From Compressed NFTs to the Saga Phone, Solana is Ready for Web3 w/ Anatoly Yakovenko

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1:34And I looked at it then and I thought, I can see the developer activity. I can see where they're going. There's a lot coming out of this. And it has done reasonably well coming out of that. But what I really want to know is what's actually going on from the launching of the phone to new chains from other chains moving across onto Solana to also their movements with NFTs and how they can do NFTs at scale. I think there's a lot of innovation going on. And I really want to catch up to find out how this all affects the Solana ecosystem and how it fits into crypto more broadly. The world of crypto is an incredibly exciting journey that we're all going on together.

2:11We don't know where it's leading to, but we know it's going to be absolutely massive. Join me, Raoul Pal, as I guide you on our adventure to discover just what this new world will look like. Anatoly, good to see you back on Real Vision. Thanks for having me. I think I checked. The last time we chatted was September last year. There's been a lot happening, particularly in Solana.

2:38I mean, it's been... The most boring six months in crypto, right? Yeah, we've gone from the entire space having an existential threat to a massive rally from the lows as well. But look, I wanted to catch up with you because I have a very close eye on Solana and the ecosystem. And you guys are doing a lot. And I think it's really, really interesting to talk through some of the things you've got going on. So I think the first one that I really wanted to talk through is Saga, the mobile stack, and everything's happening there because you're now in launch phase. So really interested to hear your thoughts, what you're up to, and where you think it's going.

3:19Yeah, we launched. The hardware's here. You can see it. It's real. And real devices are being shipped to people all over the world. So it's been really exciting to go from an idea to a physical hardware product. that's the pinnacle I think of hardware today is a phone right it's a device you use every day people are very sensitive about the build quality the screen touch kind of tactile feeling all of that stuff right we're all used to having these devices to be like exceptionally well done and the response has been like overwhelmingly positive so I'm really excited that like The product is good.

4:00Yeah, and they're being shipped. We're awesome. The company that built these, folks don't know, it's founded by Jason Keats, who's the architect of iPad Pro. He's a super hardware nerd. They've done just a phenomenal job on the build quality. I think this is the best Android device out there. And we are getting a ton of requests for applications. I think it's over 20 already in the App Store. iOS launched with 15 apps when the iPhone launched. So we just needed to cover that many. And yeah, we're getting like, things are moving. Why did you start the crazy path of going down the hardware route, being a blockchain, and then thinking, you know, why the hardware route?

4:45I mean, it's a great idea. I spent most of my career at Qualcomm. So I was there from like early flip phone days until like my team was in the advanced technology group was like working to enable like the first augmented reality device like in the phone form factor so like i was there from like phones can barely do ringtones to like phones are now everything uh and it was a really cool and exciting time and i kind of as soon as i got into crypto and i as soon as i started working on it it just became obvious to me that every phone in the world is going to have to be hardware wallet at one point or another.

5:25That's just inevitable. And the technology to do that, interestingly enough, I know my close friends worked on that to enable that. The ability for this phone to prevent Android from seeing what's on the screen for a secure display, prevent the operating system from seeing your touch inputs on the keyboard, like a secure keyboard to the signing, like the signing secure element, which is stored in a, they were like defending it against electron microscope scoping, like attacks, like scraping it, like really crazy stuff. All that stuff is here. It was already, basically this technology was already there, you know, in 2017.

6:10So I just immediately thought that eventually every phone in the world is going to be, have to be a hardware wallet, like equivalent capability. So I started asking investors and friends, like, hey, what if we built a phone? Do you guys know anyone that knows the OEM side of the business? And I talked to a bunch of the big companies and eventually met Jason Keats, who is himself. He was employee one or two at Essential, which is an Android startup that built awesome devices. worked at i at apple and wanted to build a phone himself so we kind of melded minds like okay we can build a you know kind of like the tesla roadster of android phones it's an awesome device but it's also i think needs like a soul you know like it has to have something that isn't just android and i think part of that is it has to be web 3 and crypto and getting developers excited about an open app store and getting users excited about like hardware security for their self-custody and i think the combination of those things are create really really cool user experiences for web3 um there's videos of like phantom they're working on um like we added like a couple features to make the experience even better than it is today where you can look at their video it's like just like Apple Pay, a little slider from Phantom like slides up from the bottom to the, you know, halfway to the screen.

