Solana's Future: Anatoly Yakovenko on Transaction Fees, Validator Growth, and Competing with Tech Giants

In a recent episode of the Lightspeed podcast, Solana co-founder Anatoly Yakovenko delved into the current state and future prospects of the Solana blockchain. The wide-ranging discussion covered topics from transaction fees and validator economics to competition with other blockchains and tech giants. This article explores the key points raised in the interview and provides insights into Solana's trajectory.

Transaction Front-Running and MEV

One of the primary issues addressed in the interview was the problem of transaction front-running and Maximal Extractable Value (MEV) on Solana. Despite Solana's initial goal of minimizing arbitrage opportunities through fast information synchronization, MEV remains a significant concern.

Yakovenko acknowledged this challenge, stating, "Everybody's getting front run all the time. And in fact, not only is MEV through the roof, Jito tips have surpassed Solana priority fees in many cases." However, he emphasized that users still have the option to set up their own validators and submit transactions without interference, which was the original democratizing function of Solana.

The Solana co-founder explained that while it's possible for individuals to run their own validators, it requires significant effort and resources. He noted, "It's hard to set up a validator. It's hard to scale it to enough stake where that's substantial. It's hard to find other peers that will order transactions the way you want them to and whatever you call fair or whatever."

Solana Fee Markets and Composability

Yakovenko addressed concerns about Solana's fee markets, particularly the issue of local fee markets not working deterministically under high load conditions. He attributed this to implementation challenges, stating, "The implementation that actually processes all those transactions are far from optimal and under extremely high load... those queues back up, you can't do prioritization in those queues until you get to the scheduler and that effectively breaks down the local fee market."

Despite these challenges, Yakovenko remains optimistic about Solana's ability to solve these issues through engineering improvements. He emphasized the importance of increasing bandwidth, reducing latency, and optimizing the network to eliminate bottlenecks that lead to unfairness.

Competing with Layer 2 Solutions

When questioned about how Solana competes with Layer 2 (L2) solutions that might be able to iterate faster due to their centralized nature, Yakovenko argued that L2s face similar challenges to Solana. He stated, "They still have the exact same problems as Solana. You can argue that JITO effectively has that opportunity to do now because of their relayers can be updated every 24 hours or more easily all the time anyways."

Yakovenko believes that the advantage of L2s in terms of faster iteration is smaller than people realize. He emphasized that as soon as an L2 starts dealing with global information propagation and consensus, it will encounter the same problems as Solana.

Synchronous Composability at Scale

Addressing recent comments by Ethereum founder Vitalik Buterin about synchronous composability being overrated, Yakovenko strongly disagreed. He pointed to the success of Jupiter, a decentralized exchange aggregator on Solana, as evidence of the importance of synchronous composability.

"Jupiter has enormous market share in Solana, and its market share is enormous in the entire crypto," Yakovenko stated. "You cannot build Jupiter without synchronous composability. It just doesn't work."

Validator Growth and Network Sustainability

A significant portion of the discussion focused on Solana's validator ecosystem. Yakovenko emphasized the importance of having a large, diverse validator set to future-proof the network. He explained, "If you wanna have as many block producers in the world as you can, you just need to have a large validator set. You wanna allow anyone to be able to enter and participate in every part of the network permissionlessly."

While acknowledging that the total number of validators has decreased over time, Yakovenko highlighted the growth in self-sustaining validators as a positive trend. He stated, "Four hundred and twenty validators would be self-sufficient," and emphasized that this number is likely higher than it was two years ago due to increased fees and decreased foundation stake.

Solana's Inflation Schedule

Addressing criticisms of Solana's inflation schedule, Yakovenko took a pragmatic stance. He argued that inflation, from an accounting perspective, doesn't matter to the network as a whole. "The inflation is the way it is is because it was copied from Cosmos because the initial set of validators for a bunch of Cosmos validators," he explained.

Yakovenko expressed openness to changes in the inflation schedule, stating, "Go for it. Post a sign. I personally don't care. I said this like a billion times. Change it to whatever you want. Go convince the validators to do it."

Execution as Solana's Moat

When asked about Solana's competitive advantage in a future where many chains can achieve similar technical capabilities, Yakovenko emphasized execution as the key differentiator. He stated, "I think what's going to win is either Solana because the ecosystem is good at executing and is ahead of all these problems or something that looks exactly like Solana and the only reason that it's not Solana is because they execute it faster."

Yakovenko argued that the marginal difference between Solana and potential competitors is much smaller than the difference between Solana and Ethereum, making it harder for new entrants to offer a compelling reason for users to switch.

Firedancer and Multi-Client Development

The interview touched on the development of Firedancer, an alternative Solana client implementation. Yakovenko addressed concerns about coordination challenges between different client teams, arguing that while the design phase might take longer, implementation can be parallelized, and the testing and auditing phase should be faster due to reduced chances of both teams shipping the same bug.

He emphasized Solana's approach of setting release dates rather than feature sets, stating, "The way that Solana has always functioned is kind of almost the opposite as there's a release date. If your feature doesn't make it, it gets cut. And those releases are just much, much faster."

Solana Mobile and Competing with Tech Giants

Yakovenko discussed Solana's mobile initiatives and the vision behind them. He explained the concept of a cryptographically signed firmware spec that could potentially be controlled by a DAO, stating, "That cryptographic signature is the key part. Because that could be generated by a DAO that signs off on the entire firmware for Apple. Like imagine if Apple itself was controlled the cryptographically signed certificate run by a DAO, right? It like flips the entire kind of like idea of software platforms on its head."

