đ§đ Inside Solana's Plan to Replace Wall Street
130 years of financial markets history, removing 8-layers of middlemen, launching Solana in the depths of COVID, getting early PMF, and 2026 crypto predictions
Anatoly Yakovenko is the co-founder of Solana, the fastest scaled blockchain in the world.
Iâll be honest that Iâve always been skeptical of most crypto projects. So when I got a chance to spend a few hours with Toly the co-founder of Solana, I thought it would be fun to go deep on how exactly it works and see if he could convince me on any of the use cases.
We start by talking about how people were able to trade SpaceX shares on Solana pre-IPO, which parlayed into a history lesson on the last 130 years of US financial markets.
We then get into how Solana removes eight layers of middlemen that make-up the legacy financial system, whether you actually need to use blockchain to do this, the 4am inspiration to start Solana, how Solana was 10,000x faster than Bitcoin, why a16z passed on investing then paid a 1,000x higher price, how launching Solana at the bottom of the market right as COVID hit led to their success, why AI wonât take your job, growing up sharing one toilet with four families in the USSR, and playing competitive underwater hockey.
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Timestamps to jump in:
0:00 Trading SpaceX on Solana
3:02 Why Wall Street runs on 100 year old tech
10:51 US dominance created demand for tokenized stocks
13:58 Complexity reduces risk of the financial system
15:51 Do you need to use blockchain?
18:34 Privacy tradeoffs of public ledgers
23:45 Making a 10,000x faster blockchain
30:05 A new data structure based on time
32:54 Trading was Solanaâs first use case
37:41 Advice from his wife that led to Solana
40:05 Why a16z passed (then paid up 1,000x)
43:50 Rejection and COVID led to Solanaâs fast adoption
48:30 Best time to launch is the bottom of a market
52:56 Why Bitcoin and Ethereum were so slow
57:38 Rebuilding Solana with Alpenglow
1:01:23 35% of all stablecoin volume runs on Solana
1:04:26 Motors replaced 200 billion jobs, AI will replace 100 billion
1:08:17 Itâs selfish to protest data centers
1:10:11 Growing up in the USSR: one toilet, four families
1:12:27 Culture shock moving to the US
1:13:23 Government spending is fake GDP
1:15:49 Playing competitive underwater hockey
1:18:01 Armani at Backpack
1:19:23 How Solana survived the FTX collapse
1:22:47 There wonât be massive AI job loss
Referenced:
Find Anatoly on X / Twitter and LinkedIn
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Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Toly, welcome to the show.
Anatoly Yakovenko:
Thanks for having me.
Turner Novak:
Thanks for doing this, really excited to have you on. Something super interesting that I saw happening recently: SpaceX, before it went public, people were trading SpaceX on Solana. What was going on there? What does that even mean, and how do you do that?
Anatoly Yakovenko:
Well, thereâs a lot to unpack there. What you have to kind of understand first is what tokens are, and anything can be a token. It is literally just an entry in a database. Solana is a blockchain, and the only thing that it does is it really makes sure that everyone has the same copy of a database instance. Itâs exactly as dumb as it sounds. The simplest definition is a public database.
It can only give you, as a user of this public database, a guarantee that enough other people agree that you have the exact same copy as them. You basically constantly submit attestations that you have the same data, and you can see that, okay, two-thirds of the people all agree that we all have the same copy as I do right now, so Iâm still synchronized. Thatâs all it does. Itâs as dumb as email.
So when people say theyâre going to trade SpaceX, somebody has to create an entry in this database, and the database itself is not aware that this is SpaceX stock or anything. Itâs just, hereâs some entry, and itâs got a jumbled string thatâs a public key that doesnât mean anything to the database or to people. It looks like just a bunch of ones and zeros. And then they say, this represents SpaceX. Literally, somebody has to say, Iâm a company or an issuer of this token, and when you trade it, you will have some kind of claim that is related to the real SpaceX stock.
And then this claim is where we got 100 years of securities law and a whole bunch of other things that are very complicated to unpack. It could be a cash claim on the opening price, or a whole bunch of ways that you could derive that claim. But the best, final version of this, a true version, is if itâs actually a claim on real stock ownership that connects back to the cap table that the company and the government recognizes as belonging to the SpaceX Corporation.
Turner Novak:
So this is maybe a dumb question, but some people still might be thinking this. Why donât you just buy the SpaceX shares directly? Whatâs the benefit of being able to buy it on Solana instead?
Anatoly Yakovenko:
This kind of goes back to more than 100 years ago, to the railroad boom. Why are things the way they are? A lot of the US financial system was developed pre-internet, really pre-World War II, and itâs quite excellent. The reason itâs really good is because it failed a lot over 100 years ago during this massive railroad boom. When people think of the AI boom today as huge, I think the railroad boom was twice as big relative to GDP.
Turner Novak:
Iâve seen data around that, yeah.
Anatoly Yakovenko:
The amount of capital and money and steel and everything in the economy that went into it was astronomical. At the tail end of it, first of all, a lot of railroads got built, massive amounts. And at the tail end of it, a bunch of bad stuff happened. That bad stuff was that your neighbor could sell you a stock certificate to some railroad company. You donât know if thatâs a valid stock certificate. You donât know if the railroad companyâs valid, if theyâre actually building anything, and if the railroad itself is profitable. All these things have a layer of indirection for you to actually go verify, to be certain that what youâre paying for is a real thing.
So the US financial system and the really smart regulators at the time basically created separated, regulated entities that could operate one layer at a time, and they had to go get certified and get licensed with the government. Because of how narrow each one of these slots was, the government could assess their ability to do a good job in that narrow slot. That interface between all these layers, and the fact that there are different people operating in all of them, created this safety where if one of them catches a bug, it doesnât propagate to the final person, the retail user thatâs buying a stock certificate from their neighbor.
Turner Novak:
So what are all these layers, and whatâs a bug that you could run into?
Anatoly Yakovenko:
Literally, your neighbor creates their own fake stock certificate. Thereâs no company, nothing. Itâs just totally fake.
Turner Novak:
Like the Turner and Toly Railroad or something.
Anatoly Yakovenko:
Yeah. None of it exists, and youâre like, hereâs a railroad. Itâs really hot in Kansas. And youâre in New York, and youâre like, I guess itâs hot, Iâm going to buy it.
Turner Novak:
Yeah, the price is going up, it looks like.
Anatoly Yakovenko:
Yeah, exactly, the price is moving. So they create a fake one of a fake company. They create a fake one of a real company. Somebody creates a shell that is all real company, everythingâs registered, but they donât actually build any railroads. They just take the capital and run. A whole bunch of ways that this thing could fail.
So this is what a blockchain solves, in these little layers. I forget the terms of all of these. Thereâs a transfer agent, thereâs a broker-dealer, there is a depository company, and the issuer. Thereâs probably a couple more that Iâm not aware of. But who you interface with when you buy a stock in the US is usually the broker-dealer, the Robinhood, the E-Trades. Backpack is one of them. And they have to go talk to the transfer agent to transfer stocks that the users eventually bought.
They have to go to a transfer agent, which then has to tell the depository company, hey, a bunch of transfers happened this week, can you go literally move the physical box of issued shares from bucket A to bucket B?
Turner Novak:
Are they still doing that in 2026?
Anatoly Yakovenko:
They did. They actually would fly them around on airplanes until 9/11.
Turner Novak:
Holy shit.
Anatoly Yakovenko:
And because of that failure, they realized that that could be a catastrophic failure.
