Title: "Three Crypto Pioneers on Crypto's Monolithic vs. Modular Debate"
Source: Unchained Podcast
Translated by: Kaori, BlockBeats
On January 2nd, the well-known crypto podcast Unchained released a new episode titled "Three Crypto Pioneers on Crypto's Monolithic vs. Modular Debate." In the episode, co-founder of Solana Labs, Anatoly, and Chief Operating Officer Nick White of Celestia Labs, among others, shared their views on Solana, Celestia, Bitcoin, Ethereum, security in the crypto market, and future market predictions. The main points of discussion included Solana as one of the fastest blockchains, how it prepares for mass adoption and scalability, philosophical similarities and execution differences between Solana and Celestia, and why Solana's Solana Virtual Machine (SVM) may surpass Ethereum's Ethereum Virtual Machine (EVM) in user adoption. The following is a compiled and organized content for readers' reference.
Debate Topic: Monolithic vs. Modular Blockchains
Host: Laura Shin
Guests:
Co-founder of Solana Labs, Anatoly Yakovenko
Chief Operating Officer of Celestia Labs, Nick White
Former Ark Invest crypto head, now Placeholder VC partner, Chris Burniske
Laura Shin: Chris, you are the one who proposed this special episode. Please describe to the audience how you define these two blockchain models. If you have an opinion on which approach will prevail or be superior, feel free to explain.
Chris Burniske: In a modular system, different layers of the stack allow a single protocol to perform best on specific tasks or very limited functions. Therefore, modularity often involves key terms such as data availability, settlement, and execution. In this regard, Celestia excels in data availability, becoming a true leader and defining the paradigm of data availability. Additionally, the integration perspective emphasizes the importance of tightly integrating these stack layers to achieve a more seamless developer and user experience than adopting a modular approach.
There has been a long-standing debate about which approach is more economical, faster, and more scalable. It can be understood through an analogy, for example, iOS adopts a vertical integration approach, while Android is pieced together from various parts. Despite many people using Android, iOS has built a highly valuable ecosystem, supporting Apple's position as one of the most valuable companies globally.
As an investor, one should not lean towards only iOS or Android. Growth-minded investors, when faced with choices, would invest in both. This is also Placeholder's position as they collaborate with Toly and Nick. In my view, Celestia is the most notable startup of 2023, defining the startups of each year, while Solana has risen like a phoenix from the so-called low point of 2022. Although 2022 may have been a significant challenge for Solana, it rallied in adversity, further solidifying the position of SOL, proving many people wrong about its development direction.
In terms of the integrated stack, I believe Ethereum is currently more integrated than modular, although it is gradually transitioning to modularity. In the current development environment, developers are more inclined to choose Ethereum and EVM, or Solana and SVM.
Laura Shin: Both Solana and Ethereum have become stronger from the FTX event. Anatoly, why don't you talk about the integrated approach that Solana is pursuing?
Anatoly Yakovenko: I have an obsession, which is to synchronize all the information in the world into a single memory, just like a computer's RAM. This is the fastest place to store information. No matter how large we make this memory, we will replicate and expand it around the world, just like throwing information into a bucket, and it will spread rapidly globally, allowing everyone to know instantly, just as fast as the speed of light allows. The reason for doing this is that if we can achieve this, we can discover prices more timely than exchanges like the New York Stock Exchange or NASDAQ. Even though these systems use technologies like nanosecond matching engines, information still needs to spread around the world.
For example, if something significant happens in Singapore's market, it needs to spread at the speed of light through paths like fiber optics or satellites to traders in New York, so they can view it on their terminals. This information must hit within the algorithms inside the New York Stock Exchange for the algorithm to take action in the market. At the same time, if someone in Singapore localizes and sends a state transition to Solana's block producer, the producer will rapidly spread this transaction around the world, just like spreading news. Therefore, when traders in New York look at the market, the information is already reflected in Solana's state, just as that news event has already affected the market.
