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Solana Legend Unleashed - Crypto Adoption, Investing Thesis, and Solana's Future

By Cove

Published on 2023-05-29

Dive into the world of Solana with insights from Solana Legend on crypto adoption, next-generation blockchains, and why Solana is poised to lead the future of blockchain technology.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Solana Legend Unleashed: Crypto Adoption, Investing Thesis, and Solana's Future

In a recent episode of The Cove Podcast, the host sat down with the renowned Solana Legend, managing partner of Frictionless Capital, to discuss the current state and future of cryptocurrency, with a particular focus on Solana. The wide-ranging conversation covered topics from crypto adoption to the investment thesis of Frictionless Capital, and why Solana might be the perfect approach to bridge the gap to mainstream adoption.

Who is Solana Legend?

Solana Legend, whose real name is not disclosed, is a prominent figure in the Solana ecosystem with a substantial following on Twitter. His background is rooted in traditional finance, having studied finance and econometrics at Cornell University before working in investment banking for about four years. During his time in banking, he worked on deals worth approximately $15 billion in mergers and acquisitions, primarily in the infrastructure and energy sectors.

Despite his traditional finance background, Solana Legend has always had one foot in the internet sphere. He grew up playing Massively Multiplayer Online (MMO) games and was an early adopter of platforms like YouTube. This connection to internet subculture led him to discover Bitcoin in 2013 through gaming communities.

The Journey to Solana

While Solana Legend held small amounts of Ethereum and Bitcoin from an early age, it wasn't until the COVID-19 pandemic that he had the opportunity to dive deep into the world of cryptocurrencies. Working from home allowed him to spend more time reading white papers and exploring different blockchain projects.

Unlike many in the crypto space who follow a typical progression from Bitcoin to Ethereum and then to other cryptocurrencies, Solana Legend's path was different. He discovered Solana relatively early and was immediately impressed by its capabilities. He describes his first experience with Solana as a "broadband to fiber optic moment," highlighting the significant leap in performance and user experience that Solana offered compared to other blockchains.

The Birth of Frictionless Capital

Solana Legend's deep dive into the crypto world led to the creation of Frictionless Capital, a venture fund focused on next-generation blockchains. The fund was born out of a partnership with Logan, whom Solana Legend met at Breakpoint 2021. Logan's technical background and ability to dissect complex technical problems complemented Solana Legend's community and personal insights.

The duo decided to take a thoughtful approach to launching their fund. Instead of rushing to deploy capital in what they perceived as a bearish market, they spent several years conducting in-depth research. This period allowed them to develop a clear and focused view of the space, contrasting different blockchains from first principles.

Frictionless Capital's Investment Thesis

Frictionless Capital's investment thesis centers around what they call "next-generation blockchains." These are chains characterized by parallel processing, low latency, high throughput, and minimal fees. More importantly, these blockchains can scale with improving hardware, leveraging increases in compute power and internet bandwidth.

Under this core "North Star" thesis, Frictionless Capital aims to invest in teams that can outperform the underlying coin of the chain they're built on. Their first investment, Backpack, exemplifies this approach.

Why Solana?

Solana Legend's enthusiasm for Solana is palpable throughout the interview. He argues that Solana's approach to blockchain technology is both elegant and practical. The simplicity of Solana's architecture - one layer, one coin, one USDC - makes it more accessible and user-friendly compared to the complexity of other blockchain ecosystems.

This simplicity, combined with Solana's high performance and low transaction costs, positions it well for mainstream adoption. Solana Legend believes that in a time where crypto adoption and liquidity are still limited, simplicity is key. The ease of use and efficiency of Solana could be the bridge that brings crypto to the masses.

Solana vs Ethereum: A New Perspective

When discussing Solana in comparison to Ethereum, Solana Legend offers an interesting perspective. He acknowledges Ethereum's significant contributions to the crypto space, particularly in introducing smart contracts and programmability. However, he argues that it's rare in human history for the first or second iteration of a technology to be the one that scales to mass adoption.

Using analogies from other technological advancements like airplanes, automobiles, and social networks, Solana Legend suggests that early iterations often make design choices at the architectural level that are difficult to overcome later. This technical debt can be insurmountable, leaving two options: tear down and rebuild from the ground up, or fall behind to newer entrants.

In this context, Solana represents a fresh approach, learning from the limitations of earlier blockchains and building an architecture optimized for performance and scalability from the ground up.

The Asset Case for Solana

When asked about Solana as an asset, Solana Legend takes a pragmatic view. He points out that Ethereum has had several years' head start in building its narrative and focusing on value accrual. In contrast, Solana is still in its earlier stages, with the focus primarily on technology and user experience.

Solana Legend agrees with the approach taken by Anatoly Yakovenko, Solana's founder, in prioritizing technological development and user adoption over immediate value accrual for the SOL token. He argues that with the current low levels of blockchain adoption, it's more important to focus on bringing in users and developers than to worry about token economics.

That said, Solana Legend points out that there is a clear path for Solana to become deflationary with sufficient network activity. Half of the priority fees on Solana are burned, and there are other levers that can be adjusted to influence the token's economics. The potential for value accrual is there, but it's not the primary focus at this stage of Solana's development.

