 community members who run dashboards and different tooling. And I think there are way more than 10 stellar validators. So sometimes it's just not within their area of expertise. They could be excellent DevOps people and run validators across many blockchains, but they're not a web developer. That's just not their skillset, but I wouldn't say that they don't contribute to the community.Vasiliy (29:01):Yeah. What I'm saying just there is much more nuance, especially when you don't have 300 places for a node operator, you don't have enough money to pay them for 300 validators and you need to select 15 or 20 or 50.Ella (29:18):Unless a hundred million SOL gets stake to Stake Pools, then you can expand that list to 3,000 validators and everyone will be profitable.Anatoly (29:26):So this is the challenges. How do we grow the validator set? And it almost in my mind is like, you need both, you need people that are driving, we need higher quality. We need due to proof points that you know how to manage keys, but we also need people that are like, okay, just on board and figure it out and try it. Yeah. This is a tough problem. And I think part of the reason of not wanting the foundation to do it and push out this technology, a stake fulls is because we don't know. You guys are both sound very much validator operator focused, but these things like, I think are some form of financial, like DeFi application too. How much of your time are you thinking about like how these things actually work in DeFi?Vasiliy (30:22):I think I'd say a lot. That's what makes or breaks the liquid staking, the whole point of liquid staking is that it's liquid and usable in finance. I actually don't think a lot about a lot of time about node operator because I used to work here. I'm working as the staking provider since like 2020, early 2020. So I'm just have strong opinions because I do it right. But I have to think a lot about DeFi because that's uncharted, it's new.FP (30:58):So yeah. I mean, I think as Toly points out, I think the validator operator stuff is important, but really it really is just a baseline. And I think what we do with it next is the thing that's more important. So the question was, how do we think about how it's composed with DeFi? It's just the beginning. So right now what are the main things that you can do with your stake pool token? So you can put it in an AMM and provide liquidity that way, you can do lending and that's about it, I think.I mean, there's lots of stuff you can do and you want to use the stake pool stake SOL in any occasion where you can use regular SOL. So whether it's just buying from a marketplace or doing some more exotic stuff, like options trading, that sort of stuff and not just putting it in liquidity pool or borrowing or lending or leverage yield farming. So yeah. I basically want to expand the ways in which stake pool tokens can be used. And I think that's going to be a big draw for people to start staking with us.Anatoly (32:18):How much work is it to get that adoption or to have a specific stake pool token used in a DeFi?FP (32:27):I think integration takes time. I mean, it really depends on the partner which you're integrating with. And I think some things just haven't been built out yet actually. So Ella and I have been talking about how we can use these stake pool tokens in the NFT marketplaces, for example. But none of this stuff has been built out. So, yeah. So we'll get that, but it's not there yet, I would say. So we have to build it.Vasiliy (32:57):There is two parts to the answer. One is how long does it take to build. The other is how long does it take to convince people to build? The first is, faster than usual for financial products in traditional finances, but still long because we know that shipping is hard and convincing is also can be pretty, pretty complicated. For example, we started the integration process on MiCA, I think in February this year. And we only now getting an executive at least take things on MiCA, I think around next week or so. That's how long it cost with MiCA. And it's very similar amounts of time with a major protocols on Ethereum that are by now pretty conservative. Solana is not conservative yet. Most of the protocols on Solana make fast and break things, move fast and break things. So I don't think it'll take like this long stake Solana tokens to be a major participant of DeFi, but it's still time.Ella (34:12):Yeah. I would say the technical integrations, they're not technically challenging, you're integrating an SPL token. So that part is pretty easy or not as challenging as you would imagine. I think in the early days, when the TVL was very small, it was maybe hard to convince platforms that they should care about this weird stake pool token thing. Now that TVL is close to $2 billion US dollars. They maybe will now take those meetings and be like, "Oh, okay. Yeah, let's integrate all the stake pool tokens."And maybe whereas before they would have some liquidity requirements say, prove that users actually want this on our platform. Why should we spend the time integrating it? I think hopefully the script will flip and they'll be like, "Hey please, can we integrate your stake pool token?" But I think it just, realistically it takes a couple of months to get at that traction. And hopefully we have some momentum now and we can push forward more of those integrations.Anatoly (35:08):Is there kind of danger of liquidity being fractured between too many pools?FP (35:14):Hey, I seem to recall asking you this exact question on discord back in September, Toly. Yeah. I wondered this myself to be honest because I think there is a happy medium. You don't want one stake pool taking all of it because there are protocol risk there as it ends points out. Yeah. And if they fail it, that's dangerous. Well, on the other hand, it's going to be really difficult to integrate a hundred different stakes pools.Although that being said, there are things we can do to mitigate it. One of which is to enforce some sort of standardization. So one good step would be, for example, to use the Solana reference recommendation instead of... Maybe it's too late now for some of the existing Stake Pools. But that being said we were talking about adapters. I don't know if you recall some sort of adapter, some sort of layer that makes sure that the Stake Pools can all interoperate with one another. I think that would be really good.Vasiliy (36:14):I think it's inevitable that a single representation of staked Solana to be the major player here. So that's basically Lido thesis and I'm seeing it play out in the Ethereum and in the LUNA and in the entire ecosystem. So I think it's going to happen. It doesn't necessarily mean that it'll be one stake pool, but the alternative here is just another layer of aggregation. One thing for example, was proposed by Michael from Curve where like basically a stable pool of multiple liquid staking tokens was used and LP token from this pool was proposed as a basically unit of account. I'm not sure that it will happen, but I am pretty sure that there will be