The founder of Cyber Capital explains why he fell in love with Solana

Compiler: Luffy, Foresight News

Solana has had one of the most dramatic counterattacks in crypto history, and has been the subject of controversy since its inception. But now it’s no longer supposed to be stigmatized. From the infamous FTX crash, to fake usage metrics, centralized design, and downtime, Solana has gone from strength to strength. It really makes a difference, and it forces us to change the way we think about it. Many people are keen to sing about Solana; But actually, we really need to change our damn biases.

I’m to blame, too, and I have to admit that I’m partly responsible for people’s perceptions, as I’ve been one of Solana’s harshest critics for years. However, Solana is a very different place today. That’s why, in 2023, I went from being a critic to a supporter of Solana.

In this article, we’ll break down all of my past criticisms and demonstrate how Solana has changed for the better and why it’s worth supporting now. For the sake of the idea of decentralization, and for the sake of our shared cypherpunk values, changing perceptions is not a weakness, but a superpower.

Downtime issues

Solana has experienced multiple outages, which is really worthy of serious criticism, after all, a mature blockchain should never theoretically have downtime.

However, there’s no denying that Solana’s stability continues to improve. The key here is whether the change at the technical level gives us good reason to be confident in the future stability of their networks.

Let’s take a closer look at past failures and their root causes, and the uptime charts for 2021 and 2022 are pretty bad:

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Solana Status

On September 14, 2021, the Solana network was down for more than 20 hours. Restoring the network was extremely difficult due to excessive node memory usage. On June 1, 2022, Solana went down for more than 4 hours again, this time due to a transaction breach that brought the entire network to a standstill. On October 1, 2022, Solana caused another chain fork due to an invalid block, which went down for more than 3 hours.

I won’t go into detail about every time Solana goes down, it’s well documented elsewhere. In short, you can understand that this was a serious test for Solana, which was in extremely poor condition and full of vulnerabilities at the time. If it’s still the way it looks, I’m sure I’m still critical. But on the contrary, every time a problem is solved, it gets stronger. Next, let’s take a look at what happened:

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Solana Status

The following year was a significant improvement over the previous year, not perfect, but impressive. Most of these glitches are related to Solana’s lack of a well-developed fee market. The implementation of the fee market during this period was one of the main reasons I switched to Solana, as it paved the way for perfect stability the following year:

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Solana Status

However, Solana still has other problems: congestion, spam, RPC failures, network bottlenecks, and more. For a blockchain that has reached record highs in usage, these are normal growing pains. Importantly, there was no downtime, which is a huge improvement over previous years and a sign that Solana is maturing.

Fake TPS metrics

Let’s talk about fake usage data: when I first pointed this out in 2021, there was very little real usage of Solana. So at that time, it claimed to have reached more than 40,000 TPS, which was a complete lie.

Since then, Solana has cleaned up the misinformation in its communications and is no longer talking about TPS; In fact, Solana’s leadership is now much more honest when it comes to communicating with the outside world.

! Founder of Cyber Capital explains why he fell in love with Solana

! Founder of Cyber Capital explains why he fell in love with Solana

Even today, TPS data can be misleading. According to the most conservative estimates, the adjusted figures remain extremely impressive. I’ll give you a detailed math, first of all, the original TPS, which is currently 4247:

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Solana Compass

Now we can eliminate the voting transactions, and we are left with 1109 TPS, and for the sake of argumentation, we can also eliminate the “losing transactions”.

So, 4247 raw TPS - Voting Transactions = 1109 and then excluding “Failed Transactions” (calculated at - 40%) = 665.

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Solana Compass

! Black-to-fan, founder of Cyber Capital explains why he fell in love with Solana

Source: Dune Analytics

This adjusted usage is still far greater than all other blockchains combined today.

This makes Solana a clear leader in decentralized applications. That’s why some of the criticisms at the moment seem unfair, giving the impression that Solana isn’t leading in terms of usage, but it’s clear that it’s leading even by the most conservative estimates.

Moreover, it is not entirely reasonable to deduct “failed transactions”, as these transactions are already doomed to fail and are subject to a processing fee. These transactions are mostly driven by sophisticated participants who essentially double-pay their transactions in order to get their transactions included in the block faster, and expect most of them to fail. This doesn’t reflect the transaction failure rate of the average user, which in my own testing is less than 0.2%, which is perfectly reasonable.

But for the sake of argument, even excluding the failed deals, Solana still comes out on top.

Fake TVL metrics

The same problem existed with TVL data, sometimes greatly exaggerated:

! Founder of Cyber Capital explains why he fell in love with Solana

Fortunately, these are just growing pains as the ecosystem adjusts, and now the comparison of TVL metrics is fairer, and while not perfect, no blockchain is perfect in the current way of statistics. To say the least, blockchain ecosystems are now consistently applying the same standards.