As a result, there is no longer arbitrage space between New York or decentralized systems run by a group of volunteers, and hardware becomes a common commodity. This is truly exciting, like a science fiction novel. If we can achieve this, I believe it will make the world fairer. I think this is a huge engineering achievement, and I am proud of it.
Furthermore, I believe this actually creates value for the world, making finance more transparent, better, and cheaper, which is good for consumers. This is the problem I want to solve. If the modular approach is a better engineering solution, I would unhesitatingly discard all Solana code, replicate Celestia's code, and adopt this approach. I have no doubt about achieving it, and we have made significant progress so far.
Laura Shin: Now, Nick, please explain what Celestia is.
Nick White: Celestia is the first modular blockchain network, unique in its ability to scale with the increasing number of users and nodes in the network. Its core value proposition is to provide developers with the ability to easily deploy custom blockchains. Modular blockchains differ from integrating all the functionalities needed to build decentralized applications into a single protocol; instead, they break it down into different component protocols. These protocols can be optimized for specific needs, and developers can choose and combine these components to build complete working products.
This approach gives developers new flexibility and customizability, allowing them to build unique products that cannot be achieved in a general approach. Modular blockchains emphasize the concept of permissionless innovation, unlike the situation with only one protocol or team, which limits the scope of innovation because all decisions are made by a single protocol.
In a modular setup, anyone can freely innovate execution methods or data availability methods, which promotes broader innovation in the cryptocurrency field. Compared to the top-down decision-making infrastructure stack of a single protocol, modularity is a bottom-up approach, allowing developers and builders to create their own components, with the best choices determined by the free market.
Celestia focuses on data availability, using a new technology called data availability sampling, allowing the blockchain to be verified on consumer-grade hardware, such as smartphones. As the number of running light nodes increases, block size can also grow, marking the first time there is no longer a fixed capacity or throughput, but rather scales with the increase of users and nodes.
Solestia: The "Same Path, Different Paths" of Solana and Celestia
Laura Shin: The modular approach does indeed offer more possibilities for customization. I think the world is increasingly moving towards the SaaS model, or software as a service. In the future, if Celestia has multiple competitors, developers may choose solutions that best fit their needs, such as having better options for data availability. As for the choice of phones, Anatoly uses Saga Phone, other than iPhone, while Chris and Nick may use iPhone, which can be seen as a vote for the Solana method to some extent. I'd like to hear everyone's thoughts on the future and how people will build in these two areas, rather than focusing on what most people will ultimately use.
Anatoly Yakovenko: In defense of Nick, I believe developers cannot be marketed to; you cannot sell them something, but you can incentivize them to build. Modularity is like an operating system, there's a whole genre called modular operating systems, which is the complete opposite of Linux's design. In Linux, coding is heavily restricted, while the modular approach provides developers with more expressiveness and flexibility, like QNX.
Giving developers the choice is the right thing to do because there will always be developers interested in specific optimizations. In this process, you have to pick the targets to optimize, and they are doing that. From our perspective, we care about attracting developers who genuinely care about specific optimizations. The pain of developers can be seen as a Pareto efficiency curve, picking a pain point they are willing to bear and coding around it.
Laura Shin: I'd like to bring up a question that I'm not sure if we've covered in our previous interviews. In November, you may have seen a paper written by an anonymous author, Polynya, titled "The Terrible Inefficiency of Monolithic Chains." They believe that blockchain can scale through proof of effectiveness, and they predict an increase in usage on mobile devices globally when these proof methods are used to scale the blockchain. Some see this as a veiled criticism of Solana. What is your response to this?
Anatoly Yakovenko: If you want 100,000 nodes globally, you need about 1GB of bandwidth synchronized every 400 milliseconds, but 1GB of bandwidth is not allowed. We have the technology to meet the demand for multiple boxes to sync with Solana's state. So, from an engineering perspective, it is incorrect to say that Solana cannot scale to a large number of replicas, nodes, or bandwidth. Because current technology, such as the 20-gigabit Google provides for home fiber, will become common in households in North America and Europe in the next five to ten years.
