Kain Warwick, founder of Synthetix, and Kyle Samani, managing partner at Multicoin Capital, debate the merits of Ethereum, Solana, and Binance Smart Chain. In this episode, they discuss:

  • why Ethereum is losing market share to Solana and BSC
  • whether decentralization matters and at what point decentralization becomes redundant
  • why they think Solana and Binance Smart Chain need to be taken seriously as competitors to EThereum
  • whether BSC or Solana is the bigger long-term threat to Ethereum
  • the biggest obstacle to Ethereum’s success (and it’s not gas fees)
  • how Ethereum will navigate fragmented Layer 2 solutions
  • Solana and its lack of developers
  • what differentiates DeFi from CeFi
  • why Solana has an edge on Ethereum in terms of composability 
  • how Ethereum will onboard new users
  • why Kain is such an ardent backer of Ethereum
  • why both Kyle and Kain think EIP 1559 and the potential for higher ETH prices is bad for Ethereum
  • if Synthetix would ever consider launching a cross-chain product
  • the viability of a multi-chain world
  • why Kyle believes the future holds a winner-take-most blockchain ecosystem

Thank you to our sponsors!

E&Y: https://ey.com/globalblockchainsummit 

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Kyber Network: Dmm.exchange 

Episode Links

People

Kyle Samani

Kain Warwick

Content

Kain’s tweet that instigated this pod:

Multicoin Blogs:

Kain Warwick and Sam Bankman Fried podcast

Comparing AMMs on different blockchains

BSC and Solana NFT platforms

Overview of Layer 2 solutions on Ethereum

Binance Smart Chain guide

Solana guide

https://thedefiant.io/solana-defi-ecosystem-overview/

 

Transcript

Laura Shin:

Hi, everyone. Welcome to Unchained, your new hype resource for all things crypto. I’m your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago and, as a senior editor at Forbes, was the first mainstream media reporter to cover cryptocurrency full-time.

Sign up for my newsletter, where you can learn how to pre-order my book: “The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze.” Head to unchainedpodcast.com and the sign-up for the email newsletter is right on the homepage.

EY:

Today’s episode is sponsored by EY Blockchain. Ernst and Young is committed to supporting the integration of the world’s business ecosystems on the public Ethereum blockchain.

Crypto.com:

The Crypto.com App lets you buy, earn and spend crypto, all in one place! Earn up to 8.5% interest on your Bitcoin and 14% interest on your stablecoins – paid weekly! Download the Crypto.com App and get $25 with the code “LAURA” – link is in the description.

Kyber Network:

Kyber’s Dynamic Market Maker, DMM, is the first DeFi protocol designed to adapt to market conditions to optimise fees, maximise returns, and enable extremely high capital efficiency for liquidity providers.

Laura Shin:

Today’s topic is whether Ethereum needs to worry about these ETH killers, the new generation of them, the prime examples being Solana and Binance Smart Chain.

Here to discuss is Kain Warwick, founder of Synthetix, and Kyle Samani, managing partner at Multicoin Capital. Welcome, Kain and Kyle.

So listeners should know that the impetus for the show was a recent tweet storm that Kain wrote up, saying that he was concerned about the Solana and Binance Smart Chain communities, “genuinely gaining organic traction much more so than say EOS or Tron of the last cycle.” Kain, can you explain your thoughts on this more?

Kain Warwick:

I think back in 2017, 2018, Tron and EOS made a pretty decent attempt at generating some traction and getting smart contract developers to migrate. Certainly EOS threw a lot of money at that process. And we just saw that they didn’t really get much traction — obviously it was a different part of the market cycle. It was a bear market. It was much harder to get traction back then. What we’re seeing now, especially with the high gas prices on Ethereum, is that there appears to be a bit of an opportunity for chains like Solana and Binance Smart Chain to really start chipping away at ETH dominance.

My thread was really about a bit of a wake-up call. I think that ETH-community can’t just be oblivious to this. This is actually happening, and we need to at least consider the momentum that these chains are getting.

Laura Shin:

And Kyle, I’m just curious, do you agree with Kain’s description? I’m assuming that you would not be super concerned about this because you have invested in both Solana and Binance. So what’s your take on what you’re seeing?

Kyle Samani:

So I’ll preface everything — the premise of this kind of whole podcast episode — by saying that Multicoin is quite long ETH. We’re more long ETH than Bitcoin. And we’re even more long that than on SOL and Binance. We’re long kind of all of the primary subjects of this conversation.

We have felt for a long time that the Ethereum approach to scaling was just not going to be sufficient. Not that it won’t work, but it will just not be enough. And two years ago, it was a kind of a fuzzy claim. There wasn’t enough kind of clarity upon how exactly it was gonna work. Our intuition was that it just wasn’t going to get there. Fast forward to today and we have a reasonable sense of how the ZK roll-ups are gonna work and how the Optimistic roll-ups are gonna work.

And we can kind of sort of reason about how the interoperability with these things will work. I feel more convicted than ever that the scaling solutions that are here today for Ethereum are simply not enough. I think Solana is not sufficient by probably two to three orders of magnitude.

And I think what Ethereum of ecosystem is proposing is by five or six orders of magnitude away from being sufficient. I’ve just always thought we’d have to just try other angles and see where these things go. And the primary constraint is just parallelism. And I think that’s super important. I think it’s very important for the longterm health of all of decentralized finance and all of crypto to make sure we maximally explore the full design space and trade-offs of these different ways to scale. As opposed to being dogmatic about which set of ideologies is the right approach. We’re bullish all three approaches. Obviously to different degrees.

Laura Shin:

When you mentioned that about parallelism, are you saying because you just feel like sharding is not the way to go? What did you mean by that?

Kyle Samani:

So specifically, if you look at roll-ups, roll-ups specifically break what I call logical centralization. In a roll-up, if you have a transaction happening in the base layer, but the base layer doesn’t know what the roll-ups are. It’s actually just not a logical concept that exists in the base layer. And similarly, if you’re in a  roll-ups, roll-ups don’t know what other roll-ups are either. There are ways to bridge those things together into semi-ish seamless ways to make them interact with each other, but by definition requires some additional developer tax.

That developer tax, whether it’s some sort of state channel interface or something over THORchain or something over StarkWare.

There’s a whole bunch of people working on different theoretical ways to bridge all of these things together. I have no particular view of which of those methodologies is best. In fact, there probably isn’t a best, they all have different trade-offs. As you look at how kind of this heterogeneous layer 2 world is going to evolve, there’s going to be different layer 2s, and there’s going to be multiple instances of the same layer 2 tech.

Making all those things inter-operate across in all its flavors, optimistic flavors, different latency flavors, depending on like what the user’s preferences are, what the gas fees are at the moment in the in the network — there’s just a tremendous amount of complexity in all of these things. To be clear, none of these problems are intractable.

