Anatoly recounts the behind-the-scenes story of Solana over the past eight years.

Original Video: NEW ECONOMIES   Compiled by: CryptoLeo (@LeoAndCrypto)

In this sluggish market, a true SOL defender is here again to try and bolster your confidence. Solana co-founder Anatoly Yakovenko gave an interview to NEW ECONOMIES in November, covering Solana's origins and development, its ups and downs and recovery, as well as discussions on regulation and stablecoins. Furthermore, Anatoly outlined Solana's grand vision for the future.

Odaily Planet Daily has compiled the following (due to the large amount of detail, the key points will be presented in the first person): The Origins of Solana: From Side Hustle to Full-Time Job Solana originated from a perfect storm of opportunity. A friend and I were working on a startup project, or more accurately, a side hustle. We were making AI-related things, like deep learning servers, and using these GPUs to mine cryptocurrency to pay for the GPUs. But a question popped into my head: why would people pay for our AI-related products? After a couple of coffees and a beer, my partner and I talked about mining, PoW, the Satoshi Nakamoto consensus, algorithms, and why electricity is so important in this process. I've spent most of my career as an engineer at Qualcomm. As most people know, Qualcomm is deeply involved in wireless protocols, radio technology, and mobile phones. Your phone likely uses Qualcomm products, and it might even use products I helped develop. That day, I stayed up until 4 AM, and suddenly a brilliant idea struck me: encoding the passage of time into a data structure. I thought of the protocol originally used in cellular networks, called Time Division Multiplexing (TDMA). This concept first appeared in the 1960s and 70s, and it's very simple: divide time into segments, and then use different time segments to transmit data. This avoids interference and allows more information to pass through. The reason I thought of this is because Bitcoin and the Proof-of-Work (PoW) mechanism face similar problems. If there are two block producers, two miners generating blocks simultaneously, a fork will occur, the network will be in a chaotic state, and information cannot be transmitted normally. You have to discard one of the blocks. Therefore, if the two block producers can take turns producing blocks, conflicts can be avoided, and the bandwidth utilization of the protocol can be maximized. I did a rough calculation and found that its throughput was 1,000 to 10,000 times higher than Ethereum or Bitcoin at the time. The idea struck me: maybe I should start a company. Smart contract platforms really interested me because they provided developers with a completely new application development environment, and these applications were different from those you would build anywhere else. You couldn't just build smart contracts on a regular AWS server; you needed the verifiability, cryptographic guarantees, and so on provided by the blockchain, which made it possible to write code that could handle funds. At the time, many people thought that things like Wall Street databases controlled funds, and these were monitored by people; many products simply optimized the work of these people. Smart contracts were completely different. The software itself was responsible for escrowing funds and was the sole authoritative source of the flow of funds, so in a way, smart contracts revolutionized the entire data model. In the early stages of entrepreneurship, boldly pursue what you believe in. Deciding to start a business required convincing many people, and my wife was the first. She's an engineer, and she knows me well. I've always had a side hustle, always putting ideas into practice in my spare time. We already have one child. She said, "Okay, that might work, but you can't be a worker, a father, and a startup all at the same time. You have to choose one: either go all in or give it up." It was this statement that prompted my decision to start a business. I remember she was in Colombia at the time, Facebook was expanding, and she was working at a startup that was Facebook's competitor in Colombia, when Facebook was still in its very early stages. What she learned there was that the market experiences a boom period of about six months, and everyone knows that a product under development will capture 80% of the market share; it will have certain explosive characteristics, and if you miss that window of opportunity, you'll never catch up. So at the end of 2017, I felt it was the perfect window of opportunity to build an L1 blockchain with specific properties, enabling it to scale globally and truly handle all global financial systems. For me, the biggest motivation for creating Solana was twofold: first, the necessity of giving it my all, and second, not wanting to miss out on a booming market. I think anyone reading this who is still hesitating about investing in AI or other fields, or waiting another six months or a year, is truly missing a golden opportunity. Act now, or better yet, if you've already started. Unlike BTC and ETH, Solana prioritizes transaction efficiency. Solana is a high-performance blockchain. Our key use case has always been transactions. If you consider Bitcoin as a store of value/digital gold, then building a store of value isn't an engineering challenge. In reality, ensuring settlement and global availability does require some engineering expertise. Satoshi Nakamoto's PoW algorithm and the Bitcoin white paper excel in this regard. However, you can't develop a Bitcoin Plus version; you can't compete with Bitcoin in this market by adding features or increasing throughput. Ethereum's goal is to use settlement as an application scenario. The idea is that after final checkpointing completes execution and settlement, you can use the Ethereum ledger as a reliable source of truth. I've never thought about competing in the settlement stage. Perhaps there's some room for technical improvement in that area, such as adding an execution layer, but I'm more interested in execution itself. That is, building a global blockchain capable of handling transactions, payments, and everything users need in their daily lives, all within a single system. Solana's most unique aspect is perhaps its vision: without separate blockchains or hierarchical structures, you can integrate all