The Rise of High Throughput Blockchains

The cryptocurrency landscape is rapidly evolving, with high throughput blockchains like Solana gaining significant traction. Logan Jastremski, founding partner of Frictionless Capital, has long been a vocal proponent of scaling approaches similar to Solana's. In this comprehensive discussion, Jastremski shares his insights on why high throughput blockchains are poised to dominate the future of crypto infrastructure.

Jastremski argues that the fundamental design of high throughput blockchains addresses the core issues of scalability and performance that have plagued earlier blockchain iterations. By focusing on increasing bandwidth and compute power, chains like Solana can achieve linear scaling as more resources are added. This approach allows for significantly higher transaction throughput and lower fees compared to traditional blockchain architectures.

The Ethereum Scaling Dilemma

One of the most pressing issues in the crypto space is Ethereum's ongoing struggle with scalability. Jastremski points out that Ethereum's focus on maintaining decentralization through low hardware requirements has led to severe limitations in throughput. He argues that Ethereum needs to scale its Layer 1 (L1) to remain relevant in the long term:

"I think you need high throughput data availability. And if Ethereum does not do that, then I don't see how they're going to be as relevant long term."

This statement highlights the growing recognition within the Ethereum community that significant changes may be necessary to compete with newer, more efficient blockchain architectures.

The Power of Shared Standards

A key advantage of high throughput blockchains like Solana is their emphasis on shared standards. Unlike the fragmented ecosystem of Ethereum Layer 2 solutions, Solana provides a single, unified environment for developers and users. Jastremski explains:

"By having a large single shard, what ultimately you're creating is one shared standard, where when you use Solana or you use Aptos, Monad, say, there is no sharding. There is no different versions of the Optimism, Arbitrum, Base."

This standardization simplifies development and creates a more cohesive user experience, potentially leading to faster adoption and growth.

The Evolution of Decentralized Finance (DeFi)

While early discussions around Solana often focused on its ability to support on-chain order books, the reality of DeFi on Solana has evolved differently. Jastremski notes that Automated Market Makers (AMMs) have become the dominant form of trading on Solana, particularly for long-tail assets and meme coins. This trend demonstrates the adaptability of high throughput chains to meet market demands.

Firedancer: Boosting Solana's Potential

The upcoming launch of Firedancer, a new validator client for Solana, is generating significant excitement. Jastremski explains that Firedancer has demonstrated the ability to process 22 gigabits of traffic on a four-core machine, representing a massive increase in potential throughput:

"We're going from like low megabytes to gigabytes. And again, this is why I'm super excited just about the high throughput architecture."

This development could unlock new possibilities for decentralized applications and further cement Solana's position as a leading blockchain platform.

The Importance of Order Flow in Decentralized Trading

Jastremski highlights an often-overlooked aspect of decentralized trading: the importance of order flow. He explains that market makers need to be profitable to continue providing liquidity, and understanding the source of trades can help them offer better pricing:

"If you're able to get order flow, which is, for example, Logan wants to submit a transaction on Phoenix. He's doing that through a Phantom wallet or Backpack wallet. If they have high degree of confidence that I am not a bot or I'm not another market maker, they say, hey, this person just wants to be filled."

This insight into order flow can lead to tighter spreads and better execution for retail traders, ultimately creating a more efficient market.

The Promise of DePIN (Decentralized Physical Infrastructure Networks)

Decentralized Physical Infrastructure Networks (DePIN) represent an exciting frontier in the blockchain space. Jastremski is particularly bullish on projects that leverage blockchain technology to create better real-world products and services. He cites examples like HiveMapper, which uses decentralized dash cams to create more up-to-date maps than traditional services like Google Maps.

One standout project in the DePIN space is Adrena, which aims to revolutionize internet access:

"What Adrena has ultimately figured out is that you can use a similar technology to Starlink. Where essentially you beam internet access from one point, which is the data center to residential buildings and make it wireless."

By leveraging cheap data center internet and innovative last-mile solutions, Adrena could potentially offer dramatically lower internet costs to consumers.

The Energy Sector: A Frontier for Blockchain Innovation

While less developed than other DePIN applications, the energy sector represents a massive opportunity for blockchain innovation. Jastremski envisions a future where decentralized energy grids allow people to buy and sell power using blockchain as a coordination layer. However, he notes that regulatory hurdles and the current cost of battery storage present significant challenges.

