The Current State of the Cryptocurrency Market

The cryptocurrency market is experiencing a period of significant growth and excitement. Bitcoin is approaching the $100,000 mark, while Solana (SOL) is nearing its all-time high. This bullish trend has created a sense of anticipation and energy within the crypto community. However, as Mert, one of the podcast hosts, points out, there's an interesting psychological phenomenon at play:

"People in crypto have a dopamine deficiency syndrome or a perpetual dopamine rat chase syndrome... Bitcoin is at 96k. And a few weeks ago, if it was over 69k, people would go nuts and now they don't even feel anything unless it's over 100. And then once that happens, they probably won't feel anything until it's over 200."

This observation highlights the ever-increasing expectations within the crypto space, where significant milestones quickly become the new normal, driving a constant pursuit of higher highs.

Developer Activity on Solana

Despite the seemingly calm surface of price movements, there's a flurry of activity happening beneath, particularly in the realm of developer onboarding and ecosystem growth. Mert shares his experience:

"It's actually one of the busiest weeks of my life, I would say. I haven't been able to sleep too much... There's a lot of developers coming to Solana. Or they're already on Solana. And they're having scaling issues and we have to help them optimize our codes or migrate Solana or teach them Solana or make the RPCs work better."

This surge in developer interest and activity on Solana is a positive indicator of the platform's growing appeal and technical robustness. It suggests that while price movements might have stabilized, the foundational growth of the ecosystem continues unabated.

The Diverse Landscape of Projects on Solana

The types of projects being built on Solana span a wide range, from established names to innovative startups. While Mert is unable to disclose specific details about many projects due to confidentiality, he notes:

"There are some big ones, there are also some medium ones and small ones. So it's a good demographic. In general, well, so for example, MakerDAO Sky just migrated over, but there's also in the past, I have to be careful here because there's a bunch I can't disclose, but I'm seeing a lot more newer startups for sure."

This diversity in project size and type is crucial for a healthy ecosystem. It demonstrates that Solana is attracting both established players looking to expand their reach and innovative newcomers seeking a robust platform for their ideas.

The Network Effect of Successful Applications

One of the key strengths of Solana's architecture is its ability to create a network effect from successful applications. Mert draws an interesting analogy:

"It's kind of like a city where let's say there is a very, there's an Amazon headquarters. Okay. Now small businesses around that Amazon headquarters, like the subways and the convenience store start getting a bit more traffic and then maybe the airplanes get more traffic and the tourism."

This ecosystem effect means that success breeds success. When one application gains traction on Solana, it creates opportunities and increased activity for other projects within the ecosystem, fostering a virtuous cycle of growth and innovation.

Learning from Sui's Outage

The recent outage experienced by Sui, another Layer 1 blockchain, provides valuable insights into the challenges faced by emerging platforms. The outage was related to scheduler issues causing validators to crash, which is reminiscent of some challenges Solana has faced in the past.

This incident highlights the complexity of building and maintaining high-performance blockchain networks. It also underscores the importance of robust testing, continuous improvement, and rapid response to technical issues.

The Competitive Landscape of Layer 1 Blockchains

When discussing the broader landscape of Layer 1 blockchains, Mert presents a crucial perspective on competition:

"It's roughly a losing proposition to try to compete with existing market shares. That is unless you have identified a gap in the market where you can do something at least 10x better, something like that."

This "10x improvement" principle is key to understanding the potential for new blockchains to gain significant market share. Solana itself exemplified this when it emerged, offering substantial improvements in throughput and user experience compared to Ethereum.

The Challenge of Outperforming Solana

Mert argues that simply trying to outperform Solana on its own terms is unlikely to be a successful strategy for new blockchains:

"I don't think that's performance because I believe you can get to similar levels of Solana performance or maybe marginally better depending on the sacrifices you make... but would it be 10x more? I don't see that's possible."