Solana’s TVL still stands at a respectable $6 billion and is growing fast, with a bright future:

! Founder of Cyber Capital explains why he fell in love with Solana

Source: DeFiLama

Income

Even with record revenues for L1 and DApps, many are reluctant to face the reality.

What a lot of people don’t understand is that revenue metrics can’t be faked because Solana is decentralized enough to ensure that.

The reason is that in order to “fake” these fees, the “swiper” will have to pay all the fees out of his own pocket. Since there is no control over which validators receive these fees, the “swipers” actually pay for all the fees, and the fee income cannot be faked.

! Founder of Cyber Capital explains why he fell in love with Solana

Source: DeFiLama

I don’t know what to say to anyone who thinks that Solana’s founders spend up to $5 million a day to “fake” fee income, it’s a crazy conspiracy theory. Perhaps I should advise such people to look at their portfolios and see if they are playing with bias.

Arguably, revenue is the most important metric, as it proves the real-world use cases of cryptocurrencies while providing a solid, sustainable foundation for the future of decentralization and security.

Dangerous design trade-offs

Some of Solana’s design decisions, such as the Proof of History (PoH) and Turbine mechanisms, do sacrifice a certain degree of decentralization for speed. I have to face this head-on, what does that mean? In fact, this lowers the barrier to entry.

Roughly estimated, it may be about 20% lower. Still, this is only a minor weakening of economic security. Because this allows the attacker to DDoS the next set of validators, making them the leader, thus reducing the amount of tokens needed to launch a “51% attack”. I explained this in more detail in my previous criticism:

! Black-to-fan, founder of Cyber Capital explains why he fell in love with Solana

Source: Screenshot of the article “Criticism of Solana: The Trade-off Between Lies, Fraud, and Danger”.

Still, Solana’s market cap is 3 times that of its L1 blockchain, and even with this trade-off, Solana is highly secure. Is this particular trade-off worth it? Hardly.

What is certain, however, is that Solana is not insecure these days and has finally reached a balance. Because from a practical point of view, Solana is much safer than its competitors who are closer in terms of market capitalization.

Decentralization is a category that involves multiple interacting factors. For example:

A high-volume blockchain with 10,000 nodes running on a supercomputer is more decentralized than a low-volume blockchain with only 100 nodes running on a Raspberry Pi.

This is an extreme example, but it highlights my point. That’s why, despite Solana’s high node requirements and centralized design decisions, it’s actually very decentralized in terms of its scale. Because scale plays an important role in the actual decentralization process. Solana achieves this by distributing stake across 1,300 validators:

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Solana Beach

This actually confirms the long-standing theories and debates surrounding maintaining decentralization, which can be traced back to Bitcoin’s block size battles. There has always been a contradiction between scaling and decentralization, which is most typically reflected in the “blockchain trilemma”. The solution is to find the right balance between the two extremes, as being at either end of the spectrum will lead to failure, either useless or too centralized.

So, after Bitcoin and Ethereum deviated from that vision, it was a dream come true to see Solana realize it. Hopefully this will better explain my shift in stance as an old-school big-school Bitcoin supporter of the Class of 2013 and why I’m now switching to Solana.

Governance & Client Diversity

Solana has multiple competing clients, which makes a lot of sense for decentralization. Without multi-client, blockchain is effectively a single-party governance system. You can vote, but there is only one party to choose from.

Multiclient also greatly enhances the resilience of the network, as it means that a single implementation vulnerability can no longer bring down the entire network.

There are only a handful of blockchains that can do this, and Solana is on this list. So, this achievement is not to be underestimated, and it demonstrates a strong commitment to decentralization. Because it’s much harder to maintain two clients than it is to maintain one. This explains why few people are willing to take this step, preferring to cover up the obvious centralization problem, and these “shadow rulers” pretend that it is a “meritocracy” system, when in fact they can control any change.

Solana also has basic on-chain governance, although it’s still a work in progress. But just having such a promise is already a big cut ahead of Bitcoin and Ethereum, which in my opinion are actually dictatorships when it comes to making decisions on rule changes.

Solana’s recent failure to pass Proposition SIMD228 may seem paradoxical, but it’s actually a major milestone. Because disagreement and conflict are the hallmarks of true decentralization. Think about it… The proposal was supported by all of Solana’s senior leadership, yet stakeholders still vetoed it. There’s no better evidence of true decentralization than this. Now, with Solana, the checks and balances of good governance are really working.

Turn off the switch

It’s a ridiculous statement, and I’ve never mentioned it in my previous criticisms, but it’s at least worth a brief response.

Solana doesn’t have an “Off-Switch”. Unlike those with permissioned chains (like XRP and HBAR) or chains with some permissioned elements (like ALGO and BNB). It’s an undeniable fact that Solana doesn’t have any permissioned elements, and it’s an undeniable fact that it’s a truly public, trustless, and decentralized blockchain.