You can see that the normal development of networks and computers has already outpaced people's awareness. Technology is advancing at an exponential rate, which is truly hard to grasp. On the hardware side, we already support very high throughput networks. The difficulty on the software side is, for example, it takes two days to ship double the cores from Amazon, while it takes six to twelve months to ship reliable software.
Chris Burniske: I think there is a hidden commonality between Celestia and Solana, involving future scalability and the unit economics of their respective domains. What we just discussed are different value sets, Laura. We reported on Bitcoin together, then Ethereum emerged, and now there are two leaders very relevant in today's cryptocurrency, which are the value sets of Solana and Celestia. Although the value sets of each ecosystem are intertwined, they are still quite unique.
In discussing future scalability and unit economics, I find it truly magical that with Solana, you can send value to anyone in the world at an extremely low cost, and with Celestia, the cost of publishing transactions to the data availability layer is also low, about a penny, two to three orders of magnitude cheaper compared to competitors. This means more experiments can be conducted, more developers and users can be attracted, paving the way for the future of cryptocurrency.
In 2021, we largely failed due to scalability, everything became too expensive, unable to scale to a large number of users, demand surged, leading to soaring values of transactions and goods, forming a bubble. Speculation is part of innovation, but ultimately led to a peak of adoption. Therefore, looking at Celestia, it truly supports all discussions about rollups as a data availability layer, rollups are execution, and solve the problem of data availability layer, it can be Ethereum as a data availability layer, or Eigenlayer, or Celestia. In my view, Celestia is poised to be the winner in this category.
One of the issues Celestia faces in data availability sampling is that as the number of nodes on the network increases, it can handle more throughput. This is a key component, sharply contrasting with many blockchain systems we have seen in the past. Similarly, Solana's design philosophy is to handle more throughput as hardware performance and connectivity expand. Although both systems are still in the early stages of network scale, I believe in terms of unit economics and scalability, Solana and Celestia are the most forward-looking.
Nick White: Yes, I agree with Chris's point, I think there is a profound commonality and shared philosophy between Solana and Celestia, which is that we both believe in rich and low-cost scalability at the base layer of cryptocurrency, so that we can build more things, make new applications possible, and achieve mass adoption. This is a very noble cause, and we should all strive for it.
But I think there is some divergence to some extent, Celestia is very concerned with verifiability, in addition to scaling block production and network throughput, we also care about scaling verifiability, which means for us, allowing end-users to actually audit and verify that the chain follows the rules, everything is legitimate, which is very important because that's the purpose of building a blockchain, and it's where we believe the difference from Web2 lies, they are verifiable computers.
So I think this is where the different architectures come into play, we place a lot of emphasis on data availability sampling because that's what allows our users to run these light nodes on their phones and verify Celestia. And I think, at least for now, Solana can accept high node requirements. Our validator nodes and block producer nodes also have high node requirements, but we want to provide an option with low node requirements for end-users. So I think there is an overlap and a slight divergence in some areas, which may be related to the Solestia meme I saw on Twitter, the combination of Solana and Celestia, but in some ways, they don't completely overlap.
Will Solana Shift to Modularity?
Laura Shin: This also brings up a question for Anatoly, Ethereum was initially a monolithic chain, then shifted to modularity, is there a possibility that one day you will think Solana also needs to shift to a modular structure?
Yakovenko: We cannot stop developers from putting Solana user transactions into Celestia and using Solana state routing, then running anti-fraud mechanisms or proof of effectiveness to ensure proof, effectively creating a rollup bridge similar to a data availability bridge from Celestia to Solana, and also from Ethereum to Solana. Unless there is a problem with our protocol, we cannot stop them from doing this at the protocol level. I hope Solana is flexible enough to allow such operations, which is completely fine.