Turner Novak:
Oh, like youâll lose them all.
Anatoly Yakovenko:
Yeah. You have to go make them electronically tracked.
Turner Novak:
Wow. Itâs crazy that thatâs the thing that made us finally digitize it.
Anatoly Yakovenko:
Well, donât fix it until itâs broken, right? A system that works at trillions of dollars is hard to go and make changes to unless you can point to a credible threat. So, why people want to trade these is because a lot of these layers have not been digitized, and theyâre very hard to interface with. These are paper systems that have an API call that takes a week to complete.
Turner Novak:
And thatâs basically what weâve done, right? Weâve wrapped these paper fax machine processes with APIs that are still manual on the back end.
Anatoly Yakovenko:
On the back end, thereâs a person, and thereâs sometimes real physical stock certificates and things like that. Once you have a token that you can guarantee reliably settles to the real thing at the end, once that process of settlement is infallible, it doesnât matter what happens on chain. Eventually that stock ends up in a box thatâs moved from one place to the right spot. Thatâs the settlement portion. You can effectively then bypass all these other layers, and the system becomes much faster and cheaper and 24/7.
The reason thereâs demand for this is basically the world is getting wealthier, and the companies that are making the world wealthier are, and weâre blessed that they are, American companies. Itâs the Googles. These big tech companies are creating massive value in the world. Theyâre the cheapest, best products that are globally scalable. Consumers benefit a lot from them everywhere, and people want to trade them. As they get wealthier, they want access to investment into these great products, and you now have this global demand for US equities that is creating this unmet pressure.
So there have been a bunch of these attempts throughout history to go figure out a way to bridge global liquidity. Blockchain is the latest one, and itâs, I think, the one that is inevitable and the stickiest, because it eliminates people in the same way that, if you remember the â90s, Iâm dating myself here.
Turner Novak:
I kind of remember the â90s. I remember some of it.
Anatoly Yakovenko:
You were not able to type in your credit card information safely on the web because there was no encryption. People would steal your credit card numbers when you typed them in. And there was this dumb standard, SSL, that everybody now is not aware of, but itâs the lock on the website. When your URL bar has this little lock on it, the browserâs telling you that itâs safe to type in your credit card information, that itâs not going to get intercepted.
Similarly, a blockchain is a cryptographic database. Every transaction is tracked. If I have a token and I transfer it to you, and you give me potatoes or money or whatever, we complete a trade. You can actually see cryptographically where this token came from, who issued it. This entire chain, that is like eight different people in the financial world, can trace back all the way to the issuer. Thatâs the ideal outcome, it literally goes back to SpaceX, when the SpaceX domain signed it and Elon said, this is really my stock.
Weâre not there yet right now. I think the best version of this is weâre actually pretty high up in this layer, where a broker-dealer, a brokerage like Backpack that can transfer stock between brokerages, issues a token. So thereâs a Backpack version of SpaceX that they issue, and you can now deposit tokens in and out of Backpack. You have a guarantee, through the regulated side, that the SpaceX token can become stock in your brokerage account on Backpack, and between that brokerage account on Backpack you can transfer to E-Trade. So itâs a real stock as far as all the US regulations and regulatory bodies are concerned.
Thatâs the best version of this product that we have yet. Thereâs still a whole bunch of layers to remove there, but I think the hard part is done now. Weâre 90% of the way there. The last 10% is going to take twice as long, and 10x more work.
Turner Novak:
So why is it going to take 10x more work and twice as long? Whatâs that hard aspect?
Anatoly Yakovenko:
The cynical view of this is that there are a lot of middle layers that earn money there, and they donât want to give it up. But I think the more nuanced view is that these layers provide a lot of safety to the US financial system, and when you have a new technology, itâs going to just take time for it to be proven to be as robust and for these systems to slowly get integrated.
This is why you still have checkbooks. It never makes sense in 2026 to write a check, but we still have checkbooks, and every once in a while somebody youâre interacting with will send you a check, and youâre like, what do I do with this? Now, at least you can take a photo of it with your banking app.
Turner Novak:
Yeah, thatâs fair. My grandparents live in Canada, and theyâll send me a money order for my birthday, like a hundred bucks or whatever, and itâs like, what do I do with this thing? But I guess I can take a picture of it.
Anatoly Yakovenko:
So these financial systems in the US are relatively cheap, very secure, and very safe, but theyâre pretty in and out, and the rest of the world is kind of moving ahead. India has a better payment system than the US.
Turner Novak:
UPI, is that what itâs called?
Anatoly Yakovenko:
Yeah, because they built it after the internet. Most emerging economies were able to leapfrog the United States on a whole bunch of things.
Turner Novak:
And I mean, it kind of begs the question, because itâs something I always talk through, which is: do you actually need blockchain to do this? Canât you just... because it adds this extra step, itâs public. The existing financial system worked, it was pre-internet. When you come and say, okay, letâs put it on the blockchain, whatâs the necessary piece of that that makes it the required step to make this work?
Anatoly Yakovenko:
The reason you need blockchain is because whenever there are people involved, and these systems are inside their little economically incentivized boxes, like corporations, theyâre all trying to earn money. Itâs hard for all of them to coordinate in a way that is safe and fair. Every once in a while you get, I donât know if you remember the Archegos failure, where this trader basically told one bank he didnât reveal all his liabilities. He was basically, I donât have these loans, I only have these assets, and he told five different banks the same thing.
He had the same unencumbered assets. They all lent him money because he has this history and reputation, and none of them could see into each otherâs ledgers and see that he was lying. He borrowed like $50 billion and blew up. So every once in a while these human-run systems will get hit like this, and regulators will then go try to figure out, how do we tweak this very complicated set of rules and regulation in a way to prevent this failure but not cause another one?
This is a constant possible problem to solve for them. If all these things were tokens, all the liabilities and the numbers are all directly issued in one database, you eliminate a bunch of these layers. Everybody knows exactly all the numbers. Itâs constantly settled every four milliseconds, everybody sees the exact balances, a triple accounting system. It eliminates a whole bunch of these bugs without the need of regulation, simply through construction.
Turner Novak:
But then there are the incentives of, hey, this isnât a public thing that everyone can see, so I canât make as much money hiding it. Is that also part of whatâs going on?
Anatoly Yakovenko:
Not for anybody that is not malicious. You can effectively have the kind of privacy that a merchant or a banking system needs to operate and make money from their strategies, without revealing too much about them, while still guaranteeing the triple accounting thing. Where this becomes really complicated is more on the true First Amendment side, our rights as private citizens to keep information private from the government. Thereâs a whole bunch of complicated nuance there, and I think weâll be arguing about this for the next 100 years.
Turner Novak:
Really? Okay.
Anatoly Yakovenko:
Cash is actually the most private system. The fact that I can give you a hundred bucks and nothing is recorded anywhere is the feature of cash. Itâs the most private system. So as soon as you have a public database, my biggest fear isnât that malicious actors are going to use it, itâs that itâs impossible for private, good-intentioned people to use it, because all your information is public by default.
Turner Novak:
I mean, thatâs been a big knock on crypto the whole way, that itâs only used for fraud, buying drugs, etc. But all the dataâs public, technically. You can see whatâs going on.
Anatoly Yakovenko:
If you look at analysis from any of the firms like Chainalysis or whoever, the rate of malicious activity is actually smaller than in traditional finance, because itâs public data. As soon as itâs there, itâs there forever, so thereâs no record deletion.