The Future of NFTs

Non-Fungible Tokens (NFTs) have been a significant part of the crypto ecosystem, and Solana has emerged as a major player in this space. Solana Legend, who was one of the first 500-1000 wallets trading NFTs on Solana, has witnessed the evolution of this sector firsthand.

He believes that while the 2021 business model for NFTs - characterized by roadmaps, announcements, and royalty farming - is "dead and buried," the core value proposition of NFTs remains intact. Digital assets, particularly in the form of images, have proven to be one of the few crypto-native products that have achieved demand in the real world.

Solana Legend emphasizes the need to reconceptualize NFTs beyond just digital collectibles. At their core, NFTs are a digital deed of ownership, and this concept can be applied far beyond the realm of digital art. He draws an analogy to traditional property ownership, where deeds were stored in trust company buildings. NFTs represent a vastly improved system, allowing for public verification of ownership anywhere in the world with just an internet connection.

The Promise of xNFTs

One of the most exciting developments in the NFT space, according to Solana Legend, is the emergence of xNFTs (executable NFTs). He's particularly enthusiastic about Backpack's implementation of xNFTs, seeing it as a potential game-changer for the industry.

xNFTs represent a new frontier for both NFTs and application development. They allow for the creation of interactive, executable content within the NFT framework. This opens up a world of possibilities, from mini-applications to interactive experiences, all packaged within the NFT format.

Solana Legend draws a parallel between the current state of xNFTs and the early days of iOS app development. Just as the first iPhone apps were simple utilities or games (like virtual lighters or Fruit Ninja), the current implementations of xNFTs might seem basic or even gimmicky. However, he believes that this is just the beginning, and developers will find innovative ways to leverage this technology in the future.

DeFi on Solana

Decentralized Finance (DeFi) is another area where Solana Legend sees significant potential for Solana. While acknowledging that the DeFi sector has been hit hard by recent events in the crypto world, particularly the FTX collapse, he remains optimistic about Solana's role in the future of DeFi.

Solana's low transaction fees and high throughput make it particularly well-suited for DeFi applications. These features allow for more efficient trading, lending, and borrowing protocols. For instance, on Solana, users can claim accrued interest more frequently without worrying about high gas fees eating into their profits.

However, Solana Legend cautions against simply replicating Ethereum's DeFi ecosystem on Solana. Instead, he advocates for leveraging Solana's unique capabilities to create novel DeFi primitives and applications. He's particularly excited about the potential for cross-pollination between the NFT and DeFi communities on Solana, seeing opportunities for innovative financial products that blend aspects of both sectors.

The Importance of User Experience

Throughout the interview, Solana Legend repeatedly emphasizes the importance of user experience in driving crypto adoption. He argues that Solana's simplicity and efficiency provide a significant advantage in this regard.

He contrasts the Solana experience with that of Ethereum and its Layer 2 solutions, pointing out the complexity and potential for user error in the latter. For example, he mentions a friend who lost money by accidentally buying the wrong version of USDC and sending it to the wrong address on an Ethereum Layer 2.

In Solana Legend's view, the crypto space needs less complexity, not more, especially given the current limited adoption. Solana's approach of having one layer, one native token, and one version of stablecoins like USDC simplifies the user experience significantly.

The Vision for Backpack

Backpack, Frictionless Capital's first investment, features prominently in Solana Legend's vision for the future of Solana. He sees Backpack as more than just a wallet - it's a potential "trojan horse" for bringing new users and developers into the Solana ecosystem.

The integration of xNFTs into Backpack opens up new possibilities for application distribution and user engagement. Solana Legend envisions Backpack becoming a new frontier for both NFT projects and established businesses looking to enter the crypto space. The ability to convert a website or application into an xNFT quickly and easily lowers the barrier to entry for developers.

Moreover, Backpack provides a centralized touchpoint for user engagement, solving one of the key challenges in crypto marketing. Through Backpack, projects can reach users directly through airdrops, push notifications, and an integrated app store, providing a more streamlined path to user acquisition and engagement.

The Future of Blockchain: Winner Takes Most?

When asked about his vision for the future of blockchain, Solana Legend leans towards a "winner takes most" scenario rather than a multi-chain future. He predicts that in each category of blockchain (execution chains, settlement chains, privacy chains), there will likely be one or two standout victors commanding the vast majority of market share.

However, he doesn't see these categories as necessarily separate. For instance, he believes Solana could potentially incorporate privacy layers or Layer 2 solutions in the future. The key, in his view, is getting the Layer 1 architecture right, as this forms the fundamental bottleneck for blockchain performance.

Solana Legend is particularly bullish on Solana's potential to push the boundaries of what's possible at the base layer. He points out that Solana's current block times of 400 milliseconds are still far from the physical limitations of light through fiber optic cables. With ongoing improvements in internet speeds and computing power, he believes Solana can continue to scale and improve its performance.

The Importance of Layer 1 Performance

A key point that Solana Legend emphasizes is the importance of Layer 1 performance. He argues that pushing the base layer to its physical limits is crucial, as it provides the foundation for everything built on top of it.