7:44You tap the fingerprint scanner in the back, it signs and like transaction goes through like almost instantly on Solana as fast as Apple Pay. Like if you compare it, it's like it's as good. That to me is really, really cool. And you have those kind of wonderful user experiences with hardware security and like a real app store for Web3. I think that's kind of like the start of it you know and are you thinking that it's only going to be solana or it will be web3 native in however it works this is a huge undertaking and a lot of and very risky like implementation wise not just people hate the product don't buy it that's just one thing but like even just execution is massive undertaking so we basically cut all features except what's necessary to to ship um which meant we're not experts in ethereum and bitcoin and all these other networks so we just basically just ship solana but we're adding support for curves for bitcoin for ethereum for all these other networks and then people will be able to write wallace interact with the interact with the seed uh the seed vault and sign bitcoin transactions in the same way and like you know we don't really care like from my perspective i'm um i'm more of an open source maximalist than i am even the solana maximalist and and how do you integrate solana within that as being like the core tech for some of this as well?

9:09Because obviously, you don't just want to have a Web3 phone, you want a phone, yes, it helps the whole ecosystem, but it needs to weave Solana into its kind of core infrastructure. You don't actually need to weave that much. What I want is actually like, whatever APIs that we need for wallets to be able to have that like awesome UX for signing, whether it's interpayment and stuff like that. I want that to be open. Like the problem is like when you look at like the Google ecosystem, even though Android is open, GMS and like Google Pay are closed sandboxes. So you can't plug in your own payments infrastructure into the Google mobile stack.

9:50You can't plug in your own app store, like through their APIs in the open world. You have to work with an OEM to do that. So same thing with Apple. Apple's even worse, right? If we could ship an iOS device with changes, we would totally do it, but zero chance of that happening. If you try, it will come after you. So that's the problem, right? But what we want is this thing to be open and whatever API Solana needs, Solana itself is open. So everything's open source. Everyone else will be able to plug in their own infrastructure if they want to. And this could be an open platform for a lot of users.

10:35Obviously, because we're shipping, we're experts in Solana, things are probably going to move faster. Features are going to be added faster in Solana. But if there's whoever else, like the Tezos team gets really, really excited about it and wants to work with us, we'll definitely like, the book is already open, but we'll help and we'll unblock them wherever we can. hey everyone we're gonna take a quick pause and hear a word from our partners we'll be right back

11:02and how are you finding the industry you know the other other wallet providers or just other people in the industry how they the nfc marketplaces and all of this stuff yeah what's the what's their reception so far people definitely get it like everyone in the industry gets it there's this kind of for folks that don't understand why it's so such a pain in the to work with the big app stores. It really goes back to, I think, what people think of software and digital goods in general. Like you can't really buy a copy of Windows in a box and like own it and then give it to your friends, right? Or sell it at eBay.

11:41Can't really do that anymore. You sort of can, but like with Windows, you barely can. You definitely can't do that with like a video that you buy on Amazon or like a song on iTunes. You don't actually own that digital content, even though you bought it and it says, you know, buy to own. You don't actually own it. You can't transfer it. There's no markets for it. Right. So these are goods that you're effectively renting from these giant kind of conglomerates. And that means that their models for their business models are designed around extracting rent like value from that rent. And the way that it works is that if you own the content and you're on iOS, you can sell the content to all the folks that have Apple devices and Apple lets you do that, but they want 30 % of that.

12:25And 30 % is an insane tax. It's a massive sales tax, right? It's like absurd. There would be a revolution, right? Like the revolutions are started over lower taxes than that. so it's a massive massive tax but all the content producers are able to pay it because they own the content and they're renting it to their users so they don't really care like they get more revenue more profit so they're willing to do it but with web3 the marketplaces don't own the content magic eden doesn't own any of the nfts they can't add a 30 tax in the ios mobile experience and charge their iOS users 30 % more or eat that cost themselves because that would wipe out their profits.