Turner Novak:
Hmm. So you commit a crime on the blockchain, itâs like a permanent crime. It doesnât go away.
Anatoly Yakovenko:
Not only that, your counterparty, if they commit a crime, itâs traced back to you, because they find one person in the chain of events. They literally just go back up the chain until they get to you. So law enforcement has the most hardcore super tool with public databases that they never had before, without needing to go through a whole bunch of paperwork.
Right now, when you do this, every bank, every intermediary that you talk to, you have to go through a whole bunch of paperwork and people, and itâs a slow process. You talk to Katie Haun, whoâs a federal prosecutor who runs Haun Ventures. She would spend like six months talking to a single firm to get the list of transactions to then figure out where they came from, then go talk for six months to the next firm. This is all instant now on chain. So my biggest worry isnât that law enforcement isnât going to have the right tools to go do their job. Itâs that private citizens are not going to.
Turner Novak:
So then whatâs the downside, for a private citizen, if everythingâs public on the blockchain?
Anatoly Yakovenko:
Democracy and true First Amendment human freedom doesnât work when you donât have privacy.
Turner Novak:
So, like, if I donated to Joe Biden or Donald Trumpâs campaign, the other person won, and I get persecuted because you can see that I donated.
Anatoly Yakovenko:
You get canceled because it just happens to be the way the political winds shift one way or another. Youâre no longer able to publicly participate in the public sphere without fear of retribution, even from, not even the government, but from the organizations and the institutions that we all participate in. And thatâs a really negative side effect. Thatâs effectively how the Bolsheviks ran the Soviet Union. You donât have to get thrown in jail. You would just get canceled from your job, from your school, from whatever.
Turner Novak:
So I think maybe a good time to talk about going back to when you first started Solana. What was kind of the inspiration for getting everything off the ground?
Anatoly Yakovenko:
Two pieces. One is I had this true eureka moment. I had two coffees and a beer at Cafe Soleil in San Francisco, and it didnât sit well with me, as you can imagine. I was up till 4:00 in the morning and had this, oh my God, thereâs a way to encode time as data, so passage of time. I could create a data structure that you can compute how much time has passed to generate it.
Turner Novak:
Was that not a thing anyone had done before?
Anatoly Yakovenko:
I couldnât Google for it. I couldnât describe it in a way that I could find the org, people at Stanford working on it, and the fact that I couldnât meant I had something so unique that it was worth building. I had a nut that I could go and build something around. So the part of not knowing helped, it didnât block me.
Turner Novak:
Yeah, ignorance.
Anatoly Yakovenko:
Yeah, the ignorance of bliss, because a lot of people that are too educated, I would say, not too smart, but too educated, they just know too much. They discount the value of the grit and human labor that it takes to build a company, and they kind of think itâs more your idea or something like that. Itâs almost thinking, okay, I have the idea for reusable rockets. Weâve probably had that before. Itâs going to take an infinite amount of failure to get it to work. So I had the idea for the reusable rocket blockchain, a really fast blockchain.
Everybody had that idea. The fact that I thought my idea was unique gave me the internal drive to go do it, but that idea in itself was not the core piece that made it work.
Turner Novak:
So the existing blockchains were slow? What was the issue?
Anatoly Yakovenko:
Yeah. This was 2017. Bitcoin had kind of hit its first big cycle, and transactions were $70 per person because it got so congested. Same thing with Ethereum. You had CryptoKitties, the first semblance of an app with any users, and it made the fees on Ethereum hit these astronomical numbers. I spent my entire career prior to that point working on performance optimizations, like virtual machines, operating systems, and I was at Qualcomm for most of that career.
If you remember old school, if you remember your physics class, radio waves interfere. Two waves at the same frequency that transmit at the same time.
Turner Novak:
Will they knock each other out?
Anatoly Yakovenko:
They collide. You canât tell what information is being passed. So the first protocol people built for cellular networks was called Time Division Multiple Access, where they give each transmitter a clock, and youâre only allowed to transmit during your slot, and FCC goons will drive their truck to your tower and shut it down if itâs out of sync.
Turner Novak:
Really? And this is because youâre messing up other peopleâs commercial activity of generating business, shooting their wave out so people can use their product?
Anatoly Yakovenko:
Yeah. So in blockchain you have a similar problem. Two Bitcoin miners make a block at the same time, and the network is in a noisy state, because now you have two paths and it has to resolve, and it takes like 10, 20 minutes.
Turner Novak:
Really? Whatâs going on? Itâs just all electronic. It should be instant, shouldnât it?
Anatoly Yakovenko:
Well, the problem is this idea of Byzantine fault tolerance. How do you resolve this noise without FCC goons? How do you not rely on a trusted third party to go make sure that everybody can agree on what the final state is? That was the knot that Nakamoto Consensus solved, and what made Bitcoin so trustless and scalable globally.
If you have to rely on a trusted third party, youâre taking a layer in that eight-layer brokerage cake that youâre relying on to resolve that part. Why Bitcoin was so revolutionary is that it used purely math and cryptography and algorithms, to where if I transfer Bitcoin to my neighbor here, and you receive it, you know that you can get that same Bitcoin anywhere in the world without ever relying on any trusted third party. You donât need any of these rules and regulators. This was the big reason it worked as money, and why it has any chance of working as a store-of-value alternative to gold, because of this property that you never have to rely on a third party to guarantee that your Bitcoin always works.
But the way that it solved it has a 10-minute wait time, which is 10,000 times faster than moving a box of brokerage stocks from closet A to closet B.
Turner Novak:
But still, thatâs 10 minutes. That can be kind of annoying. Youâre trying to do something and youâre just sitting, waiting, like, did this work? Did it go through?
Anatoly Yakovenko:
But you as a user never have to deal with that, because the brokerage deals with that after they accept your trade and tell you that itâs done. So you as a user arenât aware that things actually take like a week later to clear out, and theyâre batched, and thatâs what makes that system scalable to 300 million people.
But Bitcoin solved that problem and has no way of solving the user-to-user normal peer-to-peer problem. This idea of time kind of popped into my head, as much as a Qualcomm thing, and I thought, okay, thereâs a way to do it in a way that borrows a lot from existing solutions to similar problems and scales it up. My back of the envelope calculation was like 10,000 times faster.
Turner Novak:
So what are you actually doing? What was the thing when youâre like, hereâs what Iâm building into the code? Was it some kind of timestamp that went to the millionth degree, and itâs like, this is the exact time this thing occurred, and this is who got it first?
Anatoly Yakovenko:
So we forced the block producers to alternate by time without relying on a trusted third-party clock. We used this data structure that I came up with, called the verifiable delay function. Thatâs what you can Google for now. I didnât know what to Google for. It basically loops over and generates data in a cryptographic manner, so that when I send you this data, you can tell that it took real time to generate, because you cannot predict the next output. Does that make sense?
So thereâs no way for you to cheat the math problem and get ahead of it, no matter how much computer power you have. And the limit there is because the best manufacturing firms can only make chips so fast. Theyâre limited by their two-nanometer process. Even if you super cool it, thatâs as fast as it goes. So I know that when you generate this piece of data, it took you at least 400 milliseconds to generate.
Turner Novak:
Okay. So I think you called it proof of time or something like that.
Anatoly Yakovenko:
Proof of History, yeah.
Turner Novak:
Oh, Proof of History. So it shows the length of time it took to do something, versus making it up or lying about it?