Emerging High Throughput Competitors: Monad and Mega-Eth

The success of Solana has inspired new projects aiming to combine Ethereum compatibility with high throughput designs. Jastremski expresses enthusiasm for Monad, describing it as potentially what Ethereum would look like if redesigned today. However, he notes that by maintaining EVM compatibility, Monad may face some limitations.

Regarding Mega-Eth, which aims for millisecond block times, Jastremski raises concerns about the potential for front-running and information asymmetry:

"If you're not co-located to the sequencer, you're always going to get front run, um, by someone that has better information than you."

He argues that multi-leader systems, like those proposed for Solana's future, may offer a more equitable solution for global price discovery.

The Future of Ethereum: Scaling the L1

Jastremski believes that Ethereum must significantly increase its data availability and throughput to remain competitive in the long term. He criticizes Ethereum's focus on enabling solo stakers with low hardware requirements, arguing that this approach limits the network's potential:

"You can still have a very high decentralized network, even if the computer costs $5,000 instead of $500. Um, it's more so around the number of replicas geographically dispersed around the world."

This perspective challenges the traditional Ethereum narrative and suggests that a more pragmatic approach to scaling may be necessary.

The Compounding Network Effect of High Throughput Chains

One of Jastremski's key arguments is that the blockchain ecosystem with the most users and applications will likely become a "black hole" that attracts even more activity. He believes high throughput chains like Solana are well-positioned to achieve this network effect:

"I truly think the winning ish blockchain will be the one that kind of becomes a more black hole where there's more users, more applications. You can interact with go long Tesla, uh, or short eat, um, or play a blockchain, uh, game all within one ecosystem."

This vision of a unified, high-performance blockchain ecosystem contrasts sharply with the fragmented landscape of Ethereum and its various Layer 2 solutions.

Challenges and Future Developments

While Jastremski is optimistic about the future of high throughput blockchains, he acknowledges that there are still challenges to overcome. Solana, for instance, has faced issues with network congestion and downtime in the past. However, he argues that these problems are being addressed through ongoing development and optimizations.

The upcoming implementation of multi-leader systems on Solana could further enhance its performance and resilience. This development, combined with the potential of Firedancer, suggests that Solana's capabilities will continue to expand in the coming years.

Implications for Developers and Users

For developers, the emergence of high throughput blockchains presents both opportunities and challenges. While these platforms offer greater flexibility and lower costs, they may require adapting to new programming paradigms and tools. However, the potential for creating more responsive and scalable applications could make this transition worthwhile.

Users stand to benefit from faster transaction times, lower fees, and a more seamless experience across different applications. As the ecosystem around high throughput chains like Solana continues to grow, we can expect to see an increasing number of innovative dApps and services that leverage these capabilities.

The Role of Institutions in Blockchain Adoption

Jastremski notes that institutional interest in high throughput blockchains is growing, albeit slowly. He observes that many institutions are still primarily focused on Ethereum but are beginning to consider Solana as well. This gradual shift in perspective could lead to increased institutional investment and development in the Solana ecosystem over time.

Conclusion: The Future of Blockchain Infrastructure

As the cryptocurrency industry continues to evolve, high throughput blockchains like Solana are positioning themselves as the foundation for the next generation of decentralized applications and financial services. While challenges remain, the potential for these platforms to enable more efficient, scalable, and user-friendly experiences is significant.

Ethereum's future success may depend on its ability to adapt and scale its Layer 1, while newer chains like Solana continue to push the boundaries of what's possible with blockchain technology. As developers, users, and institutions increasingly recognize the benefits of high throughput architectures, we may see a shift in the balance of power within the crypto ecosystem.

Ultimately, the success of any blockchain platform will depend on its ability to attract and retain users, developers, and valuable applications. High throughput chains appear to have a significant advantage in this regard, but the race is far from over. As the industry continues to innovate and evolve, we can expect to see exciting developments that push the boundaries of what's possible with decentralized technologies.