They’re all, by definition, tractable problems. But the amount of developer tax it will create for developers to provide a good user experience will be very, very substantial. By definition, that means developers will spend a pretty large percentage of their time and energy dealing with all of what I’ll just call this like plumbing crap instead of actually building good user-facing applications. As I think about kind of long-term horizon development, I think that’s very concerning because developers are gonna have to spend too much time thinking about this stuff.

Laura Shin:

Do you have an idea for how Ethereum could scale in a better fashion, or is it just simply that you think it goes back to that scalability trilemma? Obviously Binance Smart Chain and Solana are more centralized. So is it just simply that you think, at this point, the best solution is just to have a more centralized chain and to compromise on decentralization?

Kyle Samani:

The scalability trilemma is basically not correct for the most part. Degrees of correctness matter. So like today Ethereum people will tell you to run a node on a $500 laptop, but that’s not true, like look at the gas limit per block. And I think it’s 50 million if I’m not mistaken per block you’re like, that’s not running on a $500 laptop. That’s just not going to happen. A thousand dollar laptop is more realistic, and that’s probably generous.

If you look at Solana, today Solana is running on a $3,000 server, $3,500 server. But what we’re talking about here is like a 3x-4x difference in price on what hardware you need to do it. So let’s be clear about what that is in just absolute dollar terms, what that means. And it’s not 20x difference or 50x difference. It’s 3x-4x.

The second thing that matters is then to say, okay, obviously if the hardware requirements are higher, by that definition, there are fewer computers in the world of a higher hardware standard. But to what degree fewer computers? And then what’s the diminishing marginal return of having — as you go from 1,000 nodes of 10,000 nodes, you get some marginal degree of censorship resistance. As you go from 10,000 nodes to a 100,000 nodes, you are by definition getting less censorship resistance. This explicitly has diminishing returns. When people say you’re compromising on the trilemma, like it’s true in a very theoretical sense, but like in a practical sense, does it matter? To the degree that the hardware cost matters, it’s like, okay, is it is $3,000, is that the delta? Or is it something else?

The Bitcoin and Ethereum communities both have very strong ideological beliefs on let’s call it hardware costs as like the primary constraint, which is fine. Those beliefs are reasonable. But like there is no godforsaken reason to believe that those were the right bounds to use. And I think it’s actually quite important to test what those bounds should be. Whether the number is 4,000, or 25,000, or 200,000. Probably shouldn’t be 200,000, probably shouldn’t be 25,000.

Laura Shin:

Kain, what do you make of what Kyle is saying and his take on your tweet storm?

Kain Warwick:

I think broadly it’s accurate. I don’t disagree that there is going to be a lot of thrashing. I mean, we’re in the middle of this right now. Like the Synthetix project has spent upwards of 75% of its resources over the last six months working on scaling. Now that’s an investment that we decided was worthwhile making, and it’s an investment that’s gonna pay off for the rest of the community because we’re going through a lot of issues that other people then subsequently won’t. Chainlink is doing doing the same thing as us. You know, there’s a couple of other projects, Uniswap, et cetera, that are kind of taking the brunt of this work.

Laura Shin:

Just to be clear, are you talking about working with Optimisim?

Kain Warwick:

With optimism, yeah. To to get through Optimistic roll-ups and get through the process of working out how to onboard from L1 to L2 contract modifications, et cetera. So there’s definitely a lot of overhead there and that doesn’t even speak to what happens once it works. And once we have L1 and L2, and once we have multiple L2s, and all of the interactions, et cetera, it is going to take up a lot of resources.

I suppose my view is that it’s just by necessity a thing that’s going to have to happen. When SBF and I had our debate a year ago now, or nine months ago, one of the things we sort of talked about was this idea that like, yes, maybe if everyone could converge on a single solution we could avoid fragmentation and avoid dealing with all these multiple layers and all that stuff.

It’s just not going to happen. Like as much as we might want that to be the case, it’s just not going to. We need to be realistic and accept that there will be some level of fragmentation in this process, and it is going to be overhead for engineers and developers in this space and people building in this space. I think it’s kind of a necessary process that we need to go through. To the second point around sort of decentralization and what the threshold upon where it is, I think there was an interesting kind of thing that you slipped in there, which was a $3,500 server in a data center somewhere. That’s not exactly the kind of expectation I think we have around like running an Ethereum node.

Like an $1,000 laptop or a $500 laptop — there are other requirements to run a Solana node that are maybe over and above commodity hardware, commodity access to data availability, or whatever, that I think are pretty critical in order for that throughput to be achievable. And I think running everything inside a data center, or multiple data centers, or whatever, is like not just a quantitative change, I think it’s a qualitative change. If I can’t run a node in my house because my bandwidth is not sufficient because of my cable modem or whatever, that puts a severe constraint on who can actually participate in the network, which I think is important. It’s an important thing to note.

Laura Shin:

Well, so let’s now just talk about kind of the two main ETH killers of the latest vintage that everybody’s been talking about. How would you guys characterize how Binance Smart Chain and Solana have kind of filled the gaps that Ethereum is leaving with its high gas fees and it’s issues with scaling?

Kain Warwick:

Binance Smart Chain has taken a very smart approach. Like everything that Binance does is very smart. They’re a very smart and efficient organization. It’s just, they may not be aligned with the Ethereum community, for example. And in fact, I mean, they’re not. Binance is a company that is trying to maximize profit. They’re very effective at it. And so I think that the Binance Smart Chain traction that they’re getting is not necessarily at the expense of Ethereum.

It probably is pulling some liquidity away, but I think it’s liquidity that right now is priced out, realistically. There’s obviously some additional incremental loss, but at the moment it’s basically people that are priced out that are using Binance Smart Chain. You can very quickly spin up the same codebases and clone stuff or make minor modifications, to get it running on BSC.

So it’s just going to happen. It’s just a realistic thing. That’s where I say, I think, that the fact that Ethereum has taken longer to scale than we would’ve liked has created this market opportunity for someone to do that. The fact that Binance is the smart people that are doing it — it makes sense that it would be Binance.

I think Solana is different in that it’s much more of an existential threat to Ethereum. Because this question of wonky considerations for the average person around how decentralized is it? What hardware can you run it on? What are the requirements, et cetera? The average person doesn’t care that much. I think the average person, if they looked at Ethereum and Solana versus BSC, they’d probably say like, yes, I understand that this is a fairly centralized network and it’s run by a single entity effectively.

