Mert Cracks the Crypto Da Vinci Code: Unlocking the Secrets of SOLANA

A Substack Paper on Navigating the L1/L2 Labyrinth with Crypto Guru Mert

Special Occasion & SPECIAL Guest:

This is a significant event as it marks my 1,000th video and features Mert, a noted figure in the cryptocurrency world. The occasion attracted considerable viewership of around 10,000 views in the first hour. Today, we tackle the most important conversation in Crypto - can all chains win, or will there be a select few that do?

Video's Vision & Topics of Discussion:

Ever felt lost in the labyrinthine world of crypto protocols? Worry not, for Mert unveils the secrets of layer 1 and layer 2 technologies. Mert expertly untangles the complexities of scaling solutions, future trends, and potential champions in this ever-evolving landscape. Get ready to have your burning questions about blockchains answered with clarity and depth.

The vision for this video is to provide comprehensive answers to questions about layer one and layer two technologies in crypto, future trends, potential winners in the field, and consensus trades. Mert is recognized for his extensive knowledge across various cryptocurrency chains.

Discussion on Crypto Adoption in Commonwealth Countries:

I asked Mert why countries like Canada, Australia, and New Zealand have higher per capita viewership for the channel and why they have a significant number of crypto experts. The discussion suggests that this could be due to the high level of education and general dissatisfaction with governmental policies in these countries, driving interest in alternative systems like cryptocurrency.

Advice for Aspiring Crypto Developers:

Mert shares insights for young individuals interested in crypto development, emphasizing the importance of hands-on experience and building actual projects. He advises using platforms like Solana for practical learning and highlights the importance of being proactive rather than overly theoretical.

Discussion on Solana's Ecosystem and Future Potential:

The conversation quickly dove into the strengths of the Solana ecosystem, including its pragmatic approach to software development, its ability to attract developers focused on user-facing applications, and the robustness of its community. Future potential applications and disruptions in various industries like payments, decentralized infrastructure, and Defi are also discussed. Mert also noted that ETH was far too academic in its approach and I mentioned how MSFT was back in the day shipping product that was 80% complete. I said, “never let perfection be the enemy of the good!”

Diverse Ecosystem Beyond Ethereum:

There is now a viable ecosystem in the crypto space beyond Ethereum. Previously, developers and users had limited choices, primarily Ethereum and its Layer 2 solutions. The emergence of platforms like Solana, which have been "battle-tested" and now far surpasses Ethereum in certain metrics, offers more choices and fosters healthy competition in the industry.

Ongoing Development and Challenges:

Despite advancements, there's still significant work in various aspects of the ecosystem, including wallet experiences, application abstractions, and performance issues. The development of a second validator client, Fire Dancer, for Solana, is highlighted as a key step towards decentralization and risk mitigation for the network.

And no, Firedancer will not cannibalize existing validators. Jump Crypto is making the C code for Firedancer open source so anyone can run it.

Despite Mert talking about challenges, and the fact that Blockchain is not ready to onboard 1BN users just yet, Solana are making huge progress:

The Debate Between Modular and Monolithic Blockchain Designs:

This is the Q that has vexed me since day 1. I always approach it like Occam’s Razor - the simplest solution wins.

Our discussion explored the trade-offs between modular and integrated (monolithic) blockchain designs. While there's no clear winner yet, integrated systems like Solana might offer a higher probability of success in creating useful applications due to fewer concerns for developers around trust assumptions and scalability roadmaps.

The Importance of Finality in Blockchain Transactions:

In the world of finance, every second counts. Mert emphasizes the importance of finality, especially in latency-sensitive applications. Solana's focus is on achieving the lowest possible latency in information synchronization while maintaining decentralization. The conversation also touches on the efficiency of finality in different blockchain systems, including ZK (Zero-Knowledge) proofs and optimistic rollups.

Market Dominance and Network Effects in Crypto:

Like any other industry, the crypto industry might soon see a few blockchains reigning supreme. The leader takes the most. Mert predicts a future where two or three chains handle 99% of use cases, with niche app-specific chains emerging for specific applications. This trend reflects historical patterns in technology, where a handful of platforms often capture the lion's market share.

Blockchain Scalability and Transaction Capacity:

The discussion notes that blockchains like Solana could technically handle transaction volumes comparable to those of major payment processors like Visa, assuming some hardware upgrades by validators. This high transaction capacity is crucial for widespread adoption, but it also leads to competition for blockchain resources.

Innovative Approaches to Scale and Transaction Processing:

Mert highlights innovative solutions like the app 'Code', which uses soft confirmations for micropayments, mimicking credit card transactions. This method offers a blend of blockchain benefits and scalable transaction processing, showcasing the creative approaches developed to address blockchain technology's scalability challenges.

Blockchain Disruption Potential in Traditional Finance:

Our dialogue acknowledges the potential of blockchain technology to disrupt traditional banking systems, especially in developing countries. I asked if startups like Stripe be disrupted by Solana Pay? Mert recognizes that agile companies like Stripe, already integrating crypto strategies, might not be as significantly disrupted due to their adaptability and innovation.

Note, that Solana is already disrupting Ethereum in DeFi

Token Inflation and Deflation Dynamics:

The conversation addresses concerns about token inflation in blockchains like Solana. It emphasizes that adoption and increased usage can counterbalance inflationary pressures. The Solana blockchain, for instance, includes mechanisms like transaction fee burns and token utility for storage and quality of service, which could lead to potential deflationary effects as the network grows.

As I say,

Adoption Solves Everything

Future of Blockchain Technology and AI Integration:

I asked a Question: could AI one day spin up the perfect code for a new disruptive blockchain? While discussing the future of blockchain technology, Mert suggests that while AI advancements could aid in developing more efficient blockchain tech, blockchains' socio-economic and community aspects are equally important. The success of a blockchain is not just about technological superiority but also its network effects, community, and economic model. AI might improve the technical aspects but cannot fully address the social and economic layers crucial for a blockchain's success.

Mert also said - “Community is the Moat!”

Future Dominance of Blockchain Platforms:

Mert predicts that Solana will become the most used blockchain platform, surpassing Ethereum, which is expected to be the second most used. He anticipates that Bitcoin will not be the third most used, comparing its role to gold, like a store of value – something you have but don’t necessarily use actively.

VanEck Report on Crypto Price Targets:

The speaker discusses the VanEck report, which set a bullish price target for cryptocurrencies by 2030 of over $3,200!!!!!

Mert and I consider these targets feasible, especially considering factors like fiat debasement and the growing adoption of cryptocurrencies. While high prices can be rational in the crypto space, Mert highlights that they could significantly impact development by increasing data storage costs and deploying applications on blockchains like Solana.

Cultish Nature of the Crypto Industry:

I asked why the crypto industry appears cultish, attributing it to the industry being dominated by speculation and narrative without widespread practical use cases. Mert and I compared the crypto industry to religion, where belief systems (narratives) heavily influence choices, and financial incentives amplify these beliefs further. This dynamic creates a competitive storytelling environment where the most compelling narratives attract followers and investment.

THANK YOU

Mert, your expertise on layer 1 and 2 technologies was truly invaluable. You provided actionable advice for aspiring developers and gave us a glimpse into the future of blockchain, opening our eyes to possibilities we hadn't even considered.

PS Mert is funny as hell :D