Anatoly Yakovenko:
Yeah. How do you prevent somebody from transmitting data, or saying that itâs my turn to make a block and then making it? There are a bunch of different protocols to do it. Bitcoin does this 10-minute back-off thing with proof of work, which is really slow. You had more traditional Byzantine fault tolerance, where the entire network has to agree, okay, Turner just spoke and heâs done speaking. Does everyone agree that heâs done speaking? Okay, now itâs Anatolyâs turn. Okay, now Anatoly, you start speaking. Oh wait, he didnât actually say anything, he timed out. Do we all agree that he timed out? Okay, we all agree that heâs timed out.
So you have this multiple-round thing where the entire network has to agree, and these are called Practical Byzantine Fault Tolerance, or Tendermint, if you ever heard that term. They were the first to implement that style of protocol. And then I had an idea that didnât require all these extra rounds of communication, and it was able to be fast enough for trading.
On the back of the envelope, when I saw, okay, this actually works for trading. Prior to that, why I was so interested in trading is because I spent, as a side project just for fun, I wrote all these algorithms, like a trader, how to connect to Interactive Brokers. None of them ever made any money. It was all for fun. They all lost money. And when I thought I had something working in backtesting, and I saw those opportunities in real markets, the data would take a little longer to arrive and my orders would take a little longer to submit.
And itâs not even anything to do with that system being malicious. They were actually front running and queue jumping. All these tricks that people were doing were not necessarily out of malice. The incentives were there for you to build your system in a way that would induce this behavior.
Turner Novak:
This is like the whole building as close to the exchange as you can, to get your data in quicker or whatever.
Anatoly Yakovenko:
You get the biggest, baddest connection. Once you start rubbing up against physical limits, you end up like people fighting over the physical bandwidth, the real estate, all of the stuff, and itâs not even out of malice. Itâs just, if you do the same, you make more money, even if it creates a worse Schelling point for the rest of the market.
So the fact that the system was completely open, all the data was purely open, anybody can participate by spinning up a validator. It felt to me that I would at least understand how the black box works, and I could see where these physical problems arise in an open way. And me as an engineer, I can then decide, do I want to put the resources to go and get to the same level playing field as Jump Trading or Citadel, or not? Thatâs totally fine. But in traditional finance, itâs a black box. Itâs all very dark. Not dark web. Itâs just not open, right? Itâs not open source. Itâs the opposite of that.
Turner Novak:
Theyâre literally called dark pools, kind of, right? These closed pools where no one can see whatâs actually going on.
Anatoly Yakovenko:
Dark pools are actually trying to avoid that. Itâs literally just a group of people that trade a lot who decide, okay, weâre going to trade on our own pool without going to these systems that we donât have control over. Thatâs the solution to that.
Turner Novak:
Okay.
Anatoly Yakovenko:
Theyâre trying to avoid these open lanes that are congested.
Turner Novak:
So this was in the coffee shop at 4:00 AM. You were thinking about all this stuff. Okay. So then what happened?
Anatoly Yakovenko:
This was at home at 4:00 AM after the coffee shop, two coffees and a beer, and I just couldnât sleep. Had this eureka moment for what later became Proof of History. And then as soon as I decided, okay, Iâm going to go build this, the first thing that I thought of was that it could work for trading, and that it could revolutionize trading because of these cryptographic guarantees of value transfer. You can literally shortcut this entire chain, this eight-layer cake of finance, to SpaceX directly issuing tokens on chain, but you and I have absolute cryptographic guarantees theyâre real tokens.
And to me, that meant that is the end state of finance. Thatâs real finance, thatâs internet and finance finally bridging together, and you donât have all these intermediaries, and costs for finance go down. Those are the benefits to people at the end of the day.
Turner Novak:
So then what did you do to make it? How did you start building it, and did you click a button and it was live and everyone started using it? How did things go?
Anatoly Yakovenko:
I mean, since college Iâd been working on some dumb idea. None of them made money. They all lost money. None of them were a taxable event. My wife actually was at a Facebook competitor at Columbia, way back when. And she told me, we had a child at that time. So basically, I had to pick two: a kid, a job, and a side project. The kidâs non-negotiable. So I couldnât do the side project and the job at the same time.
Her advice was that when you have this moment where thereâs kind of railroad-level investment into something. In 2017, it was blockchain, today itâs AI. You have this massive capital flowing into something. Before that, it was social networks and mobile and internet. We go through these cycles. You have like a six-month window where capital is relatively easy to get, where people will fund an idea that seems like it solves a lot of the current problems that the technology is facing. And if I waited six months for a better time, if I proved out the idea first and did my homework, it would be too late.
So the big benefit of being in the Bay Area as a founder is, when I went to Dropbox and told them, hey, Iâm quitting to go do the startup, they literally told me, come back in six months if it doesnât work out. Thereâs no other place in the world where I think you get the same kind of many layers of executives and founders and companies understanding where innovation comes from. Itâs from people taking those dumb risks and failing, and allowing for failure and being fine with it.
So that gave me the confidence to give myself six months. I had a kid. We were in a tiny 800-square-foot apartment, and my wife was the breadwinner. And I hustled, I donât know, it felt like a thousand meetings with VCs up in the city.
Turner Novak:
Was it actually a thousand, or it felt like a thousand?
Anatoly Yakovenko:
It felt like it, yeah. I think a thousand was probably an over-exaggeration.
Turner Novak:
Thatâs like a Fortune cookie number, but it was probably like a couple hundred.
Anatoly Yakovenko:
Yeah. So if youâre really serious about raising, you have to be in the Bay Area, because it maximizes your odds. You make a list of every event that is relevant to your industry. Go to every event, talk to every person there, figure out who the VCs are, pitch to them, do the elevator pitch, get an intro, ask them if their fund doesnât invest, will they write an angel check if you get a lead? Just do everything you can to work the network, and within two months you will talk to everyone, because that is their job.
All the major firms have analysts and people who literally spend 24/7 going to these events to look for deals. So thatâs where you meet them. And as you do this, you refine your pitch, and if you cannot get funding during that time, it means itâs not going to happen during that cycle.
Turner Novak:
Well, I think itâs interesting, because I know a16z invested, but they didnât at first. So you pitched them, and how did that go, and then what changed?
Anatoly Yakovenko:
They literally had the guy that invented verifiable delay functions, Dan Boneh, talk to me, and Iâm not the cryptography expert, so I could not meet. I think they could not validate my idea on a technical basis, which was their biggest blocker.
Turner Novak:
So what happened? Did you just say, okay, Iâve got to keep talking to other people? Did you just find other people that bought in?
Anatoly Yakovenko:
Yeah, you talk to as many people as you can, and we got funding from Slow Ventures, from Sam, and Foundation Capital and Multicoin and a bunch of really good VCs. So they eventually invested at like, I think, 1,000x the price of the seed round.
Turner Novak:
Oh, wow. Well, thatâs their fault then.
Anatoly Yakovenko:
Thatâs how it goes. The thing is, they have an impossible job, because they literally have to go and talk to a bajillion founders and a bajillion ideas and make a couple of bets, and their fund operates in many layers, and if theyâre wrong at stage one, they can reposition in stage two. This is how they work. So I donât fault them for saying no. I think the fact that they said yes afterwards is great. I think the best a fund can operate is to really understand that youâre taking the most risk at the earliest stage, and you can only back so many, and then figure out as things de-risk.
Running a fund, I thought, would be a dream job. It is, I think, one of the hardest jobs.
