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Validated | How Justin Bons Changed His Thesis About Solana

By Validated

Published on 2023-11-07

Crypto researcher Justin Bons discusses his evolving perspective on Solana, critiques of Ethereum's L2 scaling approach, and the importance of adaptable thinking in blockchain analysis.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Justin Bons' Evolving Perspective on Solana and Blockchain Scaling

In a candid and insightful discussion on the Validated podcast, Justin Bons, a prominent cryptocurrency researcher and founder of Cyber Capital, delves into his changing views on Solana and broader issues in blockchain scaling and governance. This article explores the key points from the conversation, highlighting Bons' journey from being a vocal critic of Solana to becoming more supportive of the network.

The Importance of Changing One's Mind in Crypto

Justin Bons begins the discussion by emphasizing the rarity and importance of publicly changing one's stance in the cryptocurrency space. He acknowledges that his views on Solana have warmed up considerably over the past few months, contrasting with his earlier critiques. This willingness to adapt and evolve opinions based on new information and developments is crucial in the fast-paced world of blockchain technology.

Cyber Capital's Investment Philosophy

As the founder of Cyber Capital, one of Europe's oldest cryptocurrency funds, Bons explains his unique approach to investing in the space. Unlike many venture capitalists or traders, Cyber Capital takes a long-term value investing approach, focusing on fundamental blockchain research. Bons states:

"I'm very much taking a value investing long-term value investing approach into cryptocurrency. As part of that is I'm really a blockchain researcher first, really looking at the fundamentals and trying to understand the fundamentals."

This approach involves considering big questions in the cryptocurrency space, such as scaling approaches, governance models, and consensus mechanisms. By answering these foundational questions, Bons believes investors can make more informed decisions about the long-term potential of various projects.

The Time Horizon of Crypto Investments

When discussing investment time horizons, Bons reveals that Cyber Capital approaches investments with a remarkably long-term perspective:

"When we invest in a cryptocurrency, we invest with the mentality that we could still be holding this cryptocurrency in a century from now. Really thinking long-term on terms of civilizational timescales."

However, he clarifies that while this century-long perspective informs their research, the practical investment horizon recommended to their investors is more in the range of three to five years. This balance between long-term vision and medium-term practicality allows Cyber Capital to navigate the rapidly evolving cryptocurrency landscape while maintaining a focus on fundamental value.

Evaluating Cryptocurrencies: Beyond Technical Metrics

Bons emphasizes the importance of taking a holistic, multidisciplinary approach when evaluating cryptocurrencies. He explains that his analysis goes beyond just technical metrics:

"I look at things like what is the capacity of the blockchain? What is the governance of a blockchain? What is the consensus algorithm? What is the internal state of the politics?"

This comprehensive evaluation includes aspects of computer science, economics, and political philosophy. Bons stresses that decentralization and scalability are of utmost importance in his assessment of a blockchain's potential.

The Evolution of Bons' View on Solana

A significant portion of the discussion revolves around Bons' changing perspective on Solana. He candidly admits to being one of Solana's biggest public critics in its early days. However, several factors contributed to his evolving viewpoint:

  1. Technical improvements: Solana addressed many of Bons' initial critiques, such as implementing fee markets.
  2. Ecosystem growth: The continued development and activity within the Solana ecosystem impressed Bons, defying his expectations of a typical "VC pump and dump" pattern.
  3. Comparative analysis: When evaluating Solana against other projects, Bons found that its overall package became increasingly compelling.

Initial Critiques of Solana

Bons details his initial concerns about Solana, which included:

  1. High node requirements, potentially compromising decentralization.
  2. Network instability, with multiple outages in its early days.
  3. Lack of fee markets, which Bons believed were critical for regulating the network and preventing certain types of attacks.
  4. Deterministic block production, which he feared could make the network more vulnerable to targeted attacks.

Reevaluating Solana

Despite these initial concerns, Bons explains how his perspective shifted:

"I think what made me change my mind is that like nothing is perfect. And if I'm evaluating all these different factors, like, okay, sure, I like sharding more, okay. And I like non-deterministic block production more. Like all those things are still true. I like fee markets. It did fix that, right?"