If there is enough demand for assets on Celestia to establish a higher level of assurance bridge, someone will build it and make a profit, which is very natural. So from my perspective, we are starting to see the boundaries between data availability, optimization chains, and what I think of as execution layer optimization chains becoming blurred. There may actually be a lot of overlap, things are starting to look like everyone is collaborating, but everyone is competing.
**From my perspective, whether we modularize the code is not the issue, it's more like an implementation detail. When we start considering how to shorten the block time from 400 milliseconds to 200 milliseconds, for us, it means actually separating execution from fork choice. They are still the same binary, just running asynchronously. This is starting to look like a chain with embedded rollups. Would you ask if this is a modular design? No, it's just the same technology we have to borrow to achieve our goals—shortening block time and improving performance.
I think these things will naturally happen on all chains with users because we are all a group of smart engineers, all these ideas are open source, and we are all working to improve the product. It's a bit like an iterative process. But I think there will be a noticeable difference, and the best example I can show now is Jupyter, which is a routing application that routes between internal markets in a single state machine, it can do 20-cent transactions and disperse them across five different liquidity pools.
Doing this in Ethereum is really hard because if you do one operation, gas fees on Ethereum L1 are expensive, but even on L2, due to the jumps and the asynchronous nature of the design, you can't get the same guarantee at such a low price, right? You can only do very large transactions, but as things get smaller and faster, the asynchronous nature of those separate state machines starts to show. So we will see this separation.
I've talked to Don Cradd from Ethereum, he's one of the best engineers I've met, and I often ask him questions. How did you solve this problem? It's very open and collaborative, those people are great. The Celestia team, I think their data availability sampling design is really good. If it works on Solana with the bandwidth we want, we will definitely implement it for our users because it's just a bonus, right? It doesn't take anything away. It just adds extra security. So having research teams like them is great.**
Chris Burniske: Solana's natural modularity is already happening. For example, the Eclipse team is an SVM rollup that settles on Ethereum while using Celestia for data availability. Therefore, it can execute on Solana through SVM while using Celestia's unit economics for data availability. Similar situations may occur in the 2024 Showtime development, or teams like CODE, created by Ted Livingston, who founded Kik, a hugely successful messaging app, and then got squeezed by WhatsApp and others. The CODE team is building a smooth wallet on Solana and building an L2 inside Solana through some clever tricks to scale. So, smart engineers are finding ways to modularize Solana itself to meet their needs, not necessarily from the Solana core.
Laura Shin: You mentioned the Eclipse project, you said it settles on Ethereum but is an SVM project. So do you think we will see more modularized Ethereum applications moving to SVM, or more monolithic Solana applications moving to Ethereum?
Chris Burniske: Applications written for SVM cannot be directly ported to EVM because they have different processes and environments. For projects like Eclipse, because its execution layer uses SVM, applications built on Solana can run on Eclipse while gaining access to Ethereum liquidity and wallets.
This makes it easier for developers in the Solana ecosystem to reach Ethereum users. However, migrating from EVM to SVM is a daunting task for teams and requires a complete rebuild. Currently, there are some young native developers building applications for SVM from scratch, creating an independent developer and user community within Solana. This may give SVM more users than EVM in a few years. Therefore, some people may want to run their Ethereum applications on Solana, which is the reverse trend we see in Eclipse. However, to achieve this, there needs to be an order of magnitude more users on-chain.
Laura Shin: Before we continue the discussion. So Chris, can you explain why you think Solana users will have more users than Ethereum users, because that will definitely be controversial on some parts of Twitter.
Chris Burniske: I'm talking about SVM and EVM, right?
Laura Shin: Oh, okay.
Chris Burniske: I mean, Solana's virtual machine is parallel, with significantly higher performance. Teams like Monad are doing a full redesign of EVM to achieve parallelization, but SVM currently has a clear advantage over EVM in terms of user experience, cost, and performance, making it easier for users to engage in on-chain applications. Previously tipping in ETH, now it's SOL. Using the Phantom wallet, I can click a button and almost instantly send value to anyone's phone, at a cost of one cent of a penny. This achieves the almost free, instant sending of value that I have always dreamed of in the crypto space. SVM is part of achieving this goal. While EVM can also achieve it, it requires more work. Before EVM achieves this goal, I think SVM will continue to gain market share.