functions into a single massive state machine and coordinate all operations at lightning speed. To give you some data, Solana's transaction volume in its first month was equivalent to Ethereum's total transaction volume over its entire lifespan at that time. Startup Challenges: Funding and Recruiting The early stages of a startup present numerous challenges. For any founder, making progress in the first crucial approval process can be the biggest obstacle, with the vast majority of companies failing at this stage. I remember attending thousands of meetings around the end of 2017. I compiled a list of all the venture capital firms in Silicon Valley that might invest in cryptocurrencies. Fortunately, I was in Silicon Valley at the time, which I think is why it remains a startup hub: you can meet thousands of people in a very short time and try to pitch your startup idea. For founders, effectively marketing their product vision and concept is crucial; otherwise, you'll never be able to recruit, sell your product, or guide users, whether you're in the B2B or B2C market. Selling Solana was a completely new experience for me, but also a process of learning and continuous improvement. This is why I believe in Silicon Valley you can build a huge list, force yourself to repeat the effort thousands of times, and ensure you eventually reach the most valuable investors. The more familiar you are with this process, the better your pitch will be. For founders, you're trying to convey your message in the most concise way possible. In a short 10-minute conversation, you have to figure out how much the other person already knows about cryptocurrency because you don't want to repeat what they already know. You also need to explain the specific problem your product is solving and its impact in the shortest possible time, and show them how the world will change based on the principles of cryptocurrency. My strategy at the time (I don't know if this strategy works for all founders) was to pitch to the company first, then to the partner. Even if the company eventually gave up, I could still convince the partner to commit, making them more likely to connect me with other venture capital firms they knew that invested in this area. Ultimately, this allowed me to attend thousands of conferences, finding companies focused on the crypto space and more willing to take risks at an early stage, because the venture capitalists who invest are both employees of the companies, investing for them and also making private investments. In fact, we had already completed a funding round and were almost done with it. This was in the first quarter of 2018, and there wasn't a standard, secure investment template for cryptocurrencies that could be quickly provided to investors. We spent six weeks having lawyers draft the relevant documents. But during this time, Ethereum started to fall, by about 10%, and many funds went bankrupt as a result—this was the first challenge we encountered in the early stages. Even so, quite a few people were willing to participate; they weren't entirely crypto funds, nor were they 100% invested in cryptocurrencies; their balance sheets held more US dollars, but they saw this investment as an opportunity. We eventually completed this funding round, but the situation was quite volatile at the time. At the time, I was sitting in the 500 Startups (now 500 Global) office with another co-founder, Raj (because one of our investors came from 500 Startups). He said, “I feel like I have to work hard, I have to go all out.” I thought that once a product had investment commitments, it could snowball and eventually turn into actual checks, but my advice was to keep raising funds until you actually had money in your bank account. I think the second challenge was hiring. However, I was lucky; many of my former colleagues at Qualcomm were eager to do something new, and these people all had over ten years of experience in low-level operating systems or protocols. For example, one of the people involved in the development of the Solana protocol had been involved in the development of the LTE specification. These people, with their deep understanding of networks, operating systems, GPUs, CPUs, and underlying chips, understood what I meant when I told them, "Since you're all going to change jobs anyway, you can treat building Solana as a vacation." I hired some experts in their respective fields whom I knew very well, and everyone quickly got to work, starting to build what I considered to be the most advanced network at the time. As it turned out, Solana was miles ahead of all its competitors from the very beginning. From the founders' synergy to Solana having PMF (Programmable Matrix Factorization) Speaking of work partners, the best way to describe my relationship with Raj is like a romantic relationship—it requires complete dedication. Raj was introduced to me by a mutual friend. At the time, I didn't have much of an impression of him; he was just an ordinary person. The friend who introduced us specifically said, "You're a great engineer, but you don't have any other experience. You need someone who complements you. Raj had previously founded a company and did very well, but he had absolutely no engineering experience. You two are a perfect match." We get along very well; my wife basically calls our marriage a "work marriage." Our decision-making process is indeed exhausting, but in that high-pressure, fast-paced environment, we'll argue repeatedly about different viewpoints until we eliminate all obviously bad options, ultimately leaving only what I call the Pareto-optimal set of options (Pareto efficient means that there's no room for further improvement). We can choose A, B, and C; all the trade-offs seem about the same. We've discussed almost every possible direction; at this point, it's almost entirely a matter of luck. It's tiring and requires a lot of endurance. It also requires mutual trust and confidence in each other's judgment. I think CEOs and initial employees or co-founders need this kind of personality—able to argue fiercely based on mutual trust, yet still feel that everyone respects each other. It's quite difficult; I just enjoy arguing, and I don't mind losing. Many of a CEO's shortcomings or personality traits will ultimately affect the company culture; in the early stages of a company, anything can spark debate.