He acknowledges that while he still believes in certain technical approaches (like sharding) over others, Solana's ability to achieve high transaction throughput, combined with its growing ecosystem and improvements, made it an increasingly attractive proposition.

The Importance of Community and Ecosystem

Bons highlights that technical superiority alone doesn't guarantee success in the blockchain space. He notes the importance of community, ecosystem activity, and reaching a critical mass of adoption:

"The best technologies don't always win or what I think are the best technologies won't always win, you know, and also community matters and also like a certain critical mass, defy activity matters a lot, right? And I felt like Solana gained that."

This realization contributed significantly to his changing perspective on Solana's potential for long-term success.

Critiques of Ethereum's Layer 2 Scaling Approach

A substantial portion of the conversation is dedicated to Bons' critiques of Ethereum's shift towards a Layer 2 (L2) scaling strategy. He expresses deep concerns about this approach, viewing it as a departure from Ethereum's original vision of on-chain scaling.

Bons argues that the L2 scaling roadmap introduces several problems:

  1. Fragmentation: The proliferation of L2 solutions leads to a fragmented ecosystem, making it difficult for users to navigate.
  2. Centralization risks: Some L2 solutions may introduce centralization through admin keys or centralized sequencers.
  3. User experience challenges: Bons believes that the complexity of L2s cannot be fully abstracted away without compromising user choice and security awareness.

He states:

"I don't see how this kind of quote unquote free market of layer twos will ever solve the problem. If you enshrined the layer twos or did like based L2s where the L1 validators actually confirm, you know, are actually responsible for those roll ups, then you could have an ecosystem of enshrined roll ups where it would be perfectly seamless and interoperable."

The Importance of On-Chain Scaling

Bons emphasizes his belief in the importance of on-chain scaling for blockchain networks. He argues that without sufficient on-chain capacity, many use cases for blockchain technology become impractical or impossible:

"I think just a blockchain that doesn't have capacity is just a bit of a joke to me. It's like what are we even doing here? What's even the point?"

This perspective informs his growing appreciation for Solana's approach to scaling, which prioritizes high throughput at the base layer.

Governance in Blockchain Networks

The discussion also touches on the critical issue of blockchain governance. Bons, drawing from his background in political philosophy, emphasizes the importance of stakeholder-based governance models. He praises Solana's current approach of validator stake-weighted upgrades as a positive step, though he notes that it's not yet fully decentralized governance.

Bons advocates for on-chain governance mechanisms and self-funding treasuries as ways to align incentives and counteract potential corruption from external funding sources. He states:

"I think self-funding mechanisms provide a L1 bias source of funding, which can actually counteract the corruption of say external funding sources. And it potentially makes it blockchain more competitive."

The Role of Philosophy in Blockchain Analysis

Throughout the conversation, Bons emphasizes the importance of his background in philosophy in shaping his approach to cryptocurrency analysis. He argues that while science is crucial for understanding the technical aspects of blockchain, philosophy is essential for grappling with the broader implications and value judgments inherent in the technology:

"Philosophy can answer things about, you know, right or wrong or, you know, concepts, ideas, ideas that don't just exist in the, you know, in our material world ideas that exist in our mind. So what is a good idea? What is a sound idea?"

This philosophical approach, Bons contends, allows him to remain open-minded and willing to change his views based on new evidence and reasoning.

The Danger of Tribalism in Crypto

Bons criticizes the tribalism often seen in the cryptocurrency space, where people become emotionally attached to specific projects or technologies. He argues for a more rational, objective approach:

"People get very emotional and tribal and they get tunnel vision and, and they can't, they can't see the forest and the trees. And I think I think the ability to understand, you know, logical contradictions and fallacies and create argument trees and all of these type of things are incredibly powerful tools for clear thinking."

This perspective allows Bons to remain flexible in his assessments, prioritizing the fundamental goals of cryptocurrency over loyalty to any particular project.

The Future of Blockchain Scaling

Looking towards the future, Bons expresses openness to various scaling solutions, including the potential for Solana to implement sharding or other forms of parallelization. He maintains a pluralistic view, stating:

"I don't care what free letter ticker achieves those goals. Ultimately, ultimately, I'm a pluralist."