13:12Their fee is like 2-3 % and people argue about that but it's literally 10 times less than that. So that's kind of the fundamental problem is that the business models are set up around users not renting the content and the value extraction coming from that instead of content truly beyond the users and freely tradable and exchangeable. That's really I think the heart to Web3. So we need an app store to enable developers to basically do whatever they want to do. Like Magic Keen just even have a simple NFT storefront in mobile. They need an app store like this. And is this available globally so far?

13:53Is it just US? It's globally. Yeah. It's basically like the bottlenecks there are like certification. And we've gone through all the easy ones. I think it's like 40 countries or something like that and there's some that are very huge pain in the butt like south korea basically have to be samsung to get certification through in india you have to make the phone in india there's some ways to kind of get like the final pieces put together there and stuff like that so like um but this is also kind of an expensive device we wanted to build a device that was when people got it that they were like inspired like it's really good build quality they kind of can see the vision like okay this is not just some it has to compete with an iphone and its quality yeah it has to for like the early adopters i think it has to i think the opportunity possibly could come from a much cheaper mass market device that then also earns rewards at scale for things like Helium, for things like HiveMapper.

14:56You know, like that could be, I think, really transformative for the world if you have a device that's effectively free, but also kind of gives you like five, 10 bucks a month, right? That could even cover effectively like your Helium, you know, like data rate at that point. And what's the price point right now for it? It's a thousand bucks. It's a thousand bucks, right. Right. And have you looked at what phones most of the kind of Web3 community use right now, outside of India and others, but, you know, in the Western world, are you having to move people across from an iPhone environment? It's a split, actually, like in the US, 60 to 70 % use iOS.

15:37And outside of the US, it's closer there's actually more android devices so apple has like pretty it's pretty dominant in the united states and a lot of users in us are like you know religious about it but i don't think i've ever seen anyone tweet except for this device that they're willing to switch from ios so a lot of people actually care more about crypto than they do about apple which is kind of interesting Yeah, although, you know, everything I've got is integrated in Apple. So the only way it works for me is, and a lot of people have this, is just two phones. It's like one for your Web3 Live because it makes it easy because it's a nightmare otherwise.

16:20So if you solve making it easy, and then you can still keep your Apple Music and everything else elsewhere. The thing is, like, this is a Google-enabled phone, too. It has GMS and all the services. So if you're like me, I have an iPhone that has, they use Chrome for my browser, use Gmail for my mail app. Google Maps generally for maps like you kind of like when you make the switch the only difference like which way you got to slide up to find apps that's really that that's about it so for like for a lot of users that are saying like don't use the defaults on iOS I think the switch is basically negligible so there's another big thing I want to talk to you about which is the compression of NFTs that you've just rolled out which I think is a really fucking big deal.

17:07Talk us through it and what you're thinking with it. So this was a really cool ecosystem-wide effort. It was some folks from labs worked on the smart contract. A lot of folks from Metaplex worked on the spec and like the rest of the kind of application side and a bunch of the infrastructure providers like Helios, not Helium, and Triton and like built the indexers to do this. And the underlying technology is pretty old, I would say, as far as crypto is concerned. You even actually have seen it in Bitcoin. It's called a stateless accumulator. And in Bitcoin, there's a implementation called the U-TreeXO, if you ever heard of that.

17:53So these are ways for, basically, you're kind of conceptually, if you want to think about it, You're trading the state space for ledger. So ledgers are actually cheaper to store because they're on disk. They don't need to be accessed immediately for consensus. Like when you do execution of smart contracts, you don't need to like, you can't typically historic look back in history. You get access to the recent state, but not the rest of the history. Does that make sense? Yeah. So the stuff that you have in the most immediate state, that's the most expensive state that you can have in a smart contract platform.