Facts + Figures

• Logan Jastremski is a founding partner of Frictionless Capital and has been a long-time advocate for high throughput blockchains like Solana.
• Solana's decentralized exchange (DEX) volumes occasionally flip Ethereum's, primarily driven by meme coin trading and long-tail asset creation.
• Automated Market Makers (AMMs) have become the dominant form of trading on Solana, contrary to early expectations of on-chain order books.
• Firedancer, an upcoming Solana validator client, has demonstrated the ability to process 22 gigabits of traffic on a four-core machine.
• Ethereum's current goal is to reach 1.3 megabytes per second of throughput, which is roughly where Solana is today.
• Jastremski argues that Ethereum needs to scale its Layer 1 to remain relevant in the long term.
• The DePIN (Decentralized Physical Infrastructure Networks) sector is seen as a promising area for blockchain innovation, with potential applications in compute, telecom, and energy.
• Adrena, a DePIN project, aims to provide internet access at significantly lower costs than traditional ISPs by leveraging data center internet and wireless technology.
• Monad and Mega-Eth are emerging high throughput blockchain projects that aim to combine Ethereum compatibility with improved performance.
• Jastremski believes that multi-leader systems, like those proposed for Solana's future, may offer more equitable solutions for global price discovery compared to single-sequencer designs.
• The energy sector is identified as a massive potential market for blockchain applications, though regulatory hurdles and current battery storage costs present challenges.
• Institutional interest in high throughput blockchains is growing, with conversations shifting from "Ethereum or Ethereum L2" to "Ethereum and Solana."

Questions Answered

What are high throughput blockchains and why are they important?

High throughput blockchains are designed to process a large number of transactions quickly and efficiently. They are important because they address the scalability issues that have plagued earlier blockchain iterations, allowing for faster and cheaper transactions. This increased performance opens up new possibilities for decentralized applications and financial services that were previously impractical due to high costs or slow confirmation times.

How does Solana's approach to scaling differ from Ethereum's?

Solana's approach to scaling focuses on increasing bandwidth and compute power in a single, large shard. This allows for linear scaling as more resources are added to the network. In contrast, Ethereum has historically prioritized decentralization through low hardware requirements, leading to limitations in throughput. Ethereum is now exploring various Layer 2 solutions and sharding to improve scalability, while Solana aims to scale its base layer directly.

What is Firedancer and how could it impact Solana?

Firedancer is an upcoming validator client for Solana that has demonstrated the ability to process 22 gigabits of traffic on a four-core machine. This represents a significant increase in potential throughput for the Solana network. If successful, Firedancer could dramatically boost Solana's performance, enabling even more complex and demanding applications to run on the network while maintaining low fees and fast confirmation times.

Why is order flow important in decentralized trading?

Order flow is important in decentralized trading because it helps market makers understand the source and nature of trades. This information allows them to offer better pricing and tighter spreads, especially for non-bot traders. By distinguishing between retail traders and sophisticated actors or bots, market makers can provide more efficient markets while maintaining profitability, ultimately benefiting all participants in the ecosystem.

What is DePIN and why is it considered a promising area for blockchain innovation?

DePIN stands for Decentralized Physical Infrastructure Networks. It's considered promising because it leverages blockchain technology to create better real-world products and services. Examples include decentralized mapping services like HiveMapper and innovative internet access solutions like Adrena. DePIN projects have the potential to disrupt traditional industries by offering more efficient, cost-effective, and user-centric alternatives to existing infrastructure.

How might Ethereum need to change to remain competitive with high throughput blockchains?

According to Jastremski, Ethereum needs to significantly increase its data availability and throughput at the Layer 1 level to remain competitive. This may involve reconsidering its focus on enabling solo stakers with low hardware requirements and instead optimizing for higher performance. Ethereum might need to embrace larger block sizes and more powerful hardware requirements while maintaining a sufficient level of decentralization through geographical distribution of validators.

What are the potential advantages of multi-leader systems in blockchain networks?

Multi-leader systems, as proposed for Solana's future, could offer more equitable solutions for global price discovery compared to single-sequencer designs. By allowing multiple nodes to propose blocks simultaneously, these systems can potentially reduce latency and improve fairness in transaction ordering. This approach could mitigate issues of front-running and information asymmetry that can occur in single-sequencer systems, especially for geographically dispersed users.

How might the success of high throughput blockchains impact the broader cryptocurrency ecosystem?

The success of high throughput blockchains could lead to a shift in the balance of power within the crypto ecosystem. As these platforms enable more efficient, scalable, and user-friendly experiences, they may attract more developers, users, and valuable applications. This could challenge the dominance of established platforms like Ethereum and potentially lead to a more diverse and competitive blockchain landscape. Ultimately, this competition could drive innovation and improvements across the entire industry.