This perspective suggests that future successful blockchains will likely need to innovate along different axes rather than just trying to be faster or cheaper than Solana.

Potential Areas for Blockchain Innovation

Given the difficulty of significantly outperforming Solana on speed or cost, Mert suggests several potential areas where new blockchains could innovate:

1. Custom Sovereign Blockspace: "Perhaps the opportunity is individual custom sovereign block space that is, that does not suffer from the tragedy of the commons problem."

2. Interoperable App Chains: "App chains that are interoperable with each other, or a sovereign roll up on something like Celestia."

3. Privacy-Focused Solutions: "Something like private money. So a private payments layer."

These areas represent potential gaps in the market where new blockchains could offer significant improvements over existing solutions.

The Importance of Differentiation

Mert emphasizes that new blockchains need to offer something fundamentally different to attract users and developers:

"You're not going to get people to move off of their 2008 Windows computer by releasing a 2009 Windows computer. You need to release the Mac. And, or maybe you should release something totally different, like a Linux desktop. Or again, something totally different, like a PlayStation or a mobile phone."

This analogy highlights the need for true innovation and differentiation in the blockchain space, rather than incremental improvements to existing models.

Solana's Approach to Shared State

One of Solana's key features is its shared state model, which Mert describes as both a strength and a potential weakness:

"Solana is both strength and weakness is the shared state. So the shared state, everything on the same state, is good for composability, atomic composability, even implicit, let's say, coordination between L1 teams or ecosystem teams on the L1, being able to share markets, things like this."

While this shared state model offers significant advantages in terms of composability and coordination, it also means that issues on the network can potentially affect all projects built on it.

The Role of Execution in Solana's Future

When asked about how Solana can maintain its competitive edge in a world of abundant and cheap blockspace, Mert emphasizes the importance of continuous execution:

"Solana just needs to keep executing and improving the blockchain as fast as it can. We think that Anza has the people to do that."

This focus on relentless improvement and adaptation is seen as crucial for Solana to maintain its position in the face of emerging competition.

The Importance of Founder-Friendly Ecosystems

Mert argues that the long-term success of a blockchain platform depends on its ability to attract and support innovative founders:

"The way to do that is to have a relentless focus on onboarding founders and startups and really setting them up for success, having infrastructure, having support for them."

This founder-centric approach is seen as key to building a thriving ecosystem that can continue to innovate and grow over time.

The Changing Landscape of Blockchain Partnerships

The podcast discussion touches on the evolving nature of blockchain partnerships, particularly the shift away from high-profile collaborations with legacy institutions. Mert and Jack both express skepticism about the value of partnerships with big-name companies that don't have a clear use case for blockchain technology.

Jack notes, "These partnerships that nobody can really explain and don't make sense to your sane mind are just going away in crypto in general."

This trend suggests a maturing of the crypto industry, moving away from hype-driven partnerships towards more meaningful collaborations that can drive real innovation and adoption.

The Launch of USDS on Solana

The podcast covers the recent launch of USDS (formerly DAI) on Solana by Sky (formerly MakerDAO). This marks a significant development for Solana's stablecoin ecosystem. Mert expresses enthusiasm about this launch:

"I always like seeing more stables on Solana because stables on Solana are not super strong compared to even something like Tron. And I think stables are quite useful."

The arrival of USDS on Solana is seen as a positive development, potentially enhancing the platform's DeFi capabilities and overall liquidity.

The Challenge of Stablecoin Adoption on Solana

Despite the positive news about USDS, the discussion reveals that Solana's overall stablecoin supply remains relatively low compared to other chains. Jack notes:

"Solana still has, I think about 2% of the total stablecoin supply that puts it in like sixth or fifth behind our average from, I believe, even in stablecoin supply, ETH L1 still has like 51%."

This discrepancy raises questions about the factors influencing stablecoin adoption on different chains and potential strategies for growing Solana's stablecoin ecosystem.