Turner Novak:
Yeah. Itâs challenging because you basically talk to really smart, really ambitious people who tell you these crazy, big dreams that they have and pictures of the world, and most of the time it probably wonât work, and youâve got to pick which ones will. 95% fail, but you absolutely know that one of them will. And you always pick wrong.
Anatoly Yakovenko:
You pick wrong, you size it wrong. Itâs just, yeah, itâs really hard.
Turner Novak:
And then youâre like, man, that guy, the one that became Solana, and youâre like, oh man, I thought I was really smart, but I didnât, I had a question around, did he actually understand it technically? And so I didnât give him any money, and itâs a really good idea. And I could totally see why I got this wrong, and I invested in something else that didnât work. And itâs just that over and over again.
Anatoly Yakovenko:
Yeah. Yep.
Turner Novak:
So you did get some money. So then you said trading was kind of this initial market that you thought was going to work. So what was the process of just getting people to start using it?
Anatoly Yakovenko:
Oh man, that was impossibly hard, and I think a lot of it was a bit of luck with timing. My biggest strength here wasnât, my weakness wasnât that I wasnât a PhD academic that understood cryptography inside out, and this is what Dan Boneh could easily smell. Sure, heâs really smart. My strength was that I had a decade-plus of experience building live systems with millions of users and low latency, and I was able to pull really smart engineers out from Qualcomm, literally folks that wrote the LTE standard, the GPU runtime, all of these really low-level, high-performance systems that run on cell phones.
We were able to leverage that knowledge and that expertise to build Solana. This was our differentiator. At that time, a lot of teams that did get funded with these hundred-million rounds were coming from academia. And as any founder that gets funded their first round at a hundred million, you get blindfolds on. You think that youâre right, and itâs really hard to pivot and try to understand real PMF and things like that.
The fact that I raised barely enough money for us for the last two years gave me that animal hunger, which is that we have to build the smallest possible set of dependencies to prove that this thing can be fast for trading. Thatâs it. I didnât care about block explorers or anything else. We literally bare-boned everything else. We had a command line wallet when we launched.
Turner Novak:
Whatâs a command line wallet versus a non-command line wallet?
Anatoly Yakovenko:
Well, do you use crypto at all?
Turner Novak:
I mean, a little bit. I have a Coinbase account. I have a MetaMask I havenât logged into in a while.
Anatoly Yakovenko:
Okay. So MetaMask is a UI where you click buttons to transfer. We had a thing in the terminal where youâd have to type in Solana transfer, because we didnât know how to build UIs.
Turner Novak:
Really? Okay. So this is the very, very early days. So then who used it? Who were the first people that were like, oh, Iâm going to start using this super weird command line crypto thing?
Anatoly Yakovenko:
This was basically, we were running out of money, and it cut us to the bone, like layoffs in December 2019, end of the year. And COVID happened in 2020. The markets crashed by like 70%. And the day before everything crashed, or two days before, we announced that weâre launching and weâre going to have this auction to sell the token initially. We had a group of super fans that participated in the testnet and boot up, and the network was a thousand times faster than anything else.
It was instant. We had this demo app that we built called Break, where you hit keys in the browser, and each keystroke is a transaction, and youâd see it send, and it lights up. As soon as it confirmed, it lit up. So it was like rainbow bright when it launched. We had this tiny demo, it was useless. You could just slam the keyboard, and every keystroke is a transaction, super cheap and super fast.
The people that saw it were like, this canât be real, you guys are cheating. And weâre like, no, look, itâs the whole thing. We had the small group. Everything crashed, and every VC that I talked to was like, I donât know whatâs going on. The world might be ending for all I know.
Turner Novak:
So this was like March of 2020?
Anatoly Yakovenko:
Yeah. And we launched and barely cleared a little below our last private round price. And that was the bottom of the market. So the fact that, you can never time markets, itâs impossible. But as soon as a major catastrophic event happens, the probability of it happening again is pretty low.
Turner Novak:
Probably not going to be another global pandemic right away again.
Anatoly Yakovenko:
Yeah. So youâre launching at the bottom of the market, and that is the best time to launch.
Turner Novak:
Why is that the best time? Because you could argue thatâs the worst time to launch. Why was that the best?
Anatoly Yakovenko:
If you can survive it. Because our team was so small, and because I never raised a lot of money, we did everything in the bare bones. We were a great entry price for people that wanted to participate, for developers that wanted to build stuff. It was a new technology that was ahead of everyone. It was all green space, and it could only get better. You could build the first explorer and then get users and get traction that way.
We had nothing. So for the people that had an easy time building wallets or UIs, to them it was an opportunity to go differentiate with something totally new. And DeFi kind of started to kick off, and we got traction with a bunch of traders and people building markets.
Turner Novak:
So people were kind of creating their own crypto coins throughout 2020 and â21?
Anatoly Yakovenko:
Yeah. Coins, but more specifically markets. So they were building their own, do you know what a constant product market maker is, like Uniswap?
Turner Novak:
Oh, Iâve heard of Uniswap, yeah. So Uniswap is built on Solana technology?
Anatoly Yakovenko:
No.
Turner Novak:
Hmm.
Anatoly Yakovenko:
It was built on Ethereum, but it was expensive and slow, and it was based on this math paper, I think from the â80s, where you kind of get rid of Jump and Citadel and all these people that are providing liquidity and use math instead. And it never took off, because US markets are really efficient, so even if youâre half a basis point less efficient than that, itâs really hard to compete.
But on blockchain, you donât have other competition, and itâs innovative in different ways, in that it can bring liquidity together for assets that are on the tail end of popularity. Things that are really early in their development, like meme coins, whatever. Things that are super risky or hard to price. It is actually really, really good for that, that traditional finance just doesnât care about. So you had this explosion of DeFi summer. DeFi summer literally happened in 2020, and we were just launched early enough, cheaper and faster than all the competitors that delayed, that we were able to get that initial traction.
Turner Novak:
So I think the lesson there for founders is, when you have PMF, people will bend over backwards to overcome all the painful problems of onboarding that they can overcome themselves over a weekend. So you donât need to solve their weekend problems that a dedicated engineer can go work through. Solve those problems later on.
Anatoly Yakovenko:
But the problems that you need to solve are the ones that take six months to a year to solve and require coordination from multiple people, which is, make the stupid blockchain fast. That was the hard problem. It takes years to solve that. We only solved that problem, and thatâs it. We left everything else to third parties, open-source developers.
And the really good ones were like, oh okay, I have to do everything in the command line. I have to code in Rust. There are no docs. I have to read the code. This is not a blocker for a good engineer. It sucks, but because it creates a barrier to entry, you actually had green fields for really smart people that could overcome it. So this was the weirdness that happened in Solana, or the opportunity that we had, that it was hard to build for, but it solved a real-world problem.
Turner Novak:
And so what was so hard about the thing that you were solving? Because it sounds like it was actually kind of difficult for people to use it, but you solved something else that was even harder, so they got through all the other hard stuff. So what was the really hard part about it that you were solving?
Anatoly Yakovenko:
Remember that physics radio lesson? The way Bitcoin solved it is that the difficulty in proof of work means that the average time it takes to find the proof-of-work puzzle, to solve it, is about 10 minutes. When you solve it, that gives you the right to propagate a block, meaning that when you accept a block from a node, youâll drop it if they didnât solve the difficulty challenge. You basically ignore blocks that donât solve it, and the difficulty challenge is set up for this 10-minute period. So you have a low probability of collisions, so you donât have two blocks happening at the same time. They call them orphan blocks.
Turner Novak:
But they were slow, because it took 10 minutes.