18:32So the way stateless accumulators work is you store a Merkle root or some kind of accumulator. Could be other fancy cryptographic thing, but Merkle roots work great. That's what we use. They're very simple and very fast. And then you track updates and changes to that Merkle root through transactions that post the proof to the state and then the new state. and it recomputes the proof and updates the Merkle root. So all the information you need to reconstruct the root and the entire kind of tree is in the ledger. So if you play it back, you can reconstruct the entire tree, but it's not stored in that immediate state.

19:07So indexers like Helios and Triton and all these other folks, as they're playing the ledger for their RPC info, they produce all these witnesses and stuff and they maintain a larger portion of the state and serve it to users like Magic Eden and so forth. but validators that are running the chain and doing all this consensus work don't have to store that entire thing in the immediate in like the ram effectively right in that really fast accessible storage can get put on tape drives for all we care right so like that that's really i think the trade-off and that dramatically cuts costs on the amount of like how much it costs to actually update and store and deal with these things.

19:48So the price to mint NFTs is now the cost of just sending a transaction and modifying a state route. That state route is very cheap, doesn't reallocate any more state once you allocate that tree. And it becomes about, the cost drops to about$130,$150 to mint a million NFTs. So that changes the game for NFTs, I think, because we all know that NFTs are not just about art, PFPs, and everything else. It's a contract that can now operate at scale for low cost ticketing all this stuff where are you thinking this is going and who's getting interested in this because i think it's a huge breakthrough where i think like the early adopters of this have been um like it's still solana smart smart like applications but one that's really interesting is dialect they're basically like built a messaging app in that messaging experience every sticker pack that you use in messaging is it's an nft and they constantly do mints and people collect all these nfts from all these like famous creators and stuff and trade them and it the user is not aware of the gas costs like in the ux you're sending like a smart message where i can request an nft from you or send you a payment like you would send cash in ios right if you ever use their their like cash application and then that user experience the user just sees that message they click the button to sign it like all happens behind the scenes.

21:12There's no gas. You're not dealing with this complex thing. Okay, what am I supposed to pay? How much? It just happens magically. It feels like a Web2 app, but everything is trustless. All the actual ownership, everything else, everything is done with self-custody. It's really, really cool. So that kind of user experience, I think, is enabled by this massive price reduction. The other one that's also in the similar vein is called Drip House. They've I think over a million of these compressed NFTs, something around that order. And they're kind of running a subscription service for like NFT users.

21:49So you get like mints every week and people get these NFTs from all sorts of other artists and they've minted over a million. And that's been pretty cool. I think their estimation is they've onboarded like 150 ,000 humans, like people in like about, you know, a span of like three, four months. It's been really, really cool. So for them, that price reduction allowed them to just scale up how many of these NFT drops they're doing. But obviously, there's also other use cases. So every hotspot that Helium had on their original layer one, they announced that they're moving to Solana. The way that they implemented that is that every hotspot is a compressed NFT.

22:32They minted a million NFTs for every hotspot. It costs them a few hundred bucks and now it's all that all that state is tracked on solana all the ownership and everything else and like that's a really really practical application that is kind of becomes a no-brainer i think for effectively logistics companies or anyone else that's tracking a you know like needs a system to track a whole bunch of like distributed crowdsourced hardware. So stuff like that, I think, is pretty exciting to have happened, I think, in the last couple of months. And this is only, you know, we launched this thing like two months ago.

23:15Hey, everyone, we're gonna take another quick break and hear a word from our partners. We'll be right back to the Real Vision Crypto Daily Briefing.

23:26My view is, I've been thinking NFTs are really the solution for ticketing. and secondary markets and getting rid of ticket scalps and all of that stuff. We've seen Ticketmaster play around with a lot of this stuff. It just feels like now with something like this and this cheap, it can be tickets for anything. It can be literally tickets for anything. And that's a game changer because then you onboard tons of people to Web3 without even realizing it's Web3 because everybody has a ticket for something. For sure. Yeah, Ticketmaster has like kind of a crazy monopoly of tickets. So that's a hard, tough nut to crack.