The Future of Stablecoins on Solana

Mert provides insights into the potential factors affecting stablecoin adoption on Solana:

"I believe one of the reasons would be that tether isn't really a strong on Solana for all sorts of reasons. And I would say Tron and Ethereum already fill that gap. So there's not much of a gap to fill at least yet."

He also suggests that the growth of stablecoins might follow rather than precede speculative activity on the chain:

"Quality assets are always, they always lag behind the speculative assets. So my optimistic case would be, okay, now that institutions have seen that the chain has a lot of revenue and sustainability and all these things. Okay, maybe we can now start putting more on WAs and stables on this chain as well."

This perspective suggests that the growth of Solana's stablecoin ecosystem may be a longer-term process, potentially following the current wave of speculative activity and institutional interest.

The Role of Liquidity Incentives in Stablecoin Adoption

The discussion touches on the use of liquidity incentives to drive stablecoin adoption. Jack mentions:

"It's also paying a lot in liquidity incentives on all these various platforms, which seems to be the new kind of stablecoin growth strategy."

However, there's some skepticism about the long-term effectiveness of this approach, with concerns about whether incentivized liquidity will remain once the incentives are reduced or removed.

The Importance of Real-World Use Cases for Stablecoins

Mert emphasizes the need for meaningful use cases to drive sustainable stablecoin adoption:

"For real world payments, it's like, I believe Tron already weirdly enough has a lot of sway there. And so again, this is something where you can't be like two X better. You need to be 10 X better."

This point underscores the challenge of not just attracting stablecoin liquidity to Solana, but also creating compelling reasons for users to choose Solana-based stablecoins for real-world transactions and applications.

The Impact of Macro Factors on Stablecoin Demand

The discussion also touches on how broader economic factors might be influencing demand for on-chain stablecoins:

"Interest rates are obviously higher now, where like, for example, do you store assets on chain in stable yield and get like 3%, 4% or do you just go take T bills and get, I don't know, 5, 6%."

This observation highlights the complex interplay between on-chain and traditional finance, and how factors like interest rates can influence the attractiveness of blockchain-based financial products.

The Potential for Payment-Focused Stablecoin Growth

Looking forward, Mert suggests that significant growth in stablecoin usage on Solana might come from large-scale payment applications:

"The only thing that comes to mind is something like payments and payments for it to make real sense in terms of like, let's say, stable metrics, you need very large volumes and very large frequency."

This perspective points to the potential for Solana to become a major platform for high-volume, high-frequency payment applications as a driver of stablecoin adoption and usage.

Conclusion: Solana's Position in the Evolving Blockchain Landscape

As the podcast discussion reveals, Solana occupies a unique position in the rapidly evolving blockchain ecosystem. Its high performance and growing ecosystem of developers and projects position it well for continued growth and innovation. However, the challenges highlighted in the discussion – from the need for continuous technical improvement to the complexities of growing a robust stablecoin ecosystem – underscore the ongoing work required to maintain and extend Solana's competitive edge.

The insights shared by Mert and Jack provide a nuanced view of the challenges and opportunities facing Solana and the broader blockchain industry. From the importance of founder-friendly ecosystems to the need for meaningful real-world applications, the discussion points to a maturing industry that is moving beyond hype and towards sustainable, value-creating innovations.

As the blockchain space continues to evolve, Solana's success will likely depend on its ability to execute on its technical roadmap, foster a vibrant ecosystem of developers and projects, and create compelling use cases that can drive widespread adoption. The coming years promise to be an exciting time for Solana and the broader crypto industry, with plenty of opportunities for growth, innovation, and potentially transformative impact on the world of finance and beyond.