Anatoly Yakovenko:
Yeah. And Ethereum sped it up to its maximum, which is 12.5 seconds, with a whole bunch of tricks that Bitcoin people will never implement. But 12 seconds is still too slow for trading, but sort of fast enough for some payments. Like backends, 12 seconds is too slow for a cash register, right? So they bridged the gap a bunch, to where dedicated super nerds could go build and experiment, build Uniswap and things like that, and they were happy to play around in their sandbox.
But itâs not enough for the normal retail user. And to go from 12 seconds to 400 milliseconds took, we basically took a guess, because ignorance is bliss, that our idea would work without any proof. Only now do we have proof, protocols that can accomplish the same thing with academically guaranteed guarantees that are equivalent to what Bitcoin can do. And that took like literally six more years of Solana showing, hey look, this can work. And a professor from Zurich called me up and said, not 100% sure it worked, but this is how you would actually solve it.
Turner Novak:
And you had to go back and adjust based on what he said?
Anatoly Yakovenko:
No, we hired him, and two years later, I think Alpenglow is about to be going live, which is the next-generation protocol. So all the stuff that I developed is getting ripped away, but the problems that we solved were the key problems. So the solution was good enough at that time. And what we were lucky on is identifying that the bottlenecks are this round-trip talking between all the parties to get agreement to go to the next block, that doesnât work, or this 12-second-to-10-minute way to resolve congestion, that doesnât work either. So you need to build this idea of a continuous block-producing protocol, which we solved.
Turner Novak:
You essentially made it instant. You essentially made it so that instead of this waiting period in the payment settlement layer, you got it down to essentially instant, or what felt like instant for everybody else.
Anatoly Yakovenko:
Yep.
Turner Novak:
Okay. And then thatâs what people are then building a bunch of other things on top of, this instant payments layer.
Anatoly Yakovenko:
Or execution and settlement. So in that 400 milliseconds, you get guarantees that everything executed and you have the correct state of the blockchain and the correct state of the order book if youâre building markets. And that meant that trading is now still slower than finance, but the gap is much, much lower.
While New York Stock Exchange or CME or these financial firms will say they have nanosecond trading, the physical reality in the world is that information has latency. So some event happens in Singapore that has relative importance to markets, it is 80 milliseconds away from New York no matter what. No matter how fast you have your Bloomberg terminal wires configured, that news wire has to go to New York to get fed into the algorithm to go take a trade. So even if the exchange is operating in this very fast system, once you get below 400 milliseconds, you actually can provide prices that are as good as centralized exchanges.
Turner Novak:
I guess today, like you said, you ripped things out, you rebuilt everything. How did that feel, to have to remake everything, and then what do people kind of build onto Solana today?
Anatoly Yakovenko:
My entire career as a software engineer, I always wanted to work in open-source software. I fell in love with Linux as a teenager, super nerd in the â90s, because you could see the entire stack. You have this full transparency of how the system works, and I was always the tinkerer. I would be the person that would overcome the weekend problems to get something to work. Thatâs what drew me to both Linux and to then build Solana the way it is, to be completely open, so that a hobbyist that is trading can actually, if they want to spend the time, have the exact same access as Citadel or Jump, as the biggest traders in the world.
And I think, to me, that always felt important. And Linux is never done. Itâs always changing. So I love to see my code getting replaced. It means that there is a new generation that is taking it on and adjusting the system that I thought would work five years ago to what the world needs now. So it means itâs not dying. Change is good. Change in software is great.
Turner Novak:
Well, to the point of the legacy financial system, itâs also had to change, and sometimes itâs good to just force the change.
Anatoly Yakovenko:
Much, much slower, but yeah. So getting to see the core parts of the protocol get ripped out and replaced with next-generation stuff, I think thatâs awesome.
Turner Novak:
Did some of that then enable what people are doing with it today?
Anatoly Yakovenko:
Whatâs funny is that nothing really changed from launch in terms of what people do today. There were a lot of ideas of what blockchain could accomplish and build, these massive, big ideas of changing the world. I think they will happen. I was right that trading is really important, and tokens are really important, and all it does is itâs a system for moving tokens around and escrowing them in different markets.
Thatâs whatâs going to, as finance moves over to blockchain and becomes this open system, all the other stuff that people had ideas about, like banking the unbanked and bringing the world to the same fair, open financial system, itâs going to happen. Itâs just much, much slower. Thatâs running on human speed. Everything else is running on finance or trading speed, which is a bit faster.
So whatâs happening now is, I think to go back to the start of this conversation, you have this company Backpack, a licensed brokerage. It has full transfers. You can transfer your SpaceX stocks from E-Trade to Backpack and mint it as a token on Solana, and itâs on the open global rail, so you can transfer to anybody else in the world, and they have full cryptographic guarantees that they can go back to E-Trade. So weâve effectively eliminated 130 years of problems from the railroad boom with software, finally. Thatâs pretty cool.
And that will slowly get propagated to the rest of the world. You kind of see early adopters like Robinhood running full steam ahead with things like this, but as finance matures, as the rest of the world gets richer and wants access to American stocks, this will start happening faster and faster.
Turner Novak:
And I think I saw thereâs something like 30, 35% of all stablecoin volume is on Solana. Maybe I got that stat wrong. But so what does that mean for somebody whoâs not really in the weeds of that?
Anatoly Yakovenko:
Transfer volume, so money being moved between addresses. I would look at these metrics relative year over year as things go up, not in terms of, does this mean that each one of these is a different individual person? Very likely you have a power-law distribution where you have entities that are fully onboarded on chain, have a bunch of accounts across a bunch of different financial institutions that they have to rebalance all the time.
And that is a really great use case for blockchain. Otherwise, youâd be paying wire fees and waiting for delays. You need money in point A, but now you need it in point B. Do you wait for a two-day wire, pay the fees there? Do you do it on something on chain? So for anyone in finance that is operating in multiple places in the world, those costs are real. The time that you have to wait is real. It all translates into, eventually, cost to consumers.
So velocity is kind of what we always thought was the important part, which is how much volume, how fast you can move it, because that is where you have real customer demands, and thatâs where finance makes most of its rate. They charge on transfers and things like that, and less so much on holding it.
Turner Novak:
And so essentially, by using stablecoins to manage your global money supply, youâre able to, is a person thatâs holding the money and owns the money?
Anatoly Yakovenko:
Itâs usually companies that operate in multiple places, have suppliers in one spot and retail or whatever. You need to pay somebody here and your balance is over there. The fastest way to do it is stablecoins right now, and the cheapest way to do it. And what I suspect will happen is people think, oh, itâll disrupt Visa or MasterCard. I actually think that the more retail-facing companies are not going to be disrupted, because they already have the customer relationship, but they will be able to squeeze their costs down by using stablecoins across all of these different layers.
Turner Novak:
So it actually might be, somebody might say, oh, Visaâs going bankrupt because of this, but it actually might be that Visa makes more money or is more profitable because of stablecoins.
Anatoly Yakovenko:
Exactly, and that means that competition should eventually mean customers get better service.
Turner Novak:
Yeah, thatâs fair. I think another thing, youâre pretty big on one lens of this. You could say AI is stealing all the jobs, the worldâs ending, blah, blah, blah. The other end is the opposite. So whatâs actually going on? How do you actually think about this? What is actually going on?
Anatoly Yakovenko:
We went through the largest transformation during the Industrial Revolution, where like 80% of the human population, kids even, were farm workers.
Turner Novak:
We used to send kids into coal mines. Theyâd die. Theyâd just get trapped down there.