This approach allows him to support whichever projects and technologies best advance the core values of decentralization and empowerment that initially drew him to the cryptocurrency space.

Lessons for the Crypto Community

The conversation with Justin Bons offers several valuable lessons for the broader cryptocurrency community:

  1. The importance of intellectual honesty and willingness to change one's mind based on new information and developments.
  2. The value of a multidisciplinary approach to analyzing blockchain projects, incorporating technical, economic, and philosophical perspectives.
  3. The need for critical thinking and skepticism, even towards popular or well-funded projects.
  4. The importance of focusing on fundamental goals and values rather than becoming attached to specific technologies or projects.

Implications for Solana

For the Solana ecosystem, Bons' evolving perspective offers several positive implications:

  1. Recognition of technical improvements: Solana's ability to address early critiques and improve its technology is gaining notice from seasoned researchers.
  2. Ecosystem resilience: The continued growth and development of the Solana ecosystem, even through market downturns, is seen as a sign of strength.
  3. Competitive positioning: Solana's approach to on-chain scaling is viewed as increasingly viable, especially in light of challenges faced by other scaling approaches.
  4. Potential for further improvements: Bons' openness to Solana potentially implementing additional scaling techniques like sharding suggests room for continued technical evolution.

Challenges and Opportunities Ahead

While Bons' updated assessment of Solana is largely positive, he also highlights areas for potential improvement or concern:

  1. Governance: While Solana's current validator stake-weighted upgrade system is seen as a step in the right direction, there's room for more decentralized governance mechanisms.
  2. Continued stability: Maintaining network stability and uptime remains crucial for building long-term confidence.
  3. Balancing trade-offs: Solana must continue to navigate the balance between high performance and decentralization.

Conclusion

Justin Bons' journey from Solana critic to supporter exemplifies the importance of open-minded, evidence-based analysis in the fast-moving world of cryptocurrency. His willingness to publicly revise his stance based on new developments and deeper understanding sets a valuable example for the community.

For Solana, this evolving perspective from a respected researcher and investor provides validation for its technical approach and ecosystem development. It also highlights the project's resilience and potential for continued growth and improvement.

Ultimately, Bons' insights underscore the complexity of evaluating blockchain projects and the need for continuous reassessment as the technology and ecosystems evolve. His emphasis on fundamental values like decentralization, scalability, and user empowerment provides a useful framework for assessing the long-term potential of various blockchain projects.

As the cryptocurrency space continues to mature, perspectives like those offered by Justin Bons will be crucial in helping both investors and users navigate the complex landscape of blockchain technology and its potential to reshape our digital world.

Facts + Figures

  • Justin Bons is the founder of Cyber Capital, the oldest cryptocurrency fund in Europe, established in 2016.
  • Cyber Capital invests with a century-long perspective but recommends a 3-5 year minimum investment horizon to its clients.
  • Bons has been a researcher in the cryptocurrency space for a decade.
  • Solana implemented fee markets, addressing one of Bons' initial critiques.
  • Solana has not experienced a network outage for several months, with the last one occurring in February 2023.
  • Bons is invested in over 30 different cryptocurrencies.
  • Cyber Capital's investment strategy involves evaluating over 100 different parameters to determine price targets for cryptocurrencies.
  • Bons believes that the blockchain trilemma (scalability, security, decentralization) has already been solved or can be solved.
  • Solana has implemented multiple client implementations, which Bons sees as crucial for decentralization.
  • Bons critiques Ethereum's pivot away from on-chain scaling to a Layer 2 scaling roadmap.
  • Layer 2 solutions on Ethereum currently account for only about 1% of total gas fees on the network.
  • Bons suggests that if all Layer 2 transactions were on Ethereum's base layer, the network would likely be deflationary due to increased fee burning.

Questions Answered

What made Justin Bons change his mind about Solana?

Justin Bons changed his mind about Solana due to several factors. Primarily, he recognized that Solana had addressed many of his initial technical critiques, such as implementing fee markets. He was also impressed by the continued growth and development of the Solana ecosystem, which defied his expectations of a typical "VC pump and dump" pattern. Additionally, when evaluating Solana against other projects and considering various factors, Bons found that its overall package became increasingly compelling, especially in terms of achieving high transaction throughput and maintaining a strong community.