Strive to build your product and complete development as quickly as possible, but you can't anticipate all possible failures. Should you assume you'll succeed and then invest in developing auxiliary features to solidify that success and launch the product more effectively? Or should you focus on developing the product well, proving your capabilities, and then add other enhancements later? In the early stages, especially when developing complex products, you have to make many of these decisions.

For example, startup books like Peter Thiel's *From Nothing to Something* offer a lot of great advice, and the best advice you can get is to build a Minimum Viable Product (MVP)—the smallest product that can validate your idea—but this is actually quite difficult to define. So you have to find your niche market. We spent some time doing this, and it was almost forced upon us, probably in the second year of our development cycle.

At that point, we only had about 12 months of funding left (out of a total of 24 months), and the product still wasn't functioning properly.

We had to cut everything except the existing features, release the product as quickly as possible, and minimize the changes required. This allowed us to gain a first-mover advantage and launch a product that was completely different from all the others on the market. To some extent, during the first year of developing Solana, I wanted to take as much product risk as possible and build a top-notch product. This was indeed part of our vision, and by the end of that year, we had developed a series of features and taken on about eight technical risks. If you only risk trying one technology, the probability of success is 50%. But if you try eight technologies, the probability of all eight succeeding is only 1 in 256. So, the probability of failure is high, various problems arise, and then you have to find ways to fix them and make repeated adjustments before you can launch it to the market. But it was precisely because of these decisions, taking on these risks early on, that we had a series of differentiated features that were more or less effective. They weren't perfect, but we did expand capacity and reduce latency, and the development experience based on Salana was completely different compared to any other platform. At the time, Ethereum used the Proof-of-Work (PoW) mechanism, where a block was generated in about 12 seconds, but you had to wait at least two blocks for a transaction to be confirmed. Therefore, users had to wait 30 seconds for transaction confirmation, resulting in a terrible user experience. Furthermore, a processing capacity of 7 or 11 transactions per second was far too low for any application of any scale. We achieved final confirmation of thousands of transactions in just 400 milliseconds, which, including all round-trip time on the server side, was only one to two seconds. Users and developers alike were amazed by Solana's performance, as it was so different, even though the product itself was still quite imperfect at the time. It could run, but it would crash after about an hour. The next challenge was scheduling its stable market launch, which was the most stressful task. You need to cut some things, like supporting EVM, or supporting a certain programming language, or needing a high-level browser, or launching your own wallet stack, etc. Strip those away and then get the most basic version to market as quickly as possible. But I think defining a minimum viable product (MPF) that achieves product-market fit (PMF)—that is, extremely high capacity, low latency, and removing all other features—is very difficult because you simply don't know how much to sacrifice or what developers really care about. We were lucky because our previous experience developing operating systems and developer platforms greatly helped us make most of the right choices and the final results.

But I think the hardest part is product sustainability. Cryptocurrencies can bring a lot of deceptive viral effects. Your token price might skyrocket, but you don't actually have users; you're disconnected from your users. We didn't have much of a user base at the time, but the SOL token price was rising, and we needed to take advantage of this opportunity to accumulate as many real user cases as possible. If you miss this opportunity, it's hard to recover.