When questioned about competing with tech giants like Apple and Google, Yakovenko acknowledged the challenge but emphasized the opportunity to disrupt their rent-seeking behavior. He stated, "It's obvious that 30% fee's too much because you have Tim Sweeney suing them everywhere he can and like it's a problem for the businesses that use Apple and Google as a distribution channel."

Future Scalability and Bandwidth Utilization

Looking to the future, Yakovenko expressed confidence in Solana's ability to scale significantly before hitting fundamental bandwidth limitations. He pointed out, "One gigabit is basically everywhere in the world even an almost every cell phone in the world at this point. And that is 250,000 TPS even in this the current inefficient turbine like the way that turbine is specked right now can handle 250k transactions per second in one gigabit."

Yakovenko argued that Solana is currently operating at only a fraction of its potential capacity, stating, "We need a 250X improvement in load for that for us to even start thinking about anything else."

Competing with Ethereum's Network Effects

Addressing the challenge of competing with Ethereum's established network effects, particularly in terms of asset quality and liquidity, Yakovenko proposed a shift in narrative. He suggested, "We can start calling Ethereum assets legacy assets and have all the new stuff launched in Solana. The meme has to change. Ethereum is for legacy assets."

This bold statement underscores Solana's ambition to position itself as the platform for innovation and new asset creation in the blockchain space.

Throughout the interview, Anatoly Yakovenko demonstrated a clear vision for Solana's future and a pragmatic approach to addressing current challenges. From improving transaction processing and fee markets to expanding the validator ecosystem and competing with tech giants, Solana's roadmap is ambitious and far-reaching.

As the blockchain space continues to evolve, Solana's focus on execution, scalability, and user experience positions it as a strong contender in the race for mainstream adoption. While challenges remain, Yakovenko's insights suggest that Solana is well-equipped to navigate the complex landscape of blockchain technology and emerge as a leading platform for decentralized applications and financial services.

Facts + Figures

• 420 validators on Solana would currently be self-sufficient, showing growth in the ecosystem's sustainability.
• Solana's current transaction processing capacity is estimated at 250,000 TPS on a 1 gigabit connection, with room for 250x improvement before hitting bandwidth limitations.
• Jito tips have surpassed Solana priority fees in many cases, indicating a shift in transaction prioritization mechanisms.
• Solana's inflation schedule was initially copied from Cosmos due to the initial set of validators being from the Cosmos ecosystem.
• The Solana Mobile initiative aims to challenge the 30% fees charged by Apple and Google on their app stores.
• Jupiter, a decentralized exchange aggregator on Solana, was cited as a successful example of synchronous composability.
• Solana's approach to releases focuses on setting dates rather than feature sets, allowing for faster iteration.
• Firedancer, an alternative Solana client implementation, is being developed to improve network resilience and performance.
• Solana's vision includes the potential for cryptographically signed firmware controlled by a DAO, potentially revolutionizing software platforms.
• Anatoly Yakovenko suggested reframing Ethereum assets as "legacy assets" to position Solana as the platform for new asset creation.

Questions Answered

What is Solana doing to address transaction front-running and MEV?

Solana is focusing on engineering improvements to increase bandwidth, reduce latency, and optimize the network. While users can currently set up their own validators to avoid front-running, Solana aims to make this process easier and more accessible. The goal is to eliminate bottlenecks that lead to unfairness and create a more competitive environment for transaction ordering.

How does Solana plan to compete with Layer 2 solutions?

Solana believes that Layer 2 solutions will face similar challenges to Layer 1 blockchains when dealing with global information propagation and consensus. Yakovenko argues that the advantage of faster iteration for L2s is smaller than perceived. Solana's strategy is to continue optimizing its base layer and leveraging its synchronous composability to provide a superior user experience.

What is the significance of Solana's validator growth?

While the total number of validators has decreased, the number of self-sustaining validators has grown, indicating a healthier ecosystem. Solana aims to support a large, diverse validator set to future-proof the network and ensure decentralization. The focus is on increasing the number of validators that can pay their own bills and actively contribute to network improvement.

How is Solana addressing concerns about its inflation schedule?

Yakovenko views inflation as primarily an accounting issue that doesn't inherently create or destroy value for the network as a whole. He is open to changes in the inflation schedule if validators agree to implement them. The current schedule was adopted from Cosmos but may be adjusted based on community consensus.

What is Solana's strategy for competing with tech giants like Apple and Google in the mobile space?

Solana Mobile aims to challenge the 30% fees charged by Apple and Google on their app stores by creating a more open and decentralized mobile ecosystem. The vision includes developing cryptographically signed firmware that could potentially be controlled by a DAO, fundamentally changing the nature of software platforms and giving more control to users and developers.

How does Solana plan to scale to meet future demand?

Solana is confident in its ability to scale significantly before hitting fundamental bandwidth limitations. Current estimates suggest that Solana can handle 250,000 TPS on a 1 gigabit connection, with room for a 250x improvement in load. The focus is on optimizing the existing infrastructure and gradually increasing capacity to meet growing demand.

What is Firedancer and how does it fit into Solana's development strategy?

Firedancer is an alternative Solana client implementation being developed to improve network resilience and performance. By having multiple independent client teams, Solana aims to reduce the risk of bugs and improve the overall quality of the network. The development process involves coordination between teams but allows for parallel implementation and faster testing and auditing phases.

How does Solana view its competition with Ethereum?

Solana is positioning itself as the platform for new asset creation and innovation, suggesting that Ethereum assets could be viewed as "legacy assets." The strategy is to focus on execution and user experience, leveraging Solana's technical advantages to attract developers and users looking for faster, more efficient blockchain solutions.