Currently, from a developer's perspective, EVM still holds a huge share over SVM. This was incredible a year ago, but now people are starting to think about it more. If SVM can emerge with some groundbreaking applications, attracting hundreds of millions of on-chain users, it will pique the interest and curiosity of developers. Just a few such applications appearing will make people think that SVM should also be considered in the design scope or potential choice list.
How to View the Bitcoin Ecosystem
Laura Shin: For startups building on Bitcoin recently, do you think these founders are at a disadvantage compared to founders building on Ethereum and Solana? Or do they have an advantage because Bitcoin is a leading digital asset gaining mainstream acceptance?
Yakovenko: It's very difficult to lower costs to build projects on Bitcoin unless using sidechains. In contrast, it may be more practical to use Solana or Celestia and bring Bitcoin in through bridging. I think people may succeed in this area, but it's similar to the high-cost environment faced when building projects on Ethereum Layer 1, although you can make money through high transaction fees, successful companies find it difficult to scale to hundreds of millions of users who want to join the ecosystem.
Nick White: Modularity is reshaping the Bitcoin community to some extent. People no longer just see Bitcoin as a layer for transferring digital gold, but more as a data availability layer that can be used to release NFTs, and even run rollups. There are teams actively exploring running rollups on Bitcoin, including schemes similar to EVM rollups. While this is exciting, Bitcoin has some fundamental limitations and is not well-suited as a data availability layer or settlement layer, as it has low data availability throughput and lacks true settlement functionality. There was recently a paper detailing how to verify execution on Bitcoin Layer 1, but I forgot the name.
Chris Burniske: BitVM.
Nick White: BitVM. Yes, if that works, it's very exciting, it can actually turn Bitcoin into a settlement layer, which I think may be the best outcome. Although I'm not sure if Bitcoin maximalists will be happy about it.
Chris Burniske: Modularity has to some extent reshaped the Bitcoin community. People no longer just see Bitcoin as a layer for transferring digital gold, but more as a data availability layer that can be used to release NFTs, and even run rollups. There are teams actively exploring running rollups on Bitcoin, including schemes similar to EVM rollups. While this is exciting, Bitcoin has some fundamental limitations and is not well-suited as a data availability layer or settlement layer, as it has low data availability throughput and lacks true settlement functionality. There was recently a paper detailing how to verify execution on Bitcoin Layer 1, but I forgot the name.
I think Bitcoin maximalists should be open-minded, as with the decreasing inflation of Bitcoin supply, transaction fees need to replace miner inflation income. Relying solely on transaction fees may not be enough for digital gold. Over the past year or so, we have seen some exciting developments, such as Ordinals, providing miners with significant fee income, which is crucial for Bitcoin maximalists. Many teams are researching Layer 2, requiring some opcode changes to create a true Layer 2. Currently, true Layer 2 does not have independent security parameters, but actually uses the security of Layer 1. Therefore, most are sidechains. We are working with Stacks, and Muneeb has been working on this, hoping to develop Stacks into a Layer 2, although currently it looks more like a sidechain.
It would be amazing for Bitcoin Layer 2 to have higher expressiveness. These Layer 2s will actually provide more value to Bitcoin than Ethereum Layer 2, as Ethereum Layer 2 just extends the expressiveness of Ethereum. Bitcoin's script language is very limited, so having expressive Layer 2s will both increase scalability and expressiveness, which is very important. However, one issue faced by many teams building in the new Bitcoin ecosystem is that they have not received the expected cooperation from Bitcoin whales. In contrast, in the Ethereum or Solana space, many whales are on-chain, as they are excited about innovation and willing to support new projects. Bitcoin's OG whales typically keep their coins in deep freeze, making it more difficult to access these coins to support Bitcoin DeFi projects. Therefore, the Bitcoin ecosystem faces resistance from the OG community, which adds friction. Friction will slow down momentum. These are the issues the Bitcoin ecosystem needs to address, but I am excited to refocus on Bitcoin.
