Anatoly Yakovenko: A Deep Dive Into Solana 2.0

In this information-packed episode of Lightspeed, Anatoly Yakovenko, co-founder of Solana, joins us to explore Solana's architecture and roadmap. The discussion covers a wide range of topics, including the Saga Chapter 2, fee market optimizations, Jito and MEV, validator profitability, Solana's end game, Firedancer and client diversity, token extensions, and more. This article provides an in-depth analysis of the key points discussed in the podcast.

Saga Chapter 2: Solana's Mobile Revolution

The Saga smartphone, Solana's foray into the mobile space, has seen a remarkable turnaround in recent weeks. Initially facing slow sales, the project experienced a surge in demand following the rise of the Solana ecosystem and various airdrops. Yakovenko explains the thesis behind the Saga:

"We kind of have this belief that crypto is like new user-generated content. It's digital content that you can transfer and own. So it kind of inherits more rights from the creator because you can force a limited supply and transfer rights and stuff like that into the contracts and make it kind of more interesting for creators."

This approach, however, clashes with traditional app store models, where developers own all the content and are price insensitive to app store fees. The Saga aims to create a new distribution channel for crypto-native content, potentially disrupting the mobile gaming industry, which is currently dominated by Apple and Google's 30% fees.

Yakovenko acknowledges the challenges in building a successful mobile ecosystem but remains optimistic about the potential:

"If we build this phone and we get ecosystem devs to go build experiences, airdrops, whatever, that could get the flywheel going. We'll see though. There's like a lot of ways it could fail."

Solana Fee Market Optimizations

One of the key focuses for Solana's development team is optimizing the fee market. Yakovenko explains the current state of the network and the challenges it faces:

"There's like a bunch of stuff that happens in the lifetime of a transaction before it hits a block producer. And the way that this is solved in like other networks is using a mempool."

Solana's approach differs from traditional mempools, allowing users to submit transactions directly to the leader or a staked node. This design aims to reduce latency but introduces new challenges, such as spam during high-demand periods like NFT mints.

To address these issues, Solana is implementing a Quality of Service (QoS) system that caps the amount of traffic received by leaders:

"With QOS, the leader actually caps the amount of traffic they receive. And I think right now it's at about 100,000 packets per second, which seems crazy, right? Like why do you need to receive 100,000 transactions per second if you only see like 800 actual user transactions land?"

This approach allows for better prioritization of transactions and helps manage network congestion. However, it also introduces new challenges in terms of transaction processing and prioritization.

Jito's Role in Solana's Ecosystem

Jito, a project focused on MEV (Miner Extractable Value) in the Solana ecosystem, has gained significant attention. Yakovenko acknowledges the importance of Jito's work:

"I'm a huge fan of what they're doing. And I think it's like really important that they like continue working on the MEV problem because it's, I think, kind of like both the feature and the bug of all of these systems."

While Jito's approach introduces a mempool-like system to Solana, Yakovenko notes that it's primarily optimized for creating bundles and searchers in DeFi. The challenge lies in scaling this approach to handle high transaction throughput across various use cases.

Scheduler Upgrades: 1.17 and 1.18

Solana is implementing significant upgrades to its scheduler in versions 1.17 and 1.18. These changes aim to improve transaction ordering and reduce jitter in the network. Yakovenko explains:

"Andrew's done a bunch of work to reduce that and make that jitter a lot less kind of, I guess the worst case is to be a lot less bad."

These upgrades are part of Solana's ongoing efforts to improve network performance and reliability.

Dynamic Write Lock Fees

To address network congestion and improve prioritization, Solana is considering implementing dynamic write lock fees. Yakovenko explains the rationale behind this approach:

"If that thing is constantly being saturated, start increasing the write lock fee. And at some point the fee is going to be so high that users are just not willing to pay that fee to sign it."

This mechanism aims to create economic back pressure on saturated accounts, potentially reducing spam and improving overall network efficiency.

Solana Consensus and Formal Verification

When asked about the lack of formal documentation for Solana's consensus mechanism, Yakovenko offers a pragmatic perspective:

"The basically, I think culturally, the engineering team from Solana was like 15 to 20 years out of college. So we just don't even know how to write those papers anymore. We know how to build those systems, but it's just not like I live in my career, I've had one event where I had to rip out a formally verified kernel and put in like a custom system because of performance."

While acknowledging the importance of formal verification for certain contexts, Yakovenko emphasizes the practical approach taken by Solana's team, focusing on real-world testing and performance optimization.