Anatoly Yakovenko:
I think that was probably the end, the last bit of the Industrial Revolution. But the reality was, prior to even needing coal jobs, we had farming as the thing that you needed. Otherwise people starve, and people starve when the weather changed and screwed up the yield. So weâre blessed in that loss of 80% of those jobs, or 95% of those jobs. Motors, mechanical motors, displaced 200 billion jobs. There are only eight billion people. The reason the world is so wealthy is because motors and mechanization displaced 200 billion jobs.
Turner Novak:
So it displaced 200 billion jobs, even though there are only eight billion people in the world right now?
Anatoly Yakovenko:
Motors have, yes.
Turner Novak:
Oh, so over the course of human history.
Anatoly Yakovenko:
No, right now. Imagine the world right now without motors, and us living at the same standard of living. There are 200 billion workers somewhere that are toiling away for us to have all this wealth.
Turner Novak:
Hmm. So anyway, it enabled us to get to places we wouldnât have been able to get to with the current population of the world.
Anatoly Yakovenko:
The fact that weâre talking real time through this magic machine is because there are 200 billion virtual workers that are motors, effectively, running on electricity and fossil fuels or whatever. The wealth that exists in the world is from that. And AI will maybe do a hundred billion more, if weâre lucky.
The median American, I think, lives on $80 a day in terms of spending, consumption. The world is, I think, around eight. So for us to bring the rest of the world to the median American, we need to 10x productivity. We roughly need to displace 80 billion jobs. Does that make sense? We need everybody in the world to still work every day as hard as theyâre working now, but to be ten times more productive, and that would bring the rest of the world, that eight-billion population, to be at the median level of an American.
So this idea that AI is taking our jobs is dangerous, because it can do real damage. If we donât increase productivity, weâre prolonging extreme global poverty, weâre prolonging extreme poverty everywhere, not just in the US. Do whatever you want with your life, be selfish, but to prevent other people from being more productive is cruel. The global economy is so interconnected that productivity improvements in the US that allow us to become richer lift people out of extreme poverty everywhere. US companies make money everywhere. Theyâre not insular in the United States.
If Apple makes a phone in China, itâs assembled in China, those people have jobs, and then thatâs sold in Southeast Asia. And we are blessed that somehow they pay taxes in the US, that they have American designers and engineers. We get a major benefit from that and capture a lot of the wealth there, but the people that benefit, benefit everywhere in the world.
And I think itâs this Luddite, miserly NIMBYism thatâs driving this anti, this fear. They see their share of the pie shrinking even though the pie itself is growing, and this is whatâs driving that kind of selfish need to protect your little share of the pie, as opposed to thinking, if the rest of the world gets wealthier and they just get to the same level as a median American, the median American is going to double in wealth easily.
Turner Novak:
Yeah. Itâs kind of interesting, though, that no one, it feels like the average view is, you know, we shouldnât be building data centers because they pollute, or itâs loud, or.
Anatoly Yakovenko:
Thatâs the least polluting industry ever. Build a phone.
Turner Novak:
But the whole narrative is like they use all this water or something like that.
Anatoly Yakovenko:
They can make them air-cooled. And in your town and your city, you can live in your beautiful town that wants low traffic and doesnât want to grow, and thatâs totally fine, and be selfish there, because I myself cannot possibly tell you how to value that. Do whatever you want in your local community, but to prevent another one that is growing, that is taking on the risk and building productivity improvements for everyone, thatâs cruel. Thatâs not being selfish. Thatâs just being actively cruel.
So places that want to do whatever they want locally, thatâs great. I think preventing Texas from building data centers is suicide, and literally cruel to not just the people of Texas, but to the lowest, extreme poverty-stricken people. I was 11 when we left the USSR, so I still remember it, and we were well off relative to the Soviet Union. When I looked up the stats, I think it was like $20, relative to $80 spending today, in purchasing power. The USSR was at like 20 or something like that.
What that meant was that we had a shared apartment with three other families. There was a single bathroom that everyone used, with one toilet for all the families. And this is bizarre, when I told my kids, they didnât believe me. The toilet seat was hanging on the wall with the last name of your family written on it. So you would put your family toilet seat on the toilet.
Turner Novak:
Thatâs insane.
Anatoly Yakovenko:
That was upper-middle-class USSR, and this is higher than the median standard of living globally. So I donât know if you have anti-data-center listeners or whatever. Youâre being cruel is my message to you, youâre being cruel to the rest of the world.
Turner Novak:
Yeah. Well, itâs interesting, though, the beauty of capitalism is like, all right, you donât want them in your town in Texas, weâre going to put them in space. Weâll just figure out a way to do this, because the incentives are like.
Anatoly Yakovenko:
But thatâs a cost. It slows us down. Every 1% of the global GDP growth thatâs short means millions of people remain in extreme poverty. People need to put on their awareness hat and think about, how do you actually lift people out of extreme poverty? You have to improve productivity, which requires risk. Risk has to be underwritten by capital. Somebody has to go build that new motor, that new way of insuring crops, or fertilizer, whatever. Somebody has to go figure it out, and to do that, you need all this growth.
Otherwise, I had six years of Soviet communist education. Emancipation of the proletariat can only come from massive productivity improvements.
Turner Novak:
Well, what was the biggest culture shock when you moved from the USSR to the US?
Anatoly Yakovenko:
I thought the entire United States was like Manhattan, end to end, like a big downtown.
Turner Novak:
Coast to coast, big building. You just saw one of those maps and youâre like, this whole thing is just big buildings.
Anatoly Yakovenko:
Because that was the idea of modern America, that New York, super busy, hyper-capitalist, dense place, and the biggest culture shock to me.
Turner Novak:
Thereâs like the end of the Soviet Union, right before the collapse, so you were like, it was probably the worst it had been before the collapse, right?
Anatoly Yakovenko:
No, it was, the highest GDP the USSR had was like a year before it collapsed.
Turner Novak:
Really? So things were great, relatively, right?
Anatoly Yakovenko:
No.
Turner Novak:
Okay. Well, relative to where it had been for the USSR. So what was going on? If GDP was going up, but things were the worst, what was going on?
Anatoly Yakovenko:
When the government directs the economy, the GDP that measures personal spending is measuring spending that people want. That I want to buy this thing, I want to buy this donut, I want to buy this Crocs shoe or this Botox treatment, whatever. That means Iâm willing to spend money on this. And when that goes up, naturally itâs very correlated to the spending that people want to do, which means that theyâre serving their needs and theyâre happy.
When the government spends money, itâs spending on our behalf, and itâs trying to do its best, in the most optimistic light. Itâs trying to figure out what is it that we want and spend it, but thereâs an error there. And the bigger the government budget is, the more dislocated the GDP number is from, Iâm spending stuff on what I want and Iâm satisfying my needs. You get this slight distortion. So the USSR economy was 100% government spending, maybe 95%. You had like 5% small, Portland-level, everything-handmade businesses. And people were unhappy because they didnât have the stuff that they needed.
Turner Novak:
So they just had what the government thought they needed, which might be right, but thereâs also going to be some stuff thatâs wrong in that assumption.
Anatoly Yakovenko:
It can only be right on very macro, large-scale energy, that kind of thing. Even then, itâs just very, very hard for it. Like, you think of, can the government solve housing? Can they build 1,000 apartments next to your home? This is how they would place the apartments in the wrong spot at the wrong quality.
Turner Novak:
And the people that would get them would not be happy. Like, I want to share this toilet with four other families.