He sees Solana's approach of optimizing for performance at the base layer as a key differentiator. This high-performance base layer, in his view, is what will enable Solana to achieve Anatoly Yakovenko's vision of "shared state at the speed of light."

Solana Legend predicts that once this high-performance base layer is established, it will naturally lead to the development of Layer 2 solutions, privacy layers, and other innovations on top of Solana. However, he believes that having this level of performance at the base layer is what will ultimately drive mass adoption.

Conclusion: Bullish on Solana

In concluding the interview, Solana Legend reiterates his bullish stance on Solana. He and his partner at Frictionless Capital have extensively researched and discussed their thesis with experts in the field, and they remain convinced of Solana's potential to lead the next wave of blockchain adoption.

Solana Legend sees Solana as solving the right problems in the right way. He believes that when people look back in the future, Solana's approach will seem obvious in hindsight. With its focus on performance, simplicity, and user experience, Solana is well-positioned to bridge the gap between the current crypto ecosystem and mainstream adoption.

As the crypto space continues to evolve, Solana Legend and Frictionless Capital are poised to play a significant role in shaping its future, particularly within the Solana ecosystem. Their focus on next-generation blockchains and teams that can leverage these technologies effectively positions them at the forefront of innovation in the space.

For those looking to follow Solana Legend's insights and Frictionless Capital's journey, he invites listeners to follow him on Twitter at @SolanaLegend, where he shares his thoughts and observations on the crypto space in real-time.

As the crypto industry continues to mature and evolve, voices like Solana Legend's provide valuable perspectives on where the technology is headed and how it might reshape our digital future. Whether his predictions come to fruition remains to be seen, but there's no doubt that the vision he presents is both compelling and thought-provoking for anyone interested in the future of blockchain technology.

Facts + Figures

  • Solana Legend studied finance and econometrics at Cornell University.
  • He worked in investment banking for about four years, advising on deals worth approximately $15 billion in M&A.
  • Solana Legend discovered Bitcoin in 2013 through MMO gaming communities.
  • He gained 100,000 Twitter followers in his first six months of actively engaging with the Solana community.
  • Frictionless Capital, co-founded by Solana Legend and Logan, focuses on "next-generation blockchains" characterized by parallel processing, low latency, high throughput, and minimal fees.
  • Backpack, Frictionless Capital's first investment, is pioneering the use of xNFTs (executable NFTs).
  • Solana's current block times are around 400 milliseconds.
  • Half of the priority fees on Solana are burned, contributing to potential deflationary mechanics.
  • Solana Legend was one of the first 500-1000 wallets trading NFTs on Solana.
  • He predicts a "winner takes most" scenario in the blockchain space, with one or two chains dominating each category (execution, settlement, privacy).

Questions Answered

Who is Solana Legend and what is his background?

Solana Legend is a prominent figure in the Solana ecosystem with a background in traditional finance. He studied finance and econometrics at Cornell University and worked in investment banking for about four years, focusing on mergers and acquisitions in the infrastructure and energy sectors. His journey into crypto began in 2013 when he discovered Bitcoin through gaming communities, but it wasn't until the COVID-19 pandemic that he dove deep into the world of cryptocurrencies, particularly Solana.

What is Frictionless Capital and what is its investment thesis?

Frictionless Capital is a venture fund co-founded by Solana Legend and his partner Logan. Their investment thesis centers around "next-generation blockchains," which they define as chains characterized by parallel processing, low latency, high throughput, and minimal fees. These blockchains should be able to scale with improving hardware, leveraging increases in compute power and internet bandwidth. Under this thesis, they aim to invest in teams that can outperform the underlying coin of the chain they're built on.

Why does Solana Legend believe Solana has an advantage over other blockchains?

Solana Legend believes Solana has an advantage due to its simplicity and efficiency. He argues that Solana's approach of having one layer, one native token, and one version of stablecoins like USDC simplifies the user experience significantly. This simplicity, combined with Solana's high performance and low transaction costs, positions it well for mainstream adoption. He also emphasizes Solana's ability to scale with improving hardware, which he sees as a key factor for future growth and adoption.

What are xNFTs and why are they important?

xNFTs, or executable NFTs, are a new development in the NFT space that Solana Legend is particularly excited about. These are NFTs that contain executable code, allowing for interactive experiences or mini-applications within the NFT framework. Solana Legend sees xNFTs as a potential game-changer, opening up new possibilities for both NFT projects and application development. He compares the current state of xNFTs to the early days of iOS app development, suggesting that while current implementations might seem basic, there's enormous potential for innovative uses in the future.

How does Solana Legend view the future of blockchain technology?

Solana Legend leans towards a "winner takes most" scenario for the future of blockchain, rather than a multi-chain future. He predicts that in each category of blockchain (execution chains, settlement chains, privacy chains), there will likely be one or two standout victors commanding the vast majority of market share. However, he believes these categories may not remain separate, with leading chains potentially incorporating features of others (e.g., Solana potentially adding privacy layers or Layer 2 solutions). He emphasizes the importance of getting the Layer 1 architecture right, as this forms the fundamental bottleneck for blockchain performance.

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