This misunderstanding can stem from not understanding the difference between a blockchain that stops functioning and an actual shutdown switch. Consensus mechanisms are complex, and there are multiple ways for blockchains to stop functioning, and this is not the result of centralized control. I don’t want to waste time on this kind of ignorant criticism, because anyone with a modicum of technical common sense knows the truth.

Fraud and lies

Fraud and lies are more difficult to tolerate. As I said in my previous criticism, there has been a series of bad behaviors on the Solana team over the years. Since then, though, the Solana team has really improved a lot in terms of honesty and professionalism in communication.

However, the ugly truth is that in 2020, the Solana team did lie about the circulating supply. Even if these numbers are no longer relevant to today’s market, they are undoubtedly a stain on Solana’s history. For the sake of complete transparency, I have elaborated on this in my previous criticism, and I have even attached evidence:

! Founder of Cyber Capital explains why he fell in love with Solana

! Cyber Capital founder explains why he fell in love with Solana

! Founder of Cyber Capital explains why he fell in love with Solana

Source: Screenshot of the article “Criticism of Solana: The Trade-off Between Lies, Fraud, and Danger”.

My response comes down to the concept of decentralization: a blockchain can transcend the state it was in when it was founded. Decentralization means that Solana is not defined by its past leadership. Especially with the advent of mass adoption, leadership is diluted and changed. This means that even if you don’t trust Solana’s current leadership, we can still support it.

Personally, I have re-established confidence in its leadership because the “bad behavior patterns” have stopped. But the main thing I want to say is that you don’t really need to trust the leadership.

That’s what decentralization means: you don’t need to trust anyone! The mistakes of the past are still there, but we can look to the future.

Summary of old criticisms

To summarize my past criticisms, as I did at the time:

! Founder of Cyber Capital explains why he fell in love with Solana

In 2020, Solana’s leadership lied about supply, but that has no substantial impact on now.

Solana has improved its external communications, and now the real TPS is at a new high!

The blockchain explorer now displays “Real TPS”.

TVL is no longer “fake”.

Most of the hazard trade-offs have been revised

I have always been a staunch defender of crypto principles, constantly adjusting my stance as cryptocurrencies evolve. Some people accuse me of childcare because my shift in position does seem sudden.

This accusation is not only a personal attack, but it is ridiculous on the surface, just think of how negative my attitude towards Solana has been in the past. Even if they tried to buy people, I was definitely the last one to be bought.

Perfection is the enemy of excellence

If we are too picky, the blockchain space will split into thousands of chains, which is not good for the development of cryptocurrencies. Or, at least, in achieving the goals of the cypherpunk movement, we should rationally distribute our support.

Remember, this is from someone who rejects 95% blockchain. I even loudly criticized the No. 1 and No. 2 blockchains (Bitcoin and Ethereum) by market capitalization in 2016 and 2022, respectively, for deviating from the on-chain scaling route.

That’s why, if we’re going to reject the third largest blockchain (Solana), it’s best to have a good reason. I’ve had a hard time, managing the world’s oldest liquidity fund and always taking a contrarian strategy. That’s why, as a matter of conscience, I can’t continue to criticize Solana anymore because they’ve fixed the flaws I’ve criticized… I had to be an admirer.

Even though the most popular content I’ve ever posted is a critique of Solana. This has led to a lot of my audience hating me because of my shift in stance, and a lot of people in the Solana community are wary of me, a former critic. Sometimes, I think, that’s the price of being a free thinker.

Of course, there may be technically better blockchains, but is the path to mass adoption as smooth as supporting Solana? I prefer to present my clients with real revenue figures rather than theoretical ones…

Importantly, Solana is decentralized enough to be censorship-resistant, immutable, financially sovereign, and so on, and it’s on a blockchain that can be used at scale today, which is ultimately key.

Conclusion

As a value investor who supports the overall scaling theory, it was only natural for me to switch to Solana as it emerged.

Solana is far from perfect; Even at the time, it wasn’t my favorite design. However, we must respect its success in use, because the real value lies in it.

Scaling without decentralization is pointless; And vice versa, of course, Solana’s opponents claim that it ignores this, which is not the case.

In an environment where Ethereum has decided not to scale L1 at all, Solana has become the new king. Of course, there are certainly many contenders vying for the throne, and diversity remains key. However, in the areas that really matter: practicality, usage, and revenue, we can’t ignore Solana’s clear advantages in the market today.

Ignoring this at this stage is either due to a serious misunderstanding of Solana or its competitors, or it is too biased. We all need to fix our damn biases! That’s why in this industry, being able to change minds is a superpower.

I was an early adopter of Bitcoin and Ethereum, and later became a critic when these blockchains deviated from the on-chain scaling route.

Solana’s success deserves our applause as cypherpunks. Because it’s only through scalable technology that people can be liberated, and Solana is delivering on that vision.

Perfection is the enemy of excellence, and Solana is good enough. Free or dead, you’ll fall in love with Solana just like I did.