24:03Well, they're doing stuff in NFTs right now. I mean, they're giving away NFTs. I mean, and they've used a couple of different chains already. So they're all looking. That would be like, yeah. So for them to scale up, give away 100 million NFTs or something like that a year, Solano would be the place to do it. We've seen some early - Well, I'm just thinking it just replaces the physical ticket. They've got a digital wallet. it probably costs them about the same cost to process the ticketing, but it means that they get a secondary market in the tickets and they can have a marketplace and they get to control a lot.

24:37It's quite different. The challenge there, I think, is how much... There's always tension between centralized companies and decentralized ones in terms of how to use this technology because you can use it in a very controlled way where you're running effectively, like co-signing every transaction and allow only the transfers that you want to allow. But the natural ethos of every like Web3 builder is that we're building digital assets that are freely transferable and freely tradable. And that's always like that tension between like these big centralized companies. Yeah, but I think that's solvable because, you know, again, with something like ticketing at scale, music tickets, sports tickets, is you just create a marketplace where now you and I could sell.

25:23I'm sure there might be a royalty in the smart contract as there is with the standard NFT. Ticketmaster gets paid for the transfer, but we're now free because I can't go to the game. I want to sell my ticket instantly. I don't have to go to a town outside the stadium, pay a 50 % spread. It just becomes very efficient. And it's decentralized in that matter. Sure, the issuing isn't, but then the spread of it is. I looked at hotel rooms. That's another one I've looked at. It's another thing where you, I will have gone to cancel hotel rooms at the last minute. you lose all the money. The hotel doesn't like it because you're not in the bar drinking a glass of wine eating a burger.

25:57And if you could just have them as NFTs, they become transferable. And that solves everybody's problems. For sure. Everything's a market. Really, everything is a market, isn't it? Yeah. So yeah, I think it's going to be interesting. How much activity does it create on chain? So at kind of protocol layer? humans create very little activity it's barely like you can't you can't even tell but meaning you know if you're issuing millions of nfts is it creating a lot of demand for for solana itself for sol itself or it's because it's very efficient it's batched no even like the problem is like so solana does like 30 million transactions per day 90 of them from applications alone 90 of them come from oracle updates and market makers so that are machine driven so they're like market making like central limit order books and then like adding one more million issuance per day is just like one or two percent more growth right and that the the problem there is that like the amount of traffic that's generated by human activity is always going to be much, much smaller than like machine automated, like robot activity, where they're basically like, you know, trying to extract value out of one penny transactions and stuff like that through arbitrage in these markets.

27:22So I really suspect that the scale that's being added to all of these chains for parallel processing, like from handling, you know, vast amount of transactions across many different parts of state. It's mostly going to be eaten up by effectively machine-automated arbitrage and that kind of thing. That doesn't mean that the chain is going to be expensive or congested. It's just that there's going to be some lower bound floor price that all these machines will take advantage of. And then you as a person, like right now on Solana, I think the fee per transaction is one thousandth of a penny. You as a person can pay one hundredth of a penny.

28:04You not even care, but you will be prioritized 10 times more than every machine. The other big thing you've got going on is these projects migrating onto Solana, like Helium. Yeah. Talk us through that as well, because that's another really fascinating development where people are kind of abandoning their original thing and then joining up with you guys to use your tech stack. So this is a lot of work to build a layer on blockchain. And a lot of people knew that going into this and needed something more scalable than what existed before. So, you know, go back to like 2017, Ethereum was even less scalable than it is now.

28:44And, you know, there were no Layer 2 technologies. Like the only thing you could do is to actually, you know, take Tendermint and go roll your own chain. So a lot of folks did that. And when you actually get to a certain scale, like Helium did, tracking a million devices on kind of your standard roll your own blockchain, it's quite expensive, like internally, operationally wise. Because it's a complex technology. You have to have like a really smart team of dedicated engineers that are constantly unblocking all the bottlenecks in these systems, making them cheaper, faster. And at some point you realize that like that's not your core business.