We were lucky at the first hackathon; many people submitted projects, but their applications were all rather haphazard. It wasn't until the second hackathon that I felt, "Wow, we think we've found our direction!" The projects from the first hackathon, after three months of continuous improvement, resulted in a very polished, fully functional product that truly aligned with our overall vision for finance, trading, and DeFi. During the second hackathon, when judging the entries, I found huge differences in quality, usability, business models, and actual entrepreneurial capabilities (such as the ability to raise funds and survive). Seeing these companies secure funding during the hackathon, my feeling was that we now had product-market fit, were a core business, and had a path to profitability. So I think that was the biggest change since Solana's launch. I mean, considering all factors, reaching this stage within a year of product launch was incredibly fortunate. Most companies spend years figuring out the best product-market fit, and I think it takes about ten years to truly build a company. From high spirits to a sudden devastating blow, Solana's struggle for survival in crisis. Then came one of the worst downturns in the industry – the FTX incident. As everyone knows, FTX is one of our largest investors and partners. It happened during our third annual Breakpoint conference, a massive event that attracted approximately 1600 developers. Our tickets were sold out, and then, on our return flight, FTX crashed. That's how it was. On the plane, when everything seemed to be going well, FTX crashed, crypto prices plummeted, and the market was in a slump. It was a massive collapse that could have destroyed the entire ecosystem. Solana was founded in the early stages of the 2018 bear market, when Ethereum was falling 10% every week. So we were very cautious, so we never overhired, and the company had ample internal funding and resources to develop and improve our products. I was terrified at the time. Many Solana ecosystem projects that raised funds on FTX actually left their capital there, because if their funding dried up, it was all over; there was no way to replenish the funds, and all the capital would be completely depleted. Fortunately, we conducted a large survey, and the results showed that 85% of the companies were doing well, and 15% were completely dead. One of these companies was very promising: Armani's Backpack. They were developing a wallet and had just completed a funding round of about $10 million, all of which was tied up on FTX and inaccessible. They only had a few million dollars left and were planning to double their team size, build a product, and complete the remaining seed round. At the time, they only had about six people. I thought most of those companies would have failed, but they survived. Despite losing a significant portion of their funds, Backpack doubled down on their work and truly focused on the product. I think they turned things around by launching the Mad Labs NFT series and establishing an exchange. I believe Armani's anger towards FTX and his desire to build a better exchange fueled this shift. Like the energy of an angry founder, I felt they captured the attention of the NFT market and the entire industry for two whole weeks when they launched Mad Labs, which felt like a complete turning point. You see many companies doubling down and revitalizing. It's like a bull market comeback. One of the biggest lessons I learned is that building a company during a bull market is actually very difficult, especially in the cryptocurrency space, because the signal distortion is so severe. You don't know who your core users are, or which features are truly important to your product and growth. However, during market downturns, if you have 10 to 20 loyal users who frequently use your product, especially in the financial sector, and if you deeply understand the value your product brings to them and continuously optimize it, making it better every week, then you will see tremendous growth during a bull market. This is because, firstly, these users will become your biggest ambassadors, and secondly, your product will be highly optimized for specific purposes. The product already has product-market fit, and the financial industry is highly cyclical. During a bull market, time risk generates enormous trading volume and revenue, so you need to ensure your product is highly optimized and ready to scale, regardless of your business model. So it's really interesting to see the companies I interviewed after the FTX crash; they were basically all saying, "We'll continue to optimize the product. We still have enough capital. Let's see what happens next year." All of these companies succeeded, and did exceptionally well. The worst part was that SOL's price plummeted by 97% from its peak, and most people thought SOL was dead. Now I think it's great to have a co-founder who loves crises. Some people are naturally better suited to operating in crises because your decision-making is limited, and you have to act quickly. What we did most was communicate with founders who continued to develop their companies, try our best to help them grow, achieve product-market fit, and clear obstacles for them as much as possible. But we couldn't provide financial support at the time because we were completely out of funds. Regarding the FTX incident, I was very surprised by Sam. As you saw in the interview, he's the kind of super nerd, an MIT quantitative analyst, a geek. They went completely bankrupt. But I find it unbelievable to think about the potential losses from that chaos. With more完善的监管 (more完善的监管 means a more complete regulatory environment), will there be more chaos in the crypto future? I believe the frequency of hacking attacks on the engineering side has decreased significantly, largely due to reduced innovation in smart contracts and the fact that many uses of blockchain have been explored. Smart contracts are becoming commoditized; once deployed, you only need a certain number of CPMM (Automated Market Maker) systems, eliminating the need to take the huge engineering risks of building another. Similarly, with Bonding Curves, lending protocols, and so on, you'll see a reduction in the attack surface. Any significant innovation in the smart contract space is accompanied by considerable risk. Beyond that, I believe we now have better tools, formal verification, better testing, and a deeper understanding of relevant attack vectors, and people are doing a better job of deploying them. The risks have decreased significantly, and with the launch of new financial systems, their risks are