And they can make a distinction there. I think it’s much harder for the average person to make a distinction between Etheruem and Solana. And so I think Solana is a much larger threat to Ethereum and is something that the Ethereum community needs to be mindful of. You can lose market share. Leaders fall behind all the time, especially in nascent phases of tech revolutions, right. It’s very easy for someone to fall behind. We just need to keep ourselves accountable and make sure that we’re aware of it. We can’t just hand wave it away and say, well Solana is not a threat to Ethereum and because of X, Y, or Z ideological view that we might have. I think it’s really important.

Laura Shin:

And just to go back earlier, when you were talking about how easy it is for developers to build on Binance Smart Chain, it’s because it’s Ethereum compatible. So it’s literally like almost a copy paste type thing. However, so it’s fascinating that you say actually Solana is the bigger threat because the Solana is not a Ethereum Virtual Machine compatible. So why do you think that Solana is the bigger threat?

Kain Warwick:

Most people can differentiate between Ethereum and Binance Smart Chain. I don’t know if most people can differentiate between Ethereum and Solana. I think also there’s another barrier, which is, if anyone can just copy-paste code from Ethereum to Binance Smart Chain, you get some interesting second-order effects of things blowing up and rug pulls, and all kinds of crazy stuff. Which undermines that ecosystem. I think the barrier to entry of having to actually write your own code in Solana means, by definition, you get better engineers, you get better teams there. There are more credible teams. They’re going to be able to take that code and develop it further. And it’s just an ecosystem that’s going to be much more competitive with Ethereum, realistically.

Laura Shin:

Oh, okay. So you’re saying it’s going to attract developers as opposed to like right now, Binance Smart Chain might just attract more users who are priced out of Ethereum, but maybe not so many developers. And that’s why Solana is the bigger threat. Is that it?

Kain Warwick:

I think so. I think there is a filter in Solana where like you genuinely can’t take solidity and drop it in and run it. Like you need to actually rewrite smart contracts from scratch. That means you need to have a better understanding, not a perfect understanding necessarily. And there’s definitely some cloned projects on Solana that have kind of taken code and just ported it across. But I think that, in general, it’s not as easy, which means that you have a filter and you get better engineers and better teams.

Laura Shin:

Okay. And Kyle, obviously Kain and I covered a lot with that, so you can kind of respond. I was asking some follow-ups cause I was curious, so go ahead and respond to whatever you’d like.

Kyle Samani:

So I agree with almost everything Kain just said. And as someone who obviously has spoken a lot of Ethereum projects over the last 12 months and said, hey, do you want to port over to Solana? I’ve actually seen both ideological challenges and engineering challenges in getting them to do that. And like in last September, October, I thought I was being successful. And I since realized I failed completely. I think my hit rate was actually zero. And so again, it’s partly ideological reasons. And then as Kain alluded to, actually more important are the engineering reasons.

One thing I’ve observed across the Ethereum community is you have these engineering teams who are all kind of oriented around solidity. And Solana is built on rust. Rust is actually, in basically every way, a more modern and better language.

It’s tremendously more, I’d say, intellectual and has toolchain firepower behind it because it’s just an enormous kind of global thing. But most solidity devs don’t know rust and vice versa. And it’s been hard logistically to see. I think it’s been very logistically difficult for an Ethereum based engineering organizations to figure out how to hire, grow, augment their teams and then kind of manage two side-by-side teams. I think it’s just a logistically difficult thing to do. So I concur with everything Kain said there.

I think that the key thing that kind of gets… Kain’s comments about an existential threat, I think are accurate. And I think this kind of all gets down to like the ideological beliefs around basically like what degree of weak subjectivity is sufficient in these systems.

I would argue everything in the world basically is weakly subjective. And what I mean by that, is like the Bitcoin maximalist view is you need to be able to verify every single transaction from genesis in 2009 all the way to today. And if you can’t verify every single transaction yourself then the system is bad and evil. That’s like the purely objectivist view. But I think that’s just an unnecessary bar to hold any of these systems to, because like, your life is weakly subjective.

What do I mean by that? Well first, you read the history books and you don’t actually know what happened 500 years ago. Like it’s just been like, some guy wrote it down and that guy passed it on to his kids and then he passed it on his kids.

You don’t actually know. So like even like basic concepts, like history, are, by definition, weakly subjectiive. But even on like on a more practical basis, I’m in a building right now, the two of you were also in buildings right now. There is a roof over your head, there were architects that designed the building and you’re generally not worried the roof is going to collapse and kill you. Like you get in a car and like there’s a bunch of pistons firing and it’s literally lighting stuff on fire and exploding and like you generally don’t care or think about it. My point is you don’t have to verify all of these things yourself.

So the world works on a weakly subjective basis, where you don’t need to verify everything. And so the question in my mind is what degree of subjectivity is okay for some sort of global, permissionless financial system.

One view is that I have to able to run my own node and that the dollar cost, and let’s say bandwidth requirements, have to be below some threshold. Let’s say, I don’t know, it’s a thousand dollars and I don’t know, a hundred megabits per second or whatever — pick your numbers. I think that’s probably too restrictive. My intuition is that so long as a sufficient number of companies, like as long as you can get to somewhere between 10,000 and a 100,000 around the world, it’s enough that all of the other 7 billion people know that those other people are sufficiently honest and sufficiently well-intentioned. That’s going to be organizations like Coinbase and like FTX, like there’s going to be a ton of well-known, reputable institutions and not just anon guys in their basement.

And so as long as you have a sufficient number of them who are distributed around the world, who all concur on the same consensus set, what are you getting as you go from, let’s say, 20,000 nodes to 2 million nodes? That extra degree of censorship resistance and that extra degree of inclusion, to me… I mean, I would love it to have it. The forced engineering trade-offs it makes in terms of gas costs, latency, in terms of all these other weird secondary effects on devX and UX. I find that kind of to be the threshold for the trade-off.

It’s an open question, but I think as Kain’s alluding to, like, that’s kind of the existential open question. I think most people in crypto have taken for granted that the answer to that question was like in this pretty narrow range, and I think Solana has opened a lot of people’s eyes to, hey, maybe the range is a little bit wider of what is actually the right answer.

Laura Shin:

One thing that I want to explore a little more here is just how Binance Smart Chain has actually gotten a lot more traction early on than Solana. It’s just fascinating, both of you, I think view Solana as something that could really be more of an Ethereum killer than Binance Smart Chain. Solana really does not at the moment have the same kind of traction that even Binance Smart Chain does or has had at different times over the last few months. There was a period where for instance, among the different automated market makers, PancakeSwap actually did have higher volume than Uniswap. Obviously now with Uniswap V3, that’s not the case, but can you just tell me kind of like how you see this playing out in the short term, since it is, at the moment, Binance Smart Chain that has posed kind of more of a threat to Ethereum?