The Value of Client Diversity: Liveness vs Safety

In light of recent events in the Ethereum ecosystem, where a bug in one client implementation caused issues, Yakovenko discusses the importance of client diversity in blockchain networks:

"If you have multiple clients, you have improvements there. But there's also risks simply because four teams spec, a single spec for teams is gonna be four different interpretations."

He emphasizes the trade-offs between liveness and safety, noting that Solana's approach prioritizes safety:

"This is kind of like the trade-offs that you make, I think with liveness leaks and things like that. I don't think Solana would ever have a liveness leak."

Are Solana Vote Transactions Just for Pumping TPS?

Addressing a common misconception about Solana's vote transactions, Yakovenko explains:

"Solana's runtime is so fast that it can handle consensus messages as transactions. That's, it's the opposite."

He argues that the ability to process vote transactions efficiently is a testament to Solana's performance capabilities rather than an attempt to artificially inflate transaction counts.

Solana's End Game

Yakovenko outlines his vision for Solana's future, aiming for a network with over 10,000 nodes and 200-millisecond block times:

"Bitcoin has like about 12,000 nodes and it hit like multi-trillion valuation. So to me that shows that like that node count is sufficient to handle very large value, very large amount of value, right?"

This ambitious goal reflects Solana's commitment to scalability and decentralization while maintaining high performance.

Is Economic Security a Meme?

Challenging the notion of economic security in blockchain networks, Yakovenko argues:

"Economic security is a hangover from like proof of work. Like I think people look at proof of work and the costs to create a heaviest fork. And that does make sense in Bitcoin, but even there, all the operators would reject a rollback deeper than six blocks at this point."

He emphasizes the importance of individual node security and the role of operators in maintaining network integrity, rather than relying solely on economic incentives.

Validator Profitability and Inflation

Addressing concerns about validator profitability and inflation in the Solana ecosystem, Yakovenko offers a nuanced perspective:

"Mathematically, like if you look at the network, inflation is moving value between unstaked users and staked users. And that is a cost to unstaked users, but you can't like, if everyone is equally staked, like I think the staking percentage are now 70%. If everyone is exactly 70% staked and 70% unstaked, no individual person is being diluted because it's literally just moving from one bucket to the other one that they own."

He argues that the focus should be on the overall sustainability of the network, considering both inflation and real-world inputs like transaction fees.

Commoditized Data Layers and L2s

Discussing the potential for layer 2 solutions and data availability layers, Yakovenko expresses skepticism about their long-term value proposition:

"So I think all execution environments are competing, because I think the only way that these systems make money is through selling block space, and that's an execution thing. Like if you're selling data, you're selling a commodity resource, and the pricing and that data is going to approach the cost of the hardware."

He argues that the real value lies in providing specific content and execution environments rather than commoditized data storage.

Firedancer Update

Firedancer, an alternative client implementation for Solana, is making significant progress. Yakovenko shares his expectations for the project:

"A working implementation that is compatible with what's running on mainnet. So we can then start pushing for 50/50 split of stake, running Firedancer and Labs."

He emphasizes the potential for Firedancer to drive improvements in the Solana codebase and potentially increase network capacity:

"What that tells me is not that we should lower the hardware requirements, is that we should figure out if there's bugs in the Labs client that we haven't fixed yet performance bugs and double the capacity of the network."

Solana's New Token Extensions

Formerly known as Token 22, Solana's new token extensions aim to provide enhanced functionality for developers and businesses. Yakovenko explains the advantages of this approach:

"What's really nice about that is that you have a single well-known implementation that everyone has verified and has gotten stressed, tested, and gets robust behaviors that you can plug into a whole bunch of other things that you can build on top."

These extensions offer features like confidential transfers, new metadata options, and increased programmability, potentially opening up new use cases for tokens on the Solana network.

Advice for Solana Founders

When asked about advice for Solana startup founders, Yakovenko emphasizes the importance of focus and perseverance:

"It's just all about focus, like having vision and focus, and surviving long enough until like the market kind of reflects that. And obviously, luck that it reflects it at all."

He recommends reading Paul Graham's essays and Peter Thiel's books for insights on building successful startups in the tech industry.

Conclusion

This deep dive into Solana 2.0 with Anatoly Yakovenko provides valuable insights into the network's current state and future plans. From mobile initiatives like Saga Chapter 2 to technical optimizations in fee markets and consensus mechanisms, Solana continues to push the boundaries of blockchain technology. As the ecosystem evolves, the focus on scalability, performance, and user experience remains paramount, positioning Solana as a leading contender in the competitive landscape of blockchain platforms.

