BULLPEN ROUNDUP: What Happens Next in Crypto?

The Unlayered podcast team, consisting of Sal, Dave, and Zen, recently sat down to discuss the current state of the cryptocurrency market and what might be coming next. In this wide-ranging conversation, they touched on several key topics, including Solana's recent scaling challenges, the rise of meme coins, and the potential for breakthrough applications in the crypto space. Let's dive into their insights and predictions for the future of blockchain technology.

Solana's Scaling Challenges

The conversation kicked off with a discussion of Solana's recent performance issues. Sal, who is building a product on Solana, shared his frustrations with the network's congestion problems:

"For about three weeks, basically every other transaction was failing, unless we optimized the heck out of the calls and made sure we use priority fees. Look, developers shouldn't have to think about all this. We shouldn't have to spend like a week trying to fully optimize every piece of the stack that touches on chain."

Despite these challenges, the team remained optimistic about Solana's future. Dave pointed out that congestion is actually a "bullish problem" for a blockchain to have, as it indicates high demand and usage. Zen added that Solana has been "tested like no other chain out there," and that other chains would likely face similar issues if they experienced the same level of activity.

The Path Forward for Solana

The team discussed several potential solutions to Solana's scaling issues. These include:

1. Improvements to the QUIC protocol: Solana is working with Google to modify the QUIC protocol to better handle high-volume connection requests.
2. Changes to the transaction scheduler: A new scheduler is being developed to better prioritize transactions based on fees.
3. Potential implementation of variable base fees: This could help manage network congestion more effectively.

While these solutions are promising, the team acknowledged that implementing them at Solana's current scale is challenging. As Zen put it, "None of this stuff is simple anymore is kind of the problem. You know, it's like none of those fixes are actually all that simple."

MEV and the Future of L1 Revenue

The conversation then turned to the topic of Maximal Extractable Value (MEV) and its potential as a revenue stream for Layer 1 blockchains. The team discussed a recent thesis from Multicoin Capital suggesting that fee income for L1s might become negligible in the future, with MEV becoming the primary revenue source.

Sal noted that Solana's MEV ecosystem, particularly through projects like Jito, is already showing significant promise:

"Gito or rather Solana MEV exceeds Ethereum and MEV now and that's in spite of the fact that Solana fees is just low. There's just a lot of opportunities for MEV extraction on Solana."

This development could have significant implications for the value proposition of various L1 blockchains and the projects built on top of them.

The Rise of Meme Coins

One of the most notable trends in the current crypto market is the explosion of meme coins, particularly on networks like Solana. The team spent considerable time discussing this phenomenon and its implications for the broader crypto ecosystem.

Sal argued that meme coins represent a significant innovation in the space:

"You're essentially tokenizing attention and things happening in real life. People can respond to it, you know, make it take a try like bootstrapper community. These are all really important, really hard things to do online, but somehow this thing, this token primitive that's permissionless, anyone can make it, actually captures almost all of crypto's most important use cases in one."

The team agreed that meme coins are likely to play an increasingly important role in the crypto ecosystem, potentially becoming a key mechanism for bootstrapping communities and driving adoption of new projects.

The Potential for Breakthrough Apps

Despite the current focus on meme coins and infrastructure projects, the team expressed optimism about the potential for breakthrough applications in the crypto space. Sal, in particular, predicted that we might see a major social app emerge in the near future:

"I think there's going to be a breakout social app that's not Frentech in the next two months. I just know too many teams still, I don't even include Bullpen, although we'll see what happens there. I just see too many teams in stealth man that are doing really interesting things."

This prediction suggests that we may be on the cusp of seeing more user-facing applications that leverage blockchain technology in novel ways.

The Role of Telegram in Crypto Distribution

An interesting point raised during the discussion was the role of Telegram as a distribution layer for crypto applications. The team noted that Telegram's built-in wallet functionality (outside the US) and large user base make it an attractive platform for crypto projects.

Dave expressed particular interest in the TON blockchain, which is closely associated with Telegram:

"I increasingly feel like TON is going to be the dark horse of this cycle just because they have the distribution, which no other project can claim to."

This observation highlights the importance of user acquisition and distribution channels in the success of blockchain projects.

Gaming and the Metaverse: A Delayed Narrative?

The team also touched on the topics of crypto gaming and the metaverse, expressing some skepticism about their near-term prospects. Zen noted that creating successful games is inherently challenging, regardless of the blockchain element:

"Games are hard, forget about crypto. Like name the last like new breakout game in the world. Fortnite and maybe you could argue the battle royale that COD put out."