Kain Warwick:

My view, I guess, is that BSC is kind of an anomaly. It’s a bit of a blip. There’s a moment in time where Ethereum scaling has been slow enough and the amount of activity that’s been generated on the chain is… I think this is one of the things that I think the point of that thread was about, was that we need to kind of not be so oblivious to these things. I think there were a lot of people in the Ethereum community that thought L1 probably can handle most of the activity that we want for the foreseeable future. And yeah, it’s important that we scale, but it’s not like an existential threat. We’re not gonna get caught out. Well, we’ve been caught out. There’s way too much activity to the point where there’s an overflow of activity that should be on Ethereum that has just drifted off into this other chain.

That’s just a missed opportunity, I think, for the Ethereum community completely. Does that get pulled back in when you have roll-ups and, and things like Polygon and zero-knowledge scaling solutions that are much better and at scale? Yes.

I think that all of that activity that’s happening in Binance Smart Chain, to a large extent, the vast majority of it will come back over once the gas prices are low enough on these other solutions. I think where Solana differs is that, again, it’s going to be a harder road for them to scale and to get activity to come across because it’s not just as easy to kind of port something across. So you can’t just do the PancakeSwap swap thing, right.

Someone needs to build the PancakeSwap of Solana, and it needs to be built from scratch in rust — that’s just harder to do. And it’s just harder to kind of transfer that across. My sense is that Binance Smart Chain will maybe lose some relevance once we get scaling. Whereas Solana, I think once it gets momentum, it’s going to be hard to unwind that because they’re building a parallel ecosystem with different engineers, different skillsets, different approaches.

They have really taken, to Kyle’s point, they’ve accepted that there’s maybe a wider range of censorship resistance, if you will, right? If that’s what it kind of ultimately comes down to, that is acceptable. And that you can have fewer nodes and it’s probably fine. And the vast majority of people don’t care. As long as there’s some people who care, people are going to sort of be happy to trust those people that do care as long as they know that there’s sufficient number of them. And what is that number? And what’s sufficient?

I didn’t know that this was going to devolve into like an epistemological debate, but I think it’s a good point. There’s not some answer that the Ethereum community or Bitcoin community has like gotten right necessarily. Like we don’t know what the market will bear. The market might be willing to bear much more because they’re not as ideologically concerned as we are. The majority might be very happy to have a much wider range of answers to that question.

Laura Shin:

Kyle, did you want to add anything?

Kyle Samani:

Yeah, I think the other thing I would add that I think is important to think about is stability and ability to project how things are going to work in the future. So gas fees is one obvious problem. That’s kind of the most salient one you see at the moment.

I would actually argue that that’s not the biggest problem. The biggest problem is… if you’re going to be Twitter or pick your big company of choice. And you want to say, okay, we’re going to like go embed crypto in a fundamental way into our application. Whether it’s with some social tokens or Bitclout, or some trading thing, whatever, I don’t really care, just something. And you have a hundred million daily active users on your app right now. If you have 100 million today and you reasonably expect you’re going to grow over the next three years, you will have 200 million users in three years or whatever.

You need to have a very, very, very strong belief. You need to have a very strong understanding of how the system works at the current moment. More importantly, you need to understand how you expect the underlying system to continue to evolve over the next two or three or four years, at a minimum, before you make any sort of large technical commitment like that.

And the biggest challenge the Ethereum ecosystem faces actually today, is that it is actually impossible to answer the question: what does a scaled Ethereum application look like in 24 months? It’s not that I don’t know, or that Kain doesn’t know, it’s that it’s actually not possible to know because you have too many things that are interfering with each other right now. From these various optimistic roll-up layers, ZK layers, and state channels. And it’s just, there’s just too many things that are all about to run into each other.

And no one knows how it’s gonna all play out. You just can’t make any projections. You can be optimistic and say, I think it will get figured out. And that’s a reasonable thing to believe. Some people will believe that with higher probability than others, but you can’t know with any degree of certainty, how does an application actually function on Ethereum at some level of scale in 24 months? It just is not possible to know. I’m not sure when it will be possible. 24 months, maybe. 12 I think is pretty optimistic. 24 seems reasonable, but it could be 36 months before that answer is really knowable. Being able to provide stability over a long horizon for large companies to commit to is extraordinarily important because when you have a large user base, the number one thing you can’t do is just screw up your entire application.

I’d say the reason I’m actually most optimistic in Solana is it provides that stability in that like in terms of just how does it scale. Then, also, in terms of just like the core development environment, which is like it’s based on the rust community. And it seems like rust is going to like slowly replace C++ as like powering the guts of like everything in the world. Linux is going to start rewriting code in rust. And so kind of that degree of technical depth and kind of integration into just all software around the world, like there’s real deep important considerations here.

Laura Shin:

So we’re going to talk a little bit about some very specific events over the next few years to see how this might play out, but first, a quick word from the sponsors who make this show possible.

EY:

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Laura Shin:

Backto my conversation with Kyla and Kain. One note before I ask my next question. Kyle, what you were saying about rust is interesting because, as you know, I’ve been working on this book and what you were saying about it, replacing C++ reminds me of how Gavin Wood, when he left the Ethereum Foundation and started Parity, they chose to make their next client in rust. His previous client had been in C++. So yes, I’ve heard a little bit about the benefits of that language. I do see that there are developers who are going in that direction.

So let’s just now talk about all these different layer 2s, because, you’re right, right now, Ethereum is in a somewhat messy period with a lot of fragmented layer 2 scaling and different projects on different layer 2s. So for both of you, how do you see Ethereum best navigating this period while we have these other competitors that are able to already handle more transactions per second?

Kain Warwick:

Maybe I’m being overly optimistic here. I think the period of highest friction is probably the next six months in terms of getting some level of consensus about where we should be trying to scale Ethereum based applications. I think one other consideration, to go back to what Kyle said before, for a large organization, it’s not just throughput. Like that’s not the only consideration. I think they’re an important consideration, which is this idea of credible neutrality.

Yes, Ethereum might be fairly opaque in terms of what the roadmap looks like and what something will look like in 24 months or three years. But I think that, at the moment, even if you ignore maybe the fact that Solana is more centralized from a node perspective, it’s far more centralized from an organizational perspective.

There is a group of people sitting in a couple of places around the world that are kind of driving the majority of development. And I think Ethereum is in a very different place. If you’re looking at a large organization that’s trying to work out which platform they believe is going to be the best place for them to put resources into, I think we’re already seeing that large scale particularly for financial applications. Maybe less so for social things and in your Twitter and Reddit and things like that. But certainly for financial applications, Ethereum is the place that you go as long as you’re not so concerned about throughput. If you’re trying to put a hundred million users on something, that’s probably not going to be viable. But when you’re issuing a bond or something like that, I think we’re seeing that Ethereum… we don’t have central banks issuing bonds on BSC, for various, obvious reasons.