Will Ethereum Succeed?
Laura Shin: If we think of Ethereum as Modulithic, do you think there is a world where Ethereum can compete with Celestia in terms of cost or data availability? Or was it not designed for that world, and Celestia is specifically built for that world?
Anatoly Yakovenko: Ethereum is like driving a $300 billion ship, and every change carries huge risks. People may underestimate the merge and the progress Ethereum has made in the past few years. From a design perspective, danksharding can scale to accommodate all of Solana's data. However, adding things internally to Ethereum involves economic and social factors, and whether it is feasible is another question. Despite facing huge challenges, I think they are moving in the right direction.
Chris Burniske: What do you think, Nick?
Nick White: The Ethereum community continues to iterate and innovate at scale, which is commendable. Compared to the protocol rigidity of Bitcoin, Ethereum remains flexible. However, making any changes to a large-scale ship is extremely challenging due to complex dependencies. The transition from modularity to monolithicity touches on multiple aspects of the protocol, more ambitious than the transition from proof of work to proof of stake. The design and effort put into danksharding are excellent, but the rollout will be a very daunting task. The researchers and engineering teams in the Ethereum ecosystem are top-notch, and while the path forward may be relatively slow, they will ultimately succeed.
Cryptocurrency Market Predictions
Laura Shin: I want to ask what you think the next bull market cycle will be like. In 2013, Bitcoin gained attention mainly because it was the first cryptocurrency. However, from my observation, the past two cryptocurrency market cycles have been more driven by technology. In 2017 and 2018, ICOs were the main driver; in 2021, despite DeFi leading, it was more like NFTs. In my view, in this bull market cycle, the upcoming spot Bitcoin ETF will actually put Bitcoin at the forefront, even before the halving. I'm interested in what you think the main driving force of this bull market cycle will be, or if it can be seen as the beginning of a super cycle, where we leave the era of bull and bear markets.
Chris Burniske: I don't think it will be a super cycle, but it will be a notable cycle. It will expand in all aspects, covering users, value, integration, and association with global daily life. The Bitcoin ETF is a major event that will further integrate Bitcoin and cryptocurrencies into the real world. With traditional financial giants like BlackRock and ARK Invest getting involved, the launch of a Bitcoin ETF will guide wealth advisors in training and introducing Bitcoin to millions of clients. This may spark curiosity about Bitcoin, followed by curiosity about other digital assets, such as an ETH ETF, and this process will continue.
From the perspectives of education, awareness, and capital flow, the Bitcoin ETF is crucial and highly anticipated for this industry. The development of this cycle will coincide with increased global liquidity and potential interest rate reductions. While the situation of inflation may lead to some instability, we are close to peak interest rates. Interestingly, some cartoons reflect the discussion of the Fed raising and lowering interest rates. Additionally, Toly mentioned the relationship between value and the federal funds rate for profound reasons. With the decrease in interest rates, value itself will expand, in line with the inevitable trend of capitalism.
We are entering a period of inflows for the Bitcoin ETF, while interest rates are decreasing and liquidity is increasing. If we look back at ICOs in 2017, that was static fungibles, laying the foundation for the development of DeFi later on. Now, I describe it as internet finance systems, transitioning from static to dynamic, and then to mature dynamic. In the coming years, I believe we will see more mature dynamic finance at the institutional level, whether on platforms like Solana, Avalanche, or Ethereum. Celestia plays a crucial role here, providing infrastructure for anyone looking to release DA transactions.
Non-fungibles typically lag behind fungibles by one cycle, as they are more complex and sometimes considered valueless, such as six-figure monkey JPEGs. In 2021, non-fungibles went through a static development phase, similar to fungibles in 2017. In the coming years, we will witness the emergence of many dynamic non-fungibles, with gaming perhaps being the most notable area. For example, experiments like DRiP on Solana demonstrate the potential of non-fungibles in building loyalty or creator-audience mechanisms. These low-cost and scalable practices are also beginning to form the cornerstone of new social media and interpersonal interactions.