This perspective suggests that while blockchain technology may eventually have a significant impact on gaming and virtual worlds, it may take longer than some enthusiasts expect for truly successful crypto-native games to emerge.

The Search for the Next Big Narrative

As the conversation wrapped up, the team reflected on the current state of the crypto market and the search for the next big narrative. While meme coins and Bitcoin's resurgence have been dominant themes in recent months, there was a sense that the market is still looking for its next major trend.

Zen observed:

"It feels like I don't know what the new thing is this cycle. That doesn't feel clear like it did in the last cycle, you know, it's like NFTs, DeFi, it was like very clear those are new product categories."

This uncertainty could create opportunities for innovative projects that can capture the imagination of the crypto community and drive the next wave of adoption.

Political Meme Coins: A Trend to Watch

With the upcoming US election, the team highlighted political meme coins as a potential area of interest. Dave suggested:

"Given it's an election year, I think that the political meme coins are definitely ones to watch. Bodeon being the obvious one."

The potential for high-profile political figures to engage with or mention these coins could lead to significant market movements and increased mainstream attention on the crypto space.

The Importance of Ore Mining on Solana

An intriguing development discussed was the emergence of "ore mining" on Solana, particularly through projects like Ordo. This concept aims to bring Bitcoin-like mining to the Solana ecosystem, potentially creating a new store of value asset native to the network.

Zen explained the potential significance:

"If Solana is the spam prevention mechanism, like it doesn't make sense for it to also be the store of value, and you would love to see like a decentralized store of value built on top of Solana because he thinks it's like the best network to transact it on."

This innovation could help address one of the key criticisms of Solana – its perceived lack of a strong monetary policy – while leveraging the network's high performance for transactions.

The Evolution of NFTs and Social Coordination

The team drew interesting parallels between the NFT boom of the previous cycle and the current meme coin trend. They suggested that meme coins might be fulfilling many of the same social coordination and community-building functions that NFTs did, but in a more accessible and flexible format.

Zen observed:

"Most of the people trading NFTs last cycle would have preferred to trade meme coins, but they just like weren't as prolific at the time. And so it's almost like meme coins have like taken a lot of the sharp edges out of NFTs that we were like skeuomorphically like pushing into them because we didn't have anything better."

This evolution highlights the ongoing experimentation and innovation in the crypto space as projects seek to create more effective mechanisms for community engagement and value creation.

The Challenges and Opportunities in Crypto Infrastructure

While much of the discussion focused on user-facing applications and trends, the team also touched on the state of crypto infrastructure projects. They noted that many of these projects have received significant venture capital funding and are launching at high valuations, which could limit retail investor participation.

This dynamic has created an interesting tension in the market, with retail investors potentially gravitating towards more accessible and volatile assets like meme coins. The team suggested that this could lead to a shift in how projects approach community building and token distribution in the future.

The Potential for Cross-Chain Innovation

Although much of the conversation centered on Solana, the team also discussed developments on other blockchains and the potential for cross-chain innovation. They noted interesting developments in the Ethereum ecosystem, such as ERC-404 tokens, and speculated about how similar concepts might be implemented on Solana.

This cross-pollination of ideas across different blockchain ecosystems could lead to exciting new primitives and applications in the coming months and years.

The Role of Decentralized Finance (DeFi) in the Current Market

While DeFi was not the primary focus of the conversation, the team acknowledged its ongoing importance in the crypto ecosystem. They noted that many of the infrastructure improvements and scaling solutions being developed are crucial for supporting complex DeFi applications.

Additionally, the discussion of MEV highlighted the continued relevance of DeFi, as many MEV opportunities arise from interactions with decentralized exchanges and lending protocols.

The Importance of User Experience in Crypto Adoption

Throughout the conversation, the team repeatedly emphasized the importance of user experience in driving crypto adoption. They noted that many current blockchain applications are still too complex for mainstream users, and that simplifying interactions with blockchain technology will be crucial for the next wave of adoption.

This focus on user experience could be a key differentiator for projects in the coming cycle, potentially separating successful applications from those that struggle to gain traction.

The Role of Layer 2 Solutions and App-Specific Chains

While much of the discussion focused on Layer 1 blockchains like Solana, the team also touched on the potential of Layer 2 solutions and app-specific chains. They noted that as the crypto ecosystem matures, we may see more applications opting to build their own purpose-built blockchains to optimize for their specific use cases.

This trend could lead to a more diverse and specialized blockchain ecosystem, with different chains optimized for different types of applications and use cases.