Ultimately what it comes down to is, can we get to a level of scalability where we start to see some traction? I don’t think we’re going to see Twitter fully decentralize itself in the near term anyway. But if we see some social applications that are running on roll-ups or zero-knowledge scaling solutions that are getting some level of traction — that will provide confidence, I suppose, in larger organizations to start to look into this. It is going to be an incremental process. I don’t think we just see a wholesale migration to any decentralized platform, whether it’s Solana or Ethereum or BSC.

Laura Shin:

Kyle, what do you think?

Kyle Samani:

I agree with kind of everything Kain said there.

How does Ethereum kind of deal with this? I’m not sure what the answer to that is because the problem is that Ethereum is not just one thing for one group of people. It’s a whole bunch of different people, living in a bunch of different places who disagree with each other on a whole bunch of things. So I’m not sure what they can do about it. And the reality is that in the long run, the experimentation going on now is necessary because you need to find the right trade-offs and it’s not clear what the right sort of trade-offs are. Experimentation is the only way to figure that out. The best thing they can do is move as quick as possible and try and play nice together as best as possible. But those are kind of obvious things.

I think the other thing that I really think about here, is that like, what happens when you have an application that’s well-known, a consumer-grade application with 30 million or 50 million daily users? Not like 500 million daily users, but like 30 or 50 kind of scale. What’s the highest probability platform, if you assume that application has to exist at some point, which I actually assume a hundred percent probability that such application will exist. If I didn’t, then I wouldn’t have the job that I have. What’s actually the highest probability location of where that application ends up living. On the surface, the answer is obviously Ethereum, but, actually, if you peel it back and think about it a little bit more, I would actually argue the only answer Solana.

Because as Kain said, like the scaling is gonna be incremental, which I agree with that statement. And so you’ve got all these people around the world, looking at crypto prices and experimenting with stuff and playing with things. And they’re all trying to figure out how to make stuff work. And if you just assume your default is I have to have support for 20 million users, then you kind of limit your choices really fast. If one of those things starts to work in the reasonably near future and gets to a reasonable degree of user your scale, that’s like widely recognized and understood, I think the relative perceptions will change really fast.

The biggest surprise to Multicoin in the last nine months has been the price of ETH-BTC. We were convinced BTC was going to perform ETH this cycle because of the big institutions coming in who were going to be buying BTC and not buying ETH.

We thought they were going to be concerned about ETH 2 and proof of stake. It’s confusing and the monetary policy is undefined. We really thought that that kind of degree of confusion was gonna cause ETH-BTC to go down. We were obviously dead wrong. ETH-BTC has way outperformed expectations. And so that’s forced us to reconsider what the marginal buyers are caring about?

They seem to be undervaluing the digital gold thesis and overvaluing the productive utility asset thesis of things that are productive for large numbers of users that do useful things. And so if you kind of just lean into that even further and say, okay, well, as this evolves, where are those dollars going to migrate over time? It just seems pretty logical to me that those dollars are going to migrate to where they see the 50 to a 100 million daily active users. And I think the probability that that application ends up on Ethereum first, is actually much lower than the market kind of assigns. And so just looking at how our views have changed over the last nine months on ETH-BTC, I think the market’s view has changed on SOL.

Laura Shin:

I just kind of need to pull together a bunch of different strands here, because I feel like some of the comments have gone one way and and at other points a different way.

For instance, earlier, Kyle, when you were saying that you actually had not convinced any developers to move over to Solana. Despite all we’re saying about the superiority of rust and about how Solana offers a better experience for developers and blah, blah, blah. Why do you think that you didn’t convince any developers to go over there? And then yet it was just funny that you mentioned that at the same time that you were saying the next really big application for that size, 30 to 50 million users, I think will be on Solana. So I’m just kind of curious to hear how you put all that together.

Kyle Samani:

To synthesize that into like five words, the answer is on a global developer basis, solidity rounds to zero. Like it really does. The number of solidity developers in the world rounds to zero — among all developers. And so that’s why it doesn’t matter. And that’s why the Solana team has stopped trying to convince new developers.

Laura Shin:

Oh, I see.

Kyle Samani:

To be fair and to be clear, I don’t think that ETH developers don’t matter as people or with the product they’re working on. I’m just saying in the aggregate universe of total developers the number of solidity developers doesn’t matter.

Laura Shin:

Then essentially, for Solana to take off, it needs to pull in new developers who aren’t currently in crypto or into blockchain. Is that correct?

Kyle Samani:

Yeah or they’re disenfranchised from ETH, or they come from the rust community, or, I mean, there’s all kinds of weird way, or they, or they work at Binance or FTX or Coinbase or BlockFi. The best example is Jump Capital. Like Jump is the largest market maker in all of crypto. They have the venture arm, which is capital. And then trading is like the main org. Single largest market maker in all of crypto. And they’re one of the largest trading firms in the world. They have 900 full-time employees, trading every single asset class around the world.

And they’re deep in crypto. They’re trading on DeFi, they’re trading on every single centralized exchange around the world. And like they’re saying, like, okay, we, we think we can build a big part of the future using their new oracle called Pyth that they announced. Jump obviously trades on all all these assets on all these venues around the world. Obviously, they’re going to pipe in a bunch of the data that they’re trading from these other places into Solana. So you just look at people like that, and it just makes you wonder, where does that lead?

Kain Warwick:

I love the Jump guys and I talk to them regularly. I think they’re an amazing company and they do a really good job. They’re amazing market makers. But I think what’s interesting, is they still have a very TradFi DNA. They don’t quite get everything DeFi. I think there is an aspect of understanding it from an ideological perspective.

So when we were talking about this oracle network that they were going to launch, one of my concerns with this is that they are looking at it from a very different perspective — and maybe that’s fine. The trade offs and optimizations they’re trying to make are coming from a very different angle of like a TradFi, centralized angle and not quite rocking, maybe, what the trade-offs are that need to exist for a smart contract developers to want to adopt something.

So I think Jump is actually a really great example of how someone can maybe get it wrong and go, okay, we’re over-optimizing for throughput here. Throughput is addicting to them. They can’t get themselves out of that mindset. I think that the fact that the siren song of Solana attracted Jump is kind of indicative of one of the dangers of maybe not having that deep understanding of what the trade-offs are in decentralized finance, that the solidity engineers who’ve been working there for the last four years have like deeply ingrained. Like we understand how these things work, and we understand why they work that way. We did all the dumb things two years ago, three years ago, four years ago.

We’ve learned our lessons. Someone who’s coming from a very centralized, TradFi perspective is maybe not going to have that understanding and may optimize for the wrong things. And I think in the case of Jump and this oracle network on Solana, I think they kind of have. I think they would have been better off building something and integrating with existing systems in the Ethereum network, like Chainlink, for example. They’re gonna hate me for saying this, but I honestly think that they would have added more value there, had they done that, but that’s my opinion. And I’ve told them that myself, but I think it’s a really good example.