even lower, simply because they rely more heavily on on-chain technology. Regulatory issues are a major problem for many exchanges and institutions. If regulations are too strict, they become too time-consuming and costly. For example, obtaining a license might take two years, but it's unrealistic to wait two years to gain market share. Projects often choose to relocate their operations overseas to less regulated markets, leveraging less sophisticated banking infrastructure in those regions, which inevitably leads to various problems. I believe many failures in the last economic cycle stemmed from this. Now, the US has stablecoin legislation, and the SEC has reformed, making it much easier to start a business there. However, the US is indeed lagging behind; Japan, France, and the UK have all enacted cryptocurrency-related laws, making cryptocurrency development much easier. Japan is probably the best place; people from developed countries are all getting into cryptocurrencies. This is why projects like FTX Japan have been so successful; they are actually far ahead, only the Japanese market is smaller compared to the US. Looking ahead, Solana's vision is to devour financial services. There are no engineering or technical reasons hindering Solana's development. Solana's grand vision is to handle payments, transactions, contracts, IPOs, and all other business processes, all completed on a single chain within a single execution engine. Accelerating the velocity of the dollar, enabling participation in the IPO market, and completing any transaction globally—this is an engineering feat requiring immense effort and dedication. Optimizing and perfecting it takes a significant amount of time, but from an engineering perspective, there's no reason to prevent its existence. So this is what we truly want to build. If this system exists, and possesses PMF (Power, Money, and Mechanism), and everyone uses it, then you can effectively reduce financial costs to the same minimum level as physical costs—the ultimate state of software devouring the world (i.e., the financial world). The Solana ecosystem has many advantages because it's a longer-established, faster-growing, and continuously expanding market. However, I believe the competition to achieve this vision will be extremely fierce. I'm unsure if a blockchain as large as Google's will emerge, capable of handling 99% of important transactions. There are two main reasons: first, countries with unique regulatory systems and firewalls are likely to have their own blockchains; second, everyone wants a piece of the pie. Even Google has launched its own blockchain. What will the future hold for fintech companies and related businesses? For example, which platform will be responsible for directing retail investors? How will this integration proceed? It's still uncertain, but I believe Solana is that platform, so we'll wait and see. Moving in this direction, what I really want to see in the future is for companies in the US and Silicon Valley that want to go public to complete their IPOs faster and at a lower cost through a simple method I call a "Linux IPO from scratch." Founders like myself, if they want to do this, can use immutable on-chain smart contracts. This can be written into the S1 filing submitted to the US SEC, stating that you are using this contract for a direct listing on this public, commercial blockchain. These have auction properties; I can directly list my equity on the chain, which will become the true source of the equity structure table and allow the public to access this information at any stage of the company's formation, without paying any fees to any investment banks, without any indirect costs. All incentives and any fees you would normally pay to banks can be used to incentivize AMMs to provide liquidity. This would be my ideal way of operating because once this happens, it will dramatically change how companies access capital and how the public engages with early-stage companies. I believe one of the most important components of the American Dream is the free market. You know, I came to the US from the Soviet Union in 1982, when the internet was booming and companies like Microsoft and Amazon were growing rapidly. They were building the future, and today these companies are multi-trillion dollar giants. I think that the fact that people could buy Amazon stock in the 90s was a huge gift to America, or a huge value proposition. And now, the number of publicly traded companies in the US is probably the lowest since the 1970s, or the lowest number of IPOs. So, if we can provide founders with the tools to complete an IPO at the lowest cost, the fastest speed, and with the least legal fees, I think it will dramatically change the entire industry landscape. This is part of a very cool science fiction future where everyone in the world can access financial services at the lowest possible cost and at near-light speed. I think this is one of the coolest projects I've ever been involved in.

Bonus: The Future of Crypto, the Era of Stablecoins

I see cryptocurrencies being effectively adopted by Wall Street and some global institutions, and stablecoins are a major driving force behind this institutional adoption trend. The Genius Act passed by Congress created a framework for issuing stablecoins and beginning to achieve product-market fit, which is far better than any funding interface that traditional banks can provide. Even building all fintech products on the foundation of traditional banks is far less effective than using stablecoins. So this will be a major driving force, with people expecting to issue $10 trillion worth of stablecoins in the next 5 to 10 years. Currently, the issuance of stablecoins is about $250 billion (note: it has actually exceeded $300 billion), which is equivalent to a several-fold increase, and this liquidity will flow into every financial-related industry you can imagine.

If you are a founder passionate about fintech, or if you want to build a fintech company, I might suggest building your business around stablecoins. You can choose to interface with existing stablecoins and manage various different stablecoins, or build your own stablecoin for specific purposes. From concept to action, Solana has experienced highs, lows, and rebirth over the past 8 years. The co-founders of Solana are among the most passionate founders I've ever met. They have advanced technology, understand operations and risk mitigation, have weathered crises, and are full of confidence and execution in their future vision. These are true crypto builders. At this moment, the heart of a Solana defender is gradually warming up again.