Anatoly Yakovenko:
Exactly.
Turner Novak:
But in theory, you got housing for the people, itâs just not what they want necessarily.
Anatoly Yakovenko:
Yeah, yeah.
Turner Novak:
Huh. Interesting. And I mean, for example, I know you play underwater hockey. You might want to play underwater hockey, but we should build soccer fields, youâve got to play soccer.
Anatoly Yakovenko:
Yeah, exactly.
Turner Novak:
So is it, that actually sounds like a fake sport. What is underwater hockey? Because I grew up, Iâm Canadian, so I grew up playing hockey, but how do you play underwater?
Anatoly Yakovenko:
Thereâs actually a really great Canada team, group, that plays.
Turner Novak:
Really? Okay.
Anatoly Yakovenko:
Itâs in places with a lot of pools. Itâs six-on-six. You wear fins and a snorkel, you hold your breath, and youâve got a stick about a foot long, and a puck that looks like a puck, but itâs got a lead core. So you fling it around in the pool, in a flat pool, eight feet deep.
Turner Novak:
Does it sink?
Anatoly Yakovenko:
Yeah, it sinks. So itâs almost like air hockey underwater, and itâs three-dimensional, because you swim over players.
Turner Novak:
So the puck is fast. When you hit it, it moves really quick?
Anatoly Yakovenko:
Yeah. You canât fling it around the side like you can in hockey. You canât do icing or whatever. But you can fling it 15 feet, which is like a quarter of the way there, and the play can move really quickly if you one-touch, one-touch it across.
Turner Novak:
So it kind of sounds like water polo but even faster and more intense. Can you climb on people and stuff?
Anatoly Yakovenko:
No, no. The reason people get into it is because it was co-ed in college. There is a global world championship. I was the worst player, I think, on the US menâs team, most probably.
Turner Novak:
Oh, you were on the US menâs team? Oh, nice. Thatâs cool. That sounds fun. It kind of sounds like one of those things youâve got to really commit to get into. You probably couldnât just try it.
Anatoly Yakovenko:
Actually, itâs so small that half the way to get on the national team is just to afford to go to all the tournaments.
Turner Novak:
Interesting. Okay. So thatâs why you were the worst, you couldnât afford it.
Anatoly Yakovenko:
I was in like Ironman shape. So I had endurance. I loved running, cycling, surfing. But I think thereâs just a certain amount of athletic talent that pros have that us normal people, no matter how much we train, canât get to.
Turner Novak:
Just a quick question to close. Do you have a favorite founder or CEO, company? Maybe it inspired Solana, maybe not, but as of current day or even historical. Anything youâve really gotten a lot of inspiration from?
Anatoly Yakovenko:
Armani Ferrante, the founder of Backpack, is this guy that, he was an FTX employee. He built a whole bunch of tools on Solana. He was like the engineer there, me working on the protocol, him working there, and he was going to build this company, and FTX collapsed, and all their funds were on FTX, like 80% of their runway, and they were stuck there.
Turner Novak:
Holy shit. On, from Backpackâs.
Anatoly Yakovenko:
They just did this big raise. They had raised $15 million, was like a massive round A, and the company was basically dead in the water after the collapse of FTX. And it was six people, and they just buckled down in the worst possible crypto market ever, and just built really good products and recovered, and is now, like, has a full exchange thatâs issued SpaceX. I think itâs an amazing recovery story of just real personal grit. So heâs been my inspiration.
Turner Novak:
Wow. I didnât, Iâm sure, thatâd be crazy. What was it like, because wasnât FTX a pretty big holder of Solana at the time it collapsed?
Anatoly Yakovenko:
Yeah, they were like a big investor, and we just finished our conference called Breakpoint, and it was the biggest conference to that date. Weâve been lucky that all of them have been bigger than the next. But it was, you know, 1,000 developers show up at this massive hacker house, like 2,500 tickets. And our tickets arenât free, they were $500 a piece. So I always made the conference seem like it has to be break-even. This is not a charity.
So it sold out, and we were riding high on the plane flying back from this amazing conference, and all of a sudden one of their biggest builders on Solana, this company that weâve been working with closely, just announced theyâre dead.
Turner Novak:
Yeah. What happened next? What did you do?
Anatoly Yakovenko:
It was pretty gut-wrenching. My co-founder, Raj, is a perfect counterparty for this. He loves crisis moments. So my biggest fear was a bunch of people had money in FTX and their runway, and if our ecosystem died, then we were dead. And we called a bunch of founders, and Backpack was one of them. So they were kind of screwed, but 80% of them were smart enough that they kept their money in banks. They did the right thing, so they didnât keep their funds in crypto or on an exchange.
Turner Novak:
A lot of advice was, keep your money in crypto, because.
Anatoly Yakovenko:
The advice I give people now is, go to treasurydirect.gov and buy the stupid T-bills.
Turner Novak:
Use the as-dumb, low-tech money as you can.
Anatoly Yakovenko:
Short-term T-bills is where you want to keep your runway. The feedback that I got during those calls was that, literally, people told me, we looked at other chains and they all suck, and we were either going to build our own blockchain or use Solana, even after all this. And everywhere else is worse on the technical side, but equally as bad on the crisis. We were at the front of it because of how big FTX was as an investor, and the token price took the biggest drop. But because the tech was good, the product was good, a bunch of people came in and built products during that time, and to them it was an opportunity to go invest in me, because of something that they saw was unique and healthy.
So it ended up working out. I think itâs crazy to say that now, but thereâs no way I wouldâve ever thought of saying it, that it probably made us stronger, all in all. Itâs nuts.
Turner Novak:
Yeah. Itâs interesting too, with the whole SBF is this legendary venture investor, when everyone goes back, like you own like 10% of Anthropic or whatever it was, a big chunk of Cursor, Robinhood, and itâs just a crazy situation. Do you have a single biggest prediction for the next year? Something you think a lot of people are sleeping on that no oneâs paying attention to, but they should?
Anatoly Yakovenko:
I think people are going to realize that there are no AI job losses. Those havenât materialized. I think the companies that use AI the most are hiring the most, because they are seeing productivity improvements from AI. That means their products are growing, and that means theyâre going to hire. Otherwise, I think we should be in a recession if it wasnât for the AI boom, so weâre kind of lucky there.
And for crypto, I always kind of made this joke that there are three phases. You have the punks, then the hoodies, then the suits, and weâre going through this transition to the suits, which is kind of more boring, but it means that itâs going to be around forever. Itâs sticky. Weâre doing boring stuff. Weâre issuing regulated stocks on chains so people can deposit them in their brokerage accounts.
Turner Novak:
Yeah, I think I saw Western Union uses Solana for stablecoins. Thatâs like the oldest boomer company you could imagine, like sending money orders.
Anatoly Yakovenko:
Weâre getting boomers onboarded. The prediction is that year over year, the number of boomers onboarded to boring crypto rails is going to increase by double-digit percentage.
Turner Novak:
Nice. Yeah, thatâs good, thatâs good for you guys for sure, and hopefully good for the boomers too.
Anatoly Yakovenko:
What I want to see is this translate into lower fees and better services for users. Weâre in this cycle where I think businesses are looking to cut costs and are using new technologies to cut costs and increase revenue. But we should start hopefully seeing lower costs for users and better growth there.
Turner Novak:
Yeah. Well, thatâd be a good prediction for 2026 too, next year. Well, cool. This was a lot of fun. Thanks for coming on the show.
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