Laura Shin:

Kyle, what do you have to say?

Kyle Samani:

There’s an open question that we have. Sometimes we iterate on these internally, sometimes it kind of pours out on Twitter, of like, what exactly makes DeFi different than CeFi. What are actually the properties that matter that are different? That’s kind of the crux of what Kain’s getting at. There’s a few obvious ones and there’s a few that are maybe more debatable.

So like the most important ones are obviously non-custodial like, it’s probably the single most important one. The fact that you can have contracts hold assets instead of people or organizations is the kind of paramount to this whole thing. The fact that it’s transparent is probably super important. The fact that you can rehypothicate collateral between systems is really important. Beyond that, it’s not clear to me that there’s any actual differences between DeFi and CeFi on a strictly financial basis. There’s obviously engineering differences, especially as it pertains to distributed networks versus central databases. But on like a strictly financial basis, I think those are the only properties that matter, that differ. And so if that’s the case, then it’s not clear to me why Jump is doing wrong. But there’s maybe an argument that I’m myopic and missing some things and there’s some others,

Kain Warwick:

I don’t think that you’re strictly missing something, but I think it’s kind of a question of like, what are you optimizing for? I think someone coming from CeFi or coming from TradFi just has a mindset of what they’re optimizing for. They’re optimizing for throughput. They’re not necessarily factoring in the social consensus aspects of these things. Maybe that doesn’t matter, but it seems to matter in DeFi. Like there is a component of that that is important to factor in. Why do people trust something? Is it genuinely, credibly neutral? Are we concerned that it’s controlled by a single entity? It’s all of these considerations come in to what’s going on here, right. And I say this as someone who launched a project that was extremely centralized in the early phases.

The Ethereum community was very vocal about how terrible that was and what a bad person I was for doing that. We obviously had a plan to decentralize over time. I think that when you have something that’s coming from a very sort of centralized place without maybe a plan to kind of decentralize over time, there’s going to be some questions about, is this a place that I want to commit resources to because you end up with a situation of platform risk. I think that Ethereum has platform risk, but it’s a different type of platform risk than say, Facebook.

Laura Shin:

I actually also now just want to ask a little bit about DeFi composability because that was something that obviously, at a certain point, was a concern. But now that we have all this fragmentation anyway, on these different layer 2s, does that make it less of a factor than it used to be and make room for these competitors to gain market share?

Kain Warwick:

Solana, certainly the fact that it’s not taking the same sort of approach to scaling and having all these multiple layer 2s, I think will have an advantage in composability, just by definition. If we’ve got four different credible choices that a DeFi team on Ethereum can choose between like Arbitrum, Optimism, Polygon, StarkWare, or whatever. It just makes it hard. We could have a situation where four of the top DeFi projects all end up on different networks. That’s something that I think we need to be aware of. Whereas on Solana, if you deploy on it, you’re there, that’s it, you’re all in the same place.

Kyle Samani:

In my conversations with traditional finance people and I imagine a lot of Kain’s he’s had in the last few years, as well, one of the cool things is that they see the composability and the light bulb clicks very quickly. I think it’s a pretty important thing to them. They tend to understand relatively quickly that this is one of those step function improvements that the new system enables to the old system could not do. It’s certainly, I’d say intellectually the coolest of them and certainly the most kind of developer-centric also of them have kind of those native new DeFi properties. Solana clearly preserves those the best. And so I think there’s going to be a real group of people who are drawn to that.

I think, for the most part, the world does not fully appreciate the degree to which these things are true at the moment. But as Ethereum kind of continues to become more heterogeneous across layer 1s, side chains, and layer 2s. And as Solano just maintains everything organically as they are working in like a single composable shard, that will become a lot more obvious to the world in 6 to 12 months time. Today it’s just us kind of theorizing. That would be very obvious. And I suspect a fair number of people will be drawn to that because they will perceive it as the right thing to optimize for. And it is a reasonable thing.

Laura Shin:

Do you think then we could see kind of like DeFi moving to Solana? My next question for you was about, obviously, we’ve seen these NFTs taking off in the last several months and both Solana and Binance Smart Chain are creating their own NFT platforms. And so then I started wondering, oh, are we just going to see different parts of the crypto ecosystem on each of these different chains? Maybe DeFi moves to Solana or it grows its own kind of organic DeFi community that is more composable than DeFi in Ethereum is right now or something. How do you think that kind of these more niche interests in crypto will affect this competition?

Kyle Samani:

I don’t think Ethereum, where it is today, will be displaced in any meaningful in any foreseeable time horizon.

Laura Shin:

Even for any particular use case?

Kyle Samani:

The uses case is just whales, like, that’s just already true. The retail dollars have peeled off to Polygon and BSC. That’s not even theoretical, but that’s just true now.

I think the bigger question is where do you onboard net new users into the system and specifically as you get on-ramps that are like… You can argue that even the major crypto companies, Binance, Coinbase, FTX, whatever, they all have some degree of ideology into building the DNA of the company based on the founders and the VPs of product and whatever. Everyone here owns a bunch of crypto outside the job. And they all have ideological beliefs about X, Y, and Z. But like the people who work at, like, I don’t know let’s just say Revolut, for example, or whatever, or like a new bank in Brazil, those people, for the most part, they look at crypto, like their ideological beliefs are like 10x if not a 100x lower than the people who work at Coinbase, Binance, or FTX.

So they really don’t care about all the stuff that we like to spend our time thinking about. And so they’re just going to be looking at like, okay, well, where can I bring the users to get…  I want like a DeFi money market. And I want some loans and I want overcollateralization and I want these risk parameters, and I want some USDC and USDT.

And like, oh great Solana has it. They’re just going to not care. And it’s I think extremely rationale for actually I think the substantial majority of the world’s companies, as they look at crypto to kind of adopt that.

Kain Warwick:

I’ve said this before on Twitter. I think the demand — probably in some Solana thread where people were annoyed by something I said — the demand for decentralization doesn’t come from users. Like users don’t care. They just want to consume something that has some benefit to them. I think the demand comes from the engineers who have a belief that not just that they are ideologically aligned with the network, but that there is some practical benefit to being decentralized. And that being more decentralized has more benefits. But there has to be some practical benefit. If there isn’t, like my thesis on Ethereum is that like being on Ethereum will, over the long term, be better, that there will be practical advantages to being on Ethereum because of the way that it’s constructed.

And if that’s not true, then yes. Like of course, people are just going to go to BSC or Solana or whatever. So when Revolut or a bank, or like some FinTech looks at which of the platforms we can deploy on, my genuine hope is that the practical benefits that I believe that Ethereum has, will be obvious there. Why are you going on here versus going on BSC?