Laura Shin: Anatoly, Nick, what do you think? What do you think the focus of this bull market cycle will be?
Anatoly Yakovenko: I think Chris has covered all aspects comprehensively. In this process of expanding applications, I look forward to seeing some more practical applications, such as payments. I hope encrypted payments like Solana Pay will start competing with traditional financial services, as I think this is a key driver of adoption. If we can launch a decentralized version of WeChat with payment functionality, seamlessly integrated with traditional financial systems, this will help liberate users from traditional financial systems, allowing them to make payments and perform various tasks in a single super app. I think a breakthrough in the use case of payments will be a key step.
We are now at a stage where decentralized technology allows us to deconstruct financial services. In DeFi, we have seen multiple competitors for every financial function. There may be a decentralized version of WeChat with billions of users in the future. I think such applications may actually be more valuable than their underlying base layer. This will raise awareness of applications as the key point of customer interaction, with all funds flowing in the application, while the base layer is more like a medium for information. Although the specific timing is uncertain, I think this may be the second stage of development.
Nick White: One of the key themes of the next cycle will be modularity versus monolithicity. Over the past few years, we have been emphasizing the concept of modularity, but it has remained theoretical until now, and we have actually reached the stage of a mature modular stack. As Chris mentioned, this may be the first wave of the modular stack, and achieving complete dynamic maturity may require multiple waves of development. But we have finally reached the stage of moving from theory to practice, where we can witness the operation of the modular stack, and people are building and demonstrating the capabilities of modular blockchains and what they can unlock.
Celestia and Solana are leading in integration, while Ethereum and its L2 extensions and a broader modular ecosystem are also driving the development of modularity. Users and developers will ultimately choose where to land, which is still unknown. Overall, I think this will be an exciting time as we explore new use cases. This is similar to when Ethereum was first launched, before that, if you wanted to launch an application, you had to build your own blockchain, just like you had to… if you wanted to create Litecoin, you had to issue… Litecoin was basically just a token, right?
When Ethereum was launched, issuing tokens and writing DeFi applications became easier. Modular blockchains achieve similar things at a deeper level of innovation in protocol and execution layers. I think this will trigger a whole new explosion of experiments, just as Ethereum led the development of DeFi and NFTs. I look forward to discovering new, market-adaptive popular applications. Payments are an area I am very excited about, and gaming and social applications have the potential for virality, spreading rapidly to hundreds of millions of users, as long as the right incentives are set.
Coinbase and Worldcoin's exploration of identity is also a significant breakthrough, as many applications are still limited by the inability to truly own citizenship, identity, or reputation. This is a big unlock, although we are still in the early stages. I used to think I might be too late when I entered the crypto space in 2017, but over time, I gradually realized that it takes a long time, but it will be an interesting journey.
Chris Burniske: Toly, are you worried that Solana will become a victim of its own success like Ethereum did in 2021?
Anatoly Yakovenko: Yes, I have experienced a similar situation when building the Brew operating system for Qualcomm. It was a top-notch engineering effort, one of the coolest things, with outstanding mobile download records. We actually had the first true mobile platform, and the design of the iPhone was in our hands. However, Verizon showed some pushback because they thought they knew what to do. We were concerned about being too big to adjust in the middle, and too small to surpass once Apple shipped. So, we were concerned about medium-scale changes. Our single focus on performance made it easier for engineers to reach consensus, drive the acceleration of the chain, and ensure high priority and stability.
But what's next? We are making this change to unlock the next level of performance. We have a culture that drives things forward through a single focus, and it has been successful. However, as things mature, changes and other aspects must be treated more cautiously. We need to slow down a bit, but we also have more resources. We hope the ecosystem can maintain this pace, although it is a terrifying thought. Yes, Firedancer is rolling out the second implementation, so eliminating single points of failure is the top priority for all of us.