Facts + Figures

• Saga smartphone pre-orders sold 30,000 units in 30 hours, surpassing expectations
• Solana's current QoS system caps leader traffic at about 100,000 packets per second
• The Solana network currently processes around 800 actual user transactions per second during normal operation
• Solana aims for a future with over 10,000 nodes and 200-millisecond block times
• The current staking percentage on Solana is around 70%
• Priority fees on Solana are currently generating a run rate of about $100 million per year
• Firedancer, an alternative Solana client, has demonstrated the ability to process the current network load on 8 cores and 16GB of RAM
• Token extensions (formerly Token 22) aim to provide enhanced functionality for developers and businesses on Solana
• Solana's approach prioritizes safety over liveness in its consensus mechanism
• The Saga smartphone project aims to disrupt the mobile gaming industry, which is currently a $100 billion annual market

Questions Answered

What is the Saga smartphone and why is it important for Solana?

The Saga smartphone is Solana's initiative to create a crypto-native mobile device. It's important because it aims to provide a new distribution channel for crypto content and applications, potentially disrupting the traditional app store model dominated by Apple and Google. The project seeks to overcome the limitations of current app stores, which take a 30% fee on digital content and don't align well with the ownership model of crypto assets.

How does Solana's approach to transaction processing differ from other blockchains?

Solana's approach differs from traditional blockchains by allowing users to submit transactions directly to the leader or a staked node, rather than using a mempool. This design aims to reduce latency and improve transaction throughput. However, it also introduces challenges in managing network congestion and spam, which Solana addresses through its Quality of Service (QoS) system and other optimizations.

What are the key upgrades coming to Solana's scheduler in versions 1.17 and 1.18?

Versions 1.17 and 1.18 of Solana introduce significant upgrades to the scheduler aimed at improving transaction ordering and reducing jitter in the network. These changes work to optimize the multi-threaded nature of Solana's execution environment, addressing issues related to the coupling of block production and execution. The upgrades should result in more consistent and efficient transaction processing across the network.

How does Solana plan to address network congestion and improve transaction prioritization?

Solana is considering implementing dynamic write lock fees to address network congestion and improve transaction prioritization. This mechanism would increase fees for saturated accounts, creating economic back pressure to reduce spam and improve overall network efficiency. Additionally, Solana is working on optimizing its Gulf Stream system and implementing other measures to better manage high-demand periods and hotspots on the network.

What is Firedancer and how does it fit into Solana's future plans?

Firedancer is an alternative client implementation for Solana, developed to improve client diversity and network resilience. Anatoly Yakovenko expects Firedancer to provide a working implementation compatible with the mainnet, allowing for a 50/50 split of stake between Firedancer and the current Labs client. This diversity aims to enhance network safety and potentially uncover performance improvements that could lead to increased network capacity.

How does Solana approach economic security and validator incentives?

Solana takes a nuanced approach to economic security and validator incentives. Anatoly Yakovenko argues that traditional notions of economic security are less relevant in Solana's model, which focuses more on individual node security and operator responsibility. The network uses a combination of inflation and transaction fees to incentivize validators, with the goal of creating a sustainable ecosystem that can support a wide range of applications and use cases.

What are token extensions in Solana and why are they significant?

Token extensions, formerly known as Token 22, are enhancements to Solana's token standard that provide additional functionality for developers and businesses. These extensions offer features like confidential transfers, new metadata options, and increased programmability. They are significant because they allow for more complex token behaviors and use cases while maintaining compatibility with existing infrastructure, potentially opening up new opportunities for innovation in the Solana ecosystem.

What is Solana's vision for its "end game" in terms of network performance and decentralization?

Solana's vision for its "end game" includes achieving over 10,000 nodes with 200-millisecond block times. This ambitious goal aims to combine high performance with a level of decentralization comparable to Bitcoin's node count. The focus is on continually improving network capacity and efficiency while maintaining a permissionless and decentralized structure that can support a global financial system.

How does Solana plan to compete with layer 2 solutions and other scalability approaches?

Solana's strategy focuses on optimizing its layer 1 solution rather than relying on layer 2 scaling. Anatoly Yakovenko argues that the real value in blockchain networks comes from selling block space and execution environments, not commoditized data storage. By continually improving Solana's base layer performance and capacity, the network aims to provide a scalable solution that doesn't sacrifice composability or introduce additional complexity through layer 2 systems.

What advice does Anatoly Yakovenko offer to Solana startup founders?

Anatoly Yakovenko advises Solana startup founders to focus on vision and perseverance. He recommends reading Paul Graham's essays and Peter Thiel's books for insights on building successful startups. The key is to have a clear vision, maintain focus, and survive long enough for the market to reflect the value of the idea. Yakovenko emphasizes the importance of timing and luck, but also the need for founders to think through their ideas thoroughly and be prepared to adapt as the ecosystem evolves.