I think for, Ethereum versus BSC we can kind of laugh about it cause it’s pretty obvious what the benefits are. Like I could just run my own database if I’m Revolut, I already have that. So it’s kind of obvious that you don’t go to BSC, but I think it’s less obvious for Solana. And I think that’s the concern, I guess, that I have to bring it back to the initial kind of starting point that like, if the practical benefits of being more decentralized, are not 10x better, or at least 5X better or something, then yeah, we could just see people going to a network that maybe makes that trade-off a little less costly than Ethereum does.

Laura Shin:

So a couple of things, first I really was expecting you guys to disagree more. So it does surprise me how much you are agreeing.

Kain Warwick:

We’re both ETH whales, so it can’t be too bad. We can’t hate each other.

Laura Shin:

Okay. Well, Kain, out of curiosity, I mean, it just sounds like you would never build on Solana even as you talk about what the benefits would be to building there. So why is that?

Kain Warwick:

Ultimately what it comes down to is I don’t just have an ideological alignment to Ethereum. I’ve got a financial alignment. I’ve got a big bag of ETH and I’m here to make ETH as successful as I can. I think this is an interesting thing about when you talk about someone at Coinbase versus someone at Revolut. Someone at Revolut probably doesn’t have a bunch of equity in like Microsoft and isn’t like in Revolut advocating for like adopting Microsoft. It’s a weird thing in crypto where like you have this weird financial alignment of all these different players in the ecosystem. I don’t know if it’s good or bad, it’s just a thing that exists. And so for me, I advocate for Ethereum because I’m both ideologically and financially aligned with it, which also comes back to an earlier point.

I think that’s why I’m pushing so hard for us to converge on Optimism as the scaling solution. I think if we have a canonical layer 2 solution that is like the consensus solution, it will be much easier for us to compete with Solana over the next 6 to 12 months. If we don’t, and it is super fragmented and there’s no understanding of where I should go, what I should do, or which place I should be deploying to, I think it’ll erode the value prop of Ethereum much more. So that’s why I’m so aggressive about advocating for like, we all need to get on Optimism, even if it’s not the perfect solution, it’s the best solution that we have. It’s better that we will converge on something, which is not too dissimilar to SBF’s argument of why we should all go to Solano, interestingly. So I think we’re we’re kind of in the same camp, with different conclusions.

Laura Shin:

One thing I will say is, I think, however much you advocate that everybody get on Optimism, like that boat has already sailed. Already there’s fragmentation.

Let’s talk about EIP 1559. It will most likely make ETH deflationary. And that could actually obviously give some adrenaline to the price. So do you think that would then change this dynamic that we’re seeing where these other chains are taking market share. Kain, as you pointed out, you’re financially aligned to Ethereum, but obviously BNB and and SOL have really shot up this year. They had lower prices. And so it’s easier to get that big jump. Once we see EIP 1159 go through, do you think that could change that dynamic?

Kain Warwick:

I think it makes it worse actually. The price appreciation of ETH and the starting point that most people got in, really makes it hard for that wealth effect to kind of spread. Like if you think about the average person that comes into crypto and they want to maybe deploy $10,000 of capital, which would be pretty high. Let’s say they get four ETH right.

Unit bias is a dumb thing. If you believe that Ethereum is going to appreciate it on a percentage basis, more so than Solana or BSC, and you’re just purely looking for capital appreciation, then you should buy those four ETH. But there is an element of people want some level of meaningful ownership. If I turn up and I can get much more meaningful ownership of something like Solana or BSC, it’s not just unit bias.

There’s other factors there where people feel like they just don’t have a decent stake of the network. I think that that wealth effect that has really kind of accelerated for BSC and Solana is quite powerful in terms of locking people in.

How distributed is it? And how widely does that go? I don’t know the answer to that. But I do think if ETH continues to appreciate, and you get to a point where ETH is $10K-$20K, it actually makes it harder for someone new to the space to come in. How good do you feel about owning half an ETH with your $10K or something like that? How aligned do you feel to the network if you’ve got, you know 200 millionth of the network or something like that. Maybe it just doesn’t psychologically feel that good.

So I think that’s something that I worry about is price appreciation could have a negative effect.

The flip side is things like Polygon. Arbitrum will obviously launch a token, I’d say you know, Optimism will pretty obviously launch token. So when these new layer 2 tokens launch, I think that that will provide an opportunity for people to feel like they’re getting in early at a lower price point, lower network value. And that they can get alignment — even if they missed the ETH train or boat or whatever analogy you want to use — that they’ll be able to get some alignment with these layer 2 tokens. And I think we’re seeing that with Polygon.

Laura Shin:

Kyle, what do you think?

Kyle Samani:

I think EIP 1559 narrative is extraordinarily bullish ETH over the next, minimum, 6 months, probably 12. There’s never really been an asset in the world that has a credible claim on that negative issuance. A lot of people will find that very appealing and very intellectually interesting. And then combined, it’s got these cool things happening and then move to proof of stake. That kind of 6 to 12 month horizon for ETH looks very, very good, which is why we’re longing ETH.

The problem as Kain can alluded to is as the price of ether goes up, it becomes more expensive to use. And like even Arbitrum and Optimism, I don’t think will be cheap. They will obviously be cheaper, a lot cheaper than the ETH main net is now.

But assuming there’s no subsidies, I think you’ll still be $2-$5 transactions. Your transactions are not going to be one penny or two pennies. $2 transactions are manageable for most people, but like for the people who are putting in a hundred dollars, that’s still not reasonable. When you’re putting in a thousand dollars, they can live with it. But for the, actually the long tail of retail, it just doesn’t work. It still doesn’t work. So yeah, it’s just like a big logistical challenge. And 1559 will short-term feel very good. But medium term, it could be problematic.

Laura Shin:

Kain, when you wrote your original tweet storm, you might’ve seen Ryan Zurrer, formerly of Polychain Capital and the Web3 Foundation, tweeted back at you recommending that you reconsider the “us versus them mentality of maximalism and consider making Synthetix cross-chain.” And then he was like, “single-chain apps are going to get dusted. It is programmed.” So would you ever consider making Synthetix cross-chain? And why or why not?

Kain Warwick:

I think I have like three draft responses to that. I kept not publishing them. Maybe one of them was a bit too aggressive, and I was like I’m just not going to go there. I really like Ryan. I got enough people that I’ve debated with on Twitter. I don’t need to make another Twitter enemy. I think his point broadly is true. I think that the Ethereum community spends a lot of time talking about BTC maxis and how ridiculous a position that is. We need to be very careful to not fall prey to the same kind of thinking. Where we just assume that our position is true by default and never challenge it.