one aggregate stake Solana token, that will take the majority of the market.Anatoly (37:20):I actually think that these things are far more fluid because it's all people based at the end of the day. And people will do promotions and get communities together and have fun or get excited about a thing that some innovation and you will see liquidity move from one thing to the other simply because it's exciting. And it feels like it's just a little too static for there to be only one token. This is not how normally people operate, but we'll see.Yeah. It's at any given moment one winning token maybe is a better way to put it. So it doesn't mean there will be one token for eternity, but at any given moment, there will be a clear winner except maybe the moments of flipping that's how I see it.FP (38:14):So I worry a little bit about that actually. I worry because we talk about increasing decentralization. And that was the reason why Stake Pools were created in the first place. And it's true that if you have one stake pool controlling all the stake, that solves a particular kind of centralization, Nakamoto coefficient. But then it introduces a new kind of centralization. And maybe there are risks that can be mitigated that way, but still this worries me a little bit. So I'd rather have an ecosystem with a good number of different Stake Pools.Ella (38:51):That's where the education piece comes in. You got to let your delegators know the importance of censorship resistance and decentralization so if there is a sexy new aggregated stake pool token, they don't just gravitate towards it because it looks good without thinking about the consequences of that.Anatoly (39:09):But the yields are so high.Vasiliy (39:15):I don't like the dynamic at all, that there will be one lean stake token, but I think it's inevitable. And what we can do is not oppose it, but we can build protocols that will be a net good for the system anyway, even if this happens, hence the self depreciate of governance and in liquid stake and stuff like that, that's all flowing from there.Ella (39:40):I wouldn't say I'm oppose to it, I think in an instance where you have 10 really small stake pool operators, let's say universities decide, hey, we want to run the Yale stake pool and the UDab stake pool. And they have very fragmented liquidity. I think it makes total sense for there to be an aggregated university stake pool token, support university students help them get their pizza and ramen. Great. That's a fun way to do it. But that's a very specific use case where you're trying to make sure liquidity isn't fragmented.But I think every stake pool today has more than 600,000 sold deposited into it Solana. So I wouldn't say that's a huge fragmentation. It seems like people have chosen the pool that they like and they're happy with the performance, with the project. And that's the one that they picked. And so I don't know that they would be attracted to something that tries to average everything out and is just a generic token, but I could be wrong.Vasiliy (40:38):Yeah. It's so very interesting to see the play out.Anatoly (40:40):So are you guys worried about if these are used collateral, like liquidations rapidly moving stake from the lenders to the people collecting to the traders, is that going to change the dynamic of the makeup of who controls the network over the long-term?Vasiliy (41:05):Not reallY. How I've seen it work by, in liquidation that happened in Terra and similar ones that there were not exactly strictly liquidation, but more of fire sale events in Ethereum when the price of weather went down and people were going out of stake teeth as well. The dynamics here is that people who have low time preference are selling at low prices and people who have higher time preference, they are buying. So then they went of the liquidation, the price goes down and people with more foresight and more patience are getting the discounted stake token. So if anything, that looks like stake token getting in the hands that smarter and are in for a longer game, usually. So not always the case, but very much looks like this.FP (42:05):I don't know. I mean, that being said, when you have all these incentive programs and emissions coming out. That doesn't that see to incentivize people who jump around pools, trying to find the best ones. And they're getting rewarded by lots of governance tokens at the end of the day. So what do we think about that?Vasiliy (42:25):I don't think that it's something to really think about, I don't know. Jumping around and getting this governance tokens and it is a natural way to get some money for people who like money. I don't know. That's not a bad thing. If you like some juicer smart contract risks and rockeries in your life, that's a very exciting way to spend time.Anatoly (42:55):Yeah. There is I think a danger, but I don't know how big it is in that normally for like a validator to receive more stake, the best they can really do is offer 0% commission and then they can start bribing people. And it's hard to bribe people, but with liquid staking, it's a lot easier. You can just simply say, when you stake with this pool, you get so many more rewards than you do anywhere else, because you can min this new reward token. And is that a dangerous, scary thing that could result with a third or more of the stake, all moving towards this hot, shiny thing? I don't know.This is the part of where I think it's very critical for DeFi to mature and to have real analysts and people analyzing these things and looking deep and giving a ton of pushback on things that look a little fishy. It naturally happens, but only happens on crypto Twitter and still so much stuff sneaks through.Anatoly (44:06):So we'll see what happens, but thank you guys for joining. Super excited to have this actually being live now and making so much headway and growing so rapidly. Honestly, if we actually get to a point where DeFi is incentivizing censorship resistance, we're kind of done. We built it. We can actually take a break. So I'm looking forward to that.FP (44:41):Is that the biggest concern for you as a creator of the layer one, the increasing this decentralization, would you say that's the biggest concern?Anatoly (44:49):Yeah. This is the thing that I'm most worried about, because I think to do it in a sustainable way, it means that you need to have a use case which benefits from decentralization. You need to have external users that have a benefit that exceeds the cost of running the network. It can't just be self-sustaining tokens moving around. So to truly succeed there means that, we build something useful to the world. And that's the ultimate goal.What else are you an engineer if not to build something useful? If that's what you care about, then you should be an artist and that's a totally different thing. Yeah. Awesome to chat with you guys. Thank you for being on the show and thank you for all the hard work everyone is doing, Ella, Vasiliy, FP. Just thank you guys.FP (45:48):Thank you so much for having us today.Vasiliy (45:49):Thank you.Ella (45:49):Thank you.