What are the main criticisms Justin Bons has of Ethereum's Layer 2 scaling approach?

Justin Bons has several criticisms of Ethereum's Layer 2 (L2) scaling approach. He argues that the L2 ecosystem leads to fragmentation, making it difficult for users to navigate. He also expresses concerns about potential centralization risks in some L2 solutions, such as those with admin keys or centralized sequencers. Bons believes that the complexity of L2s cannot be fully abstracted away without compromising user choice and security awareness. Furthermore, he sees the shift to L2 scaling as a departure from Ethereum's original vision of on-chain scaling, potentially driven by conflicts of interest due to significant funding in the L2 ecosystem.

How does Justin Bons approach cryptocurrency investment and analysis?

Justin Bons approaches cryptocurrency investment and analysis with a long-term value investing strategy, focusing on fundamental blockchain research. He takes a multidisciplinary approach, considering aspects of computer science, economics, and political philosophy when evaluating cryptocurrencies. Bons looks at factors such as blockchain capacity, governance structures, consensus algorithms, and the internal politics of projects. He emphasizes the importance of decentralization and scalability in his assessments. Cyber Capital, his investment firm, uses a comprehensive evaluation system with over 100 parameters to determine price targets for cryptocurrencies.

What does Justin Bons think about blockchain governance?

Justin Bons views governance as one of the biggest unsolved problems in cryptocurrency. He advocates for on-chain governance mechanisms and believes that stakeholder-based governance models are important. Bons praises Solana's current approach of validator stake-weighted upgrades as a positive step, though he notes it's not yet fully decentralized governance. He supports the idea of self-funding treasuries as a way to align incentives and counteract potential corruption from external funding sources. Bons emphasizes the importance of designing governance systems that can mitigate the negative effects of human nature and power concentration.

Why does Justin Bons believe on-chain scaling is important for blockchains?

Justin Bons strongly believes in the importance of on-chain scaling for blockchain networks. He argues that without sufficient on-chain capacity, many use cases for blockchain technology become impractical or impossible. Bons states that a blockchain without adequate capacity is "a bit of a joke" and questions its purpose. This perspective informs his growing appreciation for Solana's approach to scaling, which prioritizes high throughput at the base layer. He believes that empowering users with scalable blockchain technology is crucial for the technology to reach its full potential and achieve widespread adoption.

How does Justin Bons' background in philosophy influence his approach to cryptocurrency analysis?

Justin Bons' background in philosophy significantly influences his approach to cryptocurrency analysis. He emphasizes the importance of applying philosophical reasoning to understand the broader implications and value judgments inherent in blockchain technology. Bons argues that while science is crucial for understanding technical aspects, philosophy is essential for grappling with concepts of right and wrong, and for evaluating the soundness of ideas. This philosophical approach allows him to remain open-minded, question his own beliefs, and change his views based on new evidence and reasoning. It also helps him navigate the complex ethical and social questions that arise in the cryptocurrency space.

What does Justin Bons see as the future of blockchain scaling?

Justin Bons remains open to various scaling solutions for the future of blockchain. While he has become more supportive of Solana's approach to on-chain scaling, he also expresses interest in the potential for Solana to implement additional scaling techniques like sharding or other forms of parallelization. Bons maintains a pluralistic view, stating that he doesn't care which specific project achieves the goals of scalability and decentralization, as long as these fundamental objectives are met. He believes that continued innovation in scaling solutions will be crucial for the long-term success and adoption of blockchain technology.

How does Justin Bons view the role of community and ecosystem in a blockchain's success?

Justin Bons emphasizes that technical superiority alone doesn't guarantee success in the blockchain space. He highlights the importance of community, ecosystem activity, and reaching a critical mass of adoption. Bons notes that sometimes a technology that is "good enough" can succeed if it has a strong community and ecosystem behind it. This realization contributed significantly to his changing perspective on Solana's potential for long-term success. He believes that a thriving ecosystem, active development, and strong community engagement are crucial factors in evaluating a blockchain project's potential for sustained growth and relevance.

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