Laura Shin: On the day we recorded, a widespread vulnerability affected a large number of decentralized applications on multiple blockchains. This was related to a former Ledger employee becoming a victim of a phishing attack, allowing hackers to update Ledger's Connect Kit software. This software connects different dApps on multiple blockchains, and the hackers uploaded malicious code, resulting in user wallets being drained. This event clearly caused chaos and a lot of trouble. I want to know your views on the future of the industry, because I think such things should not continue to happen in order to bring this technology to the masses. What are your thoughts on this?
Anatoly Yakovenko: I think technology is improving. I am using the Fuse wallet released two months ago. This is an on-chain wallet that allows users to set up different supply chains as signers on multiple hardware devices. These solutions already exist and are live, but they need time to spread widely globally, so that people are no longer easily susceptible to these attacks. Promoting these solutions is very difficult because it requires a change in user behavior and a series of downstream updates. In the long run, I think these issues are all surmountable, although it will be a bumpy journey.
Nick White: I think we are currently in the early stages of blockchain development. At this stage, risks are inevitable, especially in protocols and the entire stack (including wallets). Although hacker attacks occur, this is actually a process that drives progress, as it reveals the issues that need to be fixed. Once fixed, we hope similar issues will not occur again. It's like we are setting up an ongoing bug bounty, although it may not be intentional, this process is constantly pushing us towards more robust systems. We hope blockchain can become the cornerstone of the future global financial system, although it is a process that requires continuous effort rather than shortcuts, and occasional hacker attacks are just part of this process.
Laura Shin: From my perspective, considering the moment we are in now, especially with the upcoming Bitcoin spot ETF, I have a premonition that a large amount of funds will enter this system, attracting more attention. People will pay more attention and connect their wealth to what is happening in the crypto ecosystem. I think this will quickly change the atmosphere of this field and attract more attention. Although some people think the problems will resolve themselves, I disagree. I feel that once the Bitcoin ETF is launched, media attention will significantly increase, especially if this happens in 2024. So, I am not sure if this explanation is enough to meet the expectations of those about to enter this field.
Anatoly Yakovenko: Yes, indeed. What I am most concerned about is the possibility of a large-scale hacker event that sets the entire blockchain field back by several years. I hope this does not happen, but it is the most frightening thing I can think of. I mean, everyone is working hard to stay vigilant, including the developers and companies involved. Fortunately, there are many such people, but the entire crypto industry does not have a single point of failure. However, every time such an event occurs, it is a reminder for us to be more vigilant.
Chris Burniske: I see this as one aspect of the evolution of financial technology over time. Different types of fraud cases arise in different eras and then get fixed, just like bank robberies are no longer as common as they used to be. Part of the reason is that a lot of value has migrated from banks to various ledgers. And now, a lot of value exists on the blockchain, where transactions are irreversible, making blockchain fraud cases more common.
Our team working with Agoric has strengthened JavaScript in multiple ways, shifting to an object-oriented programming environment. Similarly, Sui has done similar work using Move. Toly and Nick are better suited to explain the benefits of this, but it can be foreseen that over time, the development environments and tools used by developers will become more robust to protect them from potential harm. Toly also mentioned Fuse and some available wallets, making currently existing super secure wallets easier to use. However, while Fuse is user-friendly, it may also make users a target for hacker attacks.
As Carlota Perez said, this is the new default, just as correct hygiene habits and the right way to use blockchain have not yet been widely adopted as the new default. In the crypto space, almost everyone now uses local 2FA, which has become the new default in the crypto space, but not outside the crypto space. However, as more people face issues like spam, SMS attacks, and email attacks, this trend will push more towards crypto. We have a responsibility to provide the right solutions. Although this may bring some challenges, I believe through innovation, we will be able to address this issue. If the crypto space cannot address this issue through innovation, then other spaces may face the same predicament, forcing us to solve this issue through innovation.
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