That was part of what that thread was about. That we should be challenging our assumptions and saying like, is there something we’re missing here? The market is sending us a signal. We can’t just bury our head in the sand and say, no, the market’s wrong, we’re right. That’s just not the right way to approach this problem. If the market’s making bad decisions for the wrong reasons, on some level, we’ve still failed because we haven’t given the market the information to make the right decisions for the right reasons. It’s a communication issue. Regardless of what the reason is, the market is doing something that we don’t think is a good idea, so we’re wrong. Just by definition. We need to work out how to fix that problem. So I think Ryan is right.

To come back to like, would we look at cross-chain, I mean, we looked at running on EOS in 2018. Like we were genuinely considering that. We ended up deciding not to do that and doubling down on Ethereum. And I think that was the right call. But Synthetix has very specific challenges around running cross-chain. The interesting thing is going from layer 1 to layer 2 and running across both chains will make that problem a lot less hard in the future. We will be able to support other chains much more easily because all the infrastructure will be there. I would imagine, most likely, it would be other the roll-ups, whether they be ZK or other Optimistic roll-ups would be the more likely adjacent place that we would deploy. For the reason that Kyle sort of mentioned as well. We don’t have the the infrastructure to spin up a rust team to go and rebuild all of our contracts and deployment them on Solana.

That would be very challenging. We could do it, we can do anything, but it would be a lot of resources to throw at something like that. So I think it’s going to be much more likely that EVM compatible chains will be where we go in the short term. But we’re not ruling anything out.

I should also say, when I say we, there’s a community that decides this stuff. I don’t decide that I’m just someone who says things on Twitter at this point. Personally, even if I said we’ll never do it, I can’t guarantee you that doesn’t happen. You know, the community could say, actually, this guy’s an idiot. Let’s go on Solana tomorrow.

Laura Shin:

Yeah. I think your Twitter bio right now says former benevolent dictator of Synthetix.

Kain Warwick:

That’s true. Yeah. Yeah.

Laura Shin:

So in the same vein of my previous question, I was just wondering, so obviously we have this THORchain that now makes it easy to swap between different chains. If we’re starting to see things like that, then does that make this question that we’ve been discussing in this episode moot? Will we eventually just see users seamlessly going to different chains rather than staying in specific ecosystems? And, if so, then will that just kind of make this multi-chain world that kind of grows the pie for everyone? Like will Etereum get bigger, Solana will get bigger, BSC will get bigger, et cetera. And it’s not going to be kind of this little tribal tribal view of crypto?

Kyle Samani:

I have some non-consensus views on this question. One of the common things you see as people talk about back in the day, in early internet software days, like making standards work together and there was competing standards and those people got together and then tried to make better operation standards. There’s a whole ton of history of this happening at many different layers of the stack from like networking pieces of the stack to like kernel pieces all the way through like the browser and HTML and all this stuff. Kind of a recurring theme in the history of software. The biggest takeaway from seeing that history play out many times across many layers of the stack is that the answer is always interoperability and that it’s not one size fits all.

Things kind of evolve to deal with backwards compatibility, basically like different things evolve at different speeds and then everyone has realized that they have to play nice and they all have to talk to each other later on. And a lot of people have used that historical framework to say there is a very high probability that the future must be multi chain for that kind of same basic reason.

I think that’s wrong-ish. It is obviously the right-ish today. If you look at our portfolio, we have big THORchain position and a big Solana position and a big ETH position. Obviously money says that we believe that’s happening. And I think with basically 100% probability that will continue to accelerate the world with a more heterogeneous — both within Ethereum and outside of Ethereum — over the next minimum 12 months and probably 24 to 36.

There are real costs to having multiple chains. And those costs are not just like developer costs or like the standard organization costs; it’s actually user costs in different forms of gas and the form of latency. The moment you do anything cross-chain, you guarantee an increase in gas costs and you guarantee increasing latency cost. Those two dynamics did not exist, for all kinds of previous iterations of these types of what I’ll call interoperability standards for DEXs. At least not in such an explicit way where that cost is not measured in billions to the penny, but where the cost is measured in like dollars. I think that’s a really, really big difference. Being able to stay synchronous, being able to stay composable, I think it is a lot more important than the kind of historical perspective, which led me to ETH.

Kain Warwick:

Broadly I agree. I think there’s a reason why we’re not talking about Cosmos, for example. There’s a reason why we’re not, maybe, maybe it’s a bit unfair to Polkadot. This kind of architectural decision of creating all of these little zones and having them all talk to each other, I just don’t know how sort of credible that is as a long-term solution. That’s why, again, I think Solana going down this path of making trade-offs that ensure composability for the longer-term versus things like sharding and various optimistic roll-ups in different flavors competing with one another. I think it’s has the best chance of unseating Ethereum.

It’s the thing that concerns me the most because it’s a good pathway. And when you get to start from scratch three years after someone else has done a whole bunch of dumb things, you can learn lessons from that and you can make optimizations and improvements. It’s just the reality. Like we’re still very early. We don’t have enough traction and momentum as an entire ecosystem to say that any one particular thing is going to work and continue to exist. So that doesn’t mean that I don’t think that Ethereum can fix some of the issues and I think some of the trade-offs that it makes are the right trade-offs, though they’re challenging. I do think that ultimately we will probably converge on a network that people will use because of that composable factor.

I don’t think we’re going to have these weird zones. I think there’ll be a way to kind of aggregate them all, seamlessly. Potentially like we’ve seen in the AMM space in DeFi where you have these aggregator layers sitting on top, but they have to be in the same place for that aggregation to work. It’s really hard to aggregate across these different zones because the cost and latency that it introduces and the lack of composability. I just think that that we will end up in a situation where most things, the vast majority of liquidity — it won’t be winner-take-all, but it’ll be winner take most. Most of the liquidity will end up in a single place. That would be the place where people go. My hope is that that’s an optimistic roll-up on Ethereum. But I can see a world where that’s not the case as well.

Laura Shin:

Speaking of the aggregators, I did notice 1inch is on Binance Smart Chain, but I don’t believe it’s on Solana. So that’s kind of interesting, given everything that we’ve said so far. Well, we’re well over time, but there were just kind of a number of different topics I wanted to hit. So I just wanted to make sure to ask questions about those items. Where can people learn more about each of you and your work?

Kyle Samani:

Yeah, so it’s easy to find me on Twitter. My Twitter handle is just my name, so it’s @KyleSamani. And then Multicoin has a blog. We publish stuff every now and again.

Kain Warwick:

Kindly. My handle is @kaiynne. And I publish stuff on the Synthetix blog as well, predominantly. So that’s blog.synthetics.io.

Laura Shin:

All right. Great. Well, thank you both so much for coming on Unchained. Thank you so much for joining us today to learn more about Kain and Synthetix, and to learn about Kyle and Multicoin, check out the show notes for this episode.

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