Facts + Figures

• Bitcoin price is approaching $100,000, with Solana (SOL) nearing its all-time high.
• Solana currently holds about 2% of the total stablecoin supply, placing it in 5th or 6th position among blockchains.
• Ethereum L1 still dominates with 51% of the total stablecoin supply.
• MakerDAO's stablecoin, now called USDS (formerly DAI), has launched on Solana.
• USDS is the third-largest stablecoin in existence, behind USDC and USDT.
• Solana's grants program is described as "very strict" and "quite tiny" compared to newer chains.
• Optimism reportedly paid around $40 million in locked OP tokens to Kraken to launch their L2.
• MakerDAO (now Sky) launched in 2015, making it one of the oldest DeFi protocols.
• DAI (now USDS) was Ethereum-exclusive for seven years before launching on Solana.
• PayPal's stablecoin supply on Solana briefly outpaced Ethereum when liquidity incentives were high.
• Current T-bill rates are around 5-6%, compared to 3-4% yield for some on-chain stablecoin investments.
• Phantom, a Solana wallet, has reportedly surpassed Coinbase on app store rankings.
• Solana's focus on shared state is described as both a strength and a potential weakness.
• The podcast suggests that for a new blockchain to compete effectively, it needs to offer a 10x improvement over existing solutions.

Questions Answered

What caused the recent outage on the Sui blockchain?

The recent outage on Sui was related to scheduler issues causing validators to crash. This incident highlights the complexity of maintaining high-performance blockchain networks and draws parallels to challenges Solana has faced in the past. It underscores the importance of robust testing, continuous improvement, and rapid response to technical issues in the blockchain space.

How is Solana attracting new developers and projects?

Solana is experiencing a surge in developer interest and activity, with both established names and innovative startups building on the platform. The ecosystem is seeing a diverse range of projects, from large established players to medium and small startups. This growth is driven by Solana's high performance, developer-friendly environment, and the network effect created by successful applications on the platform.

What are potential areas for innovation in new Layer 1 blockchains?

According to the discussion, potential areas for innovation in new Layer 1 blockchains include custom sovereign blockspace that avoids the tragedy of the commons, interoperable app chains or sovereign rollups, and privacy-focused solutions like private payment layers. The key is to offer something fundamentally different or at least 10x better than existing solutions, rather than just incremental improvements in speed or cost.

How important are partnerships with legacy institutions for blockchain adoption?

The podcast suggests a shift away from high-profile collaborations with legacy institutions that lack clear blockchain use cases. Instead, there's a growing focus on meaningful partnerships that can drive real innovation and adoption. The industry appears to be maturing, moving beyond hype-driven partnerships towards collaborations that create tangible value and use cases.

What factors are influencing stablecoin adoption on Solana?

Several factors are influencing stablecoin adoption on Solana. These include competition from established stablecoins on other chains, the need for compelling use cases, the impact of liquidity incentives, and broader economic factors like interest rates. The discussion suggests that significant stablecoin growth on Solana might come from large-scale, high-frequency payment applications in the future.

How does Solana plan to maintain its competitive edge in the face of new blockchain platforms?

Solana's strategy to maintain its competitive edge focuses on continuous execution and improvement of the blockchain. This includes relentless focus on onboarding founders and startups, providing robust infrastructure and support, and fostering a founder-friendly ecosystem. The goal is to attract innovative projects and create a thriving ecosystem that can continue to grow and evolve over time.

What is the significance of USDS launching on Solana?

The launch of USDS (formerly DAI) on Solana by Sky (formerly MakerDAO) is seen as a significant development for Solana's stablecoin ecosystem. It represents the entry of a major, established DeFi protocol onto the Solana platform and has the potential to enhance Solana's DeFi capabilities and overall liquidity. However, the long-term impact will depend on adoption and real-world use cases.

How does the concept of "10x improvement" apply to blockchain competition?

The podcast emphasizes that for a new blockchain to effectively compete with established platforms like Solana, it needs to offer a "10x improvement" in some aspect. This could be in performance, user experience, or by solving a problem in a fundamentally new way. Simply being marginally better is not enough to overcome the network effects and established ecosystems of existing blockchains.