The Intersection of Traditional Finance and Crypto

The approval of Bitcoin ETFs was mentioned as a significant development in the crypto space, highlighting the growing intersection between traditional finance and the cryptocurrency world. The team speculated about how this increased institutional involvement might impact the market dynamics and regulatory landscape going forward.

The Potential for Social Tokens and Community-Driven Projects

Building on their discussion of meme coins and social applications, the team explored the potential for more sophisticated social tokens and community-driven projects. They suggested that we might see new models emerge that combine elements of social media, tokenomics, and decentralized governance in novel ways.

These projects could potentially address some of the criticisms leveled at current social media platforms, such as issues around data ownership and algorithmic control of content distribution.

The Role of Artificial Intelligence in Crypto

While not a primary focus of the conversation, the team briefly touched on the potential intersections between artificial intelligence and blockchain technology. They speculated about how AI might be used to enhance blockchain applications, improve security, or create new types of decentralized autonomous organizations (DAOs).

This convergence of AI and blockchain could be an area to watch in the coming years, potentially leading to new paradigms in how we interact with and govern decentralized systems.

The Importance of Developer Tooling and Infrastructure

Throughout the discussion, the team emphasized the crucial role of developer tooling and infrastructure in the growth of the crypto ecosystem. They noted that for blockchain technology to reach its full potential, it needs to become easier for developers to build and deploy applications.

This focus on developer experience could be a key differentiator for blockchain platforms in the coming years, potentially influencing which ecosystems attract the most innovative projects and applications.

The Potential for Decentralized Identity Solutions

While not explicitly discussed, the conversation touched on themes related to online identity and social coordination. This naturally leads to considerations about the potential for decentralized identity solutions built on blockchain technology.

Such solutions could address many of the privacy and security concerns associated with current online identity systems, while also enabling new types of applications and interactions in the digital world.

The Role of Governance in Blockchain Ecosystems

The team briefly touched on governance issues, particularly in relation to implementing changes to address scaling challenges. This highlights the ongoing importance of effective governance mechanisms in blockchain ecosystems.

As these systems grow and evolve, finding ways to make decisions and implement changes that balance the needs of various stakeholders will be crucial for long-term success.

The Potential for Blockchain in Enterprise and Government Applications

While the conversation focused primarily on consumer-facing applications and financial use cases, the potential for blockchain technology in enterprise and government applications remains significant. The scalability improvements and infrastructure developments discussed could pave the way for more widespread adoption in these sectors.

The Importance of Education and Onboarding in Crypto Adoption

Throughout the discussion, the team alluded to the complexity of many crypto applications and the need for better user experiences. This naturally leads to considerations about the role of education and effective onboarding processes in driving crypto adoption.

As the technology matures and becomes more accessible, finding ways to educate users and simplify their entry into the crypto ecosystem will be crucial for achieving mainstream adoption.

The Potential for Blockchain in Developing Economies

While not explicitly discussed, the conversation about accessible financial tools and community-driven projects naturally extends to considerations about the potential impact of blockchain technology in developing economies. The ability to create financial services and community-driven projects with minimal infrastructure could have significant implications for economic development and financial inclusion globally.

The Evolving Regulatory Landscape for Crypto

Although not a primary focus of the conversation, the regulatory environment for cryptocurrencies and blockchain technology continues to evolve. The team's discussion of various projects and innovations implicitly touches on the need for clear and balanced regulation that allows for innovation while protecting consumers and maintaining financial stability.

The Future of Blockchain Scalability

While much of the discussion focused on Solana's current scaling challenges, the broader question of blockchain scalability remains crucial for the entire ecosystem. The solutions being developed and implemented on Solana could have implications for other blockchains and the industry as a whole.

As the team noted, these scaling challenges are in many ways a sign of success – they indicate growing adoption and usage. However, solving these issues in a way that maintains decentralization and security will be crucial for the long-term viability of blockchain technology.

Conclusion: A Dynamic and Evolving Ecosystem

The wide-ranging discussion on the Unlayered podcast highlights the dynamic and rapidly evolving nature of the blockchain and cryptocurrency ecosystem. From scaling challenges and infrastructure development to the rise of meme coins and the potential for breakthrough applications, the industry continues to innovate and adapt.

While challenges remain, particularly in areas like scalability and user experience, the overall tone of the conversation was optimistic. The team's insights suggest that we may be on the cusp of significant developments in areas like social applications, community-driven projects, and novel financial primitives.

As the crypto market continues to mature and evolve, it will be fascinating to see which of these trends and predictions come to fruition. One thing is clear: the blockchain space remains a hotbed of innovation, with the potential to reshape numerous aspects of our digital lives in the coming years.

Facts + Figures

• Solana experienced severe congestion issues for about three weeks, with approximately 50% of transactions failing during peak times.
• Solana is working with Google to modify the QUIC protocol to better handle high-volume connection requests.
• Solana MEV now exceeds Ethereum MEV, despite Solana's lower transaction fees.
• The Jito project on Solana has seen significant success in the MEV space.
• Over 300,000 new tokens have been created on pump.fun in just two months.
• The Coliseum hackathon named Ordo (ore mining on Solana) as their grand prize winner.
• Political meme coins, such as Bodeon, are emerging as a trend to watch in the election year.
• The team predicts a breakout social app in the crypto space within the next two months.
• Telegram's built-in wallet functionality (outside the US) makes it an attractive platform for crypto project distribution.
• The TON blockchain, associated with Telegram, is seen as a potential "dark horse" in the current market cycle.
• The team expressed skepticism about the near-term prospects of crypto gaming and metaverse projects.
• ERC-404 and SPL-404 tokens were mentioned as interesting developments in the NFT and meme coin space.
• The approval of Bitcoin ETFs was noted as a significant development in the crypto space.

Questions Answered

What are the main scaling challenges Solana is currently facing?

Solana has been experiencing severe congestion issues, with up to 50% of transactions failing during peak times. The main challenges include problems with the QUIC protocol handling high-volume connection requests, inefficiencies in the transaction scheduler, and the need for a more effective fee structure to manage network load. Solana is working on solutions to these issues, including collaborating with Google to modify the QUIC protocol and developing a new transaction scheduler.

How does Maximal Extractable Value (MEV) factor into the future of Layer 1 blockchains?

MEV is becoming an increasingly important factor for Layer 1 blockchains. Some analysts, like Multicoin Capital, suggest that fee income for L1s might become negligible in the future, with MEV becoming the primary revenue source. This is already evident on Solana, where MEV extraction opportunities are significant despite low transaction fees. The success of projects like Jito on Solana demonstrates the growing importance of MEV in the blockchain ecosystem.

What is the significance of meme coins in the current crypto market?

Meme coins have emerged as a significant trend in the crypto market, particularly on networks like Solana. They represent a new way of tokenizing attention and bootstrapping communities. Meme coins capture many of crypto's most important use cases in one primitive: they're permissionless, transferable, have price discovery mechanisms, and can spread virally. The team sees meme coins as an evolution of the community-building and social coordination functions that NFTs served in the previous market cycle.

What potential do the hosts see for breakthrough applications in the crypto space?

The hosts are optimistic about the potential for breakthrough applications in the crypto space, particularly in the realm of social apps. They predict that a major social app, beyond the existing Frentech platform, could emerge within the next two months. They also see potential in political meme coins, especially given the upcoming election year, and in projects that combine elements of social media, tokenomics, and decentralized governance in novel ways.

How does Telegram factor into the crypto ecosystem?

Telegram plays a significant role in the crypto ecosystem as a distribution layer for crypto applications. Its large user base and built-in wallet functionality (outside the US) make it an attractive platform for crypto projects. The TON blockchain, which is closely associated with Telegram, is seen as a potential "dark horse" in the current market cycle due to its strong distribution capabilities.

What are the hosts' views on crypto gaming and metaverse projects?

The hosts expressed some skepticism about the near-term prospects of crypto gaming and metaverse projects. They noted that creating successful games is inherently challenging, regardless of the blockchain element. While they believe blockchain technology may eventually have a significant impact on gaming and virtual worlds, they suggest it may take longer than some enthusiasts expect for truly successful crypto-native games to emerge.

What is "ore mining" on Solana and why is it significant?

"Ore mining" on Solana, particularly through projects like Ordo, aims to bring Bitcoin-like mining to the Solana ecosystem. This concept could potentially create a new store of value asset native to the Solana network. It's significant because it addresses one of the key criticisms of Solana – its perceived lack of a strong monetary policy – while leveraging the network's high performance for transactions. This innovation could help position Solana as both a high-performance transaction network and a platform for store of value assets.

How do the hosts view the potential for political meme coins?

The hosts see political meme coins as a trend to watch, particularly given the upcoming US election. They mention Bodeon as an example of this trend. The potential for high-profile political figures to engage with or mention these coins could lead to significant market movements and increased mainstream attention on the crypto space. However, they also note that there can be confusion around these coins, such as whether support for a coin like Bodeon indicates support for or opposition to the political figure it references.