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CRYPTO 101
Ep. 714 Why Solana Could Dominate Crypto (And What Ethereum Got Wrong) with SOL Strategies
00:45:14
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- [00:00]
Narrator/Advertiser
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- [00:38]
Brendan (Podcast Host)
All right, everyone, welcome back to the Crypto 101 podcast. We hope everyone is having a fantastic morning or evening, because no matter where you're coming in from, you are certainly in the right place here today. We, we have a very highly requested podcast. In fact, a little bit of a familiar face over here. He's been on before. He's a friend of the pod. Mr. Max Kaplan is the CTO of Solana Strategies, or Sol Strategies, and he is the former director of engineering over at Kraken as well. Max, it's good to have you back, man. Excited to talk to you again.
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Max Kaplan (Guest, CTO of Soul Strategies)
Thank you so much for having me, Brendan. Really appreciate it. Excited to get into it.
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Brendan (Podcast Host)
You know, we were catching up a little bit before this and we were just saying, man, it's been a little while, about a year or so since we last got to talk and a lot of things have changed in, in the last year. Some for the better, some for the worst, I'd say, in terms of our overall adoption and what's actually going on. The whole crypto industry, especially Solana, has made some big steps in the right direction. However, there have been a few speed bumps along the way that have knocked us back in other areas. So excited to talk to you about everything that's going on and what, what you all are still focused on doing over at Soul Strategies. So just catch us up here, I guess, before we even catch up and talk about what you've been up to since we last got to talk. Just reintroduce what you're doing in Soul Strategies and what your role is for the people who probably aren't as familiar with, with what the overall mission is.
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Max Kaplan (Guest, CTO of Soul Strategies)
Absolutely. So I'll keep it high level. Right. So Soul Strategies has really two different things that we're doing. Revenue models. Right. Well, first of all, we'll start here. Number one, we're a public company. Okay. So we're listed on the cse, the Canadian Securities Exchange, as well as NASDAQ Ticker. Right on my hat. These are, these are New hats. So figure, figure, it was cool to wear, but you know, so we're a public company, but we're really doing two things is number one, we have the treasury side and we have the validator side right now. And on the treasury side it is, you know, we, we definitely always say we are not a dad. So I want to make that very clear. But you know, we do believe in Seoul and Solana, the network. So much so that we have a Solana treasury strategy where we hold a significant portion of our own funds in Seoul. Right. So we're always looking to get more, we're always looking to accrue more. We believe in Seoul and salon of the network and you know, we're putting our money where our mouth is on the other end and kind of, you know, for the same reasons we, we also run four proprietary Solana validators. What I mean by proprietary is that they are our own validators that we're going out and other clients are delegating their stake with us. Right. So we have four validators. There are about, in total about 3.5 million SOL delegated to our validators. We also run white label validators as well for other clients. So we have two right now. One is for Solana Mobile. Maybe people in your audience know the secret phone. Pretty cool. If you haven't tried that out, definitely recommend you check that out. And on the other one is Pengu by Pudgy Penguins. And the last thing, which is just like very, very new that we launched as a new product is our own liquid staking token, which for those who aren't familiar with liquid staking, there's pros and cons to each. Like, I don't think native staking is better or worse than liquid staking, but one of the, one of the cons of native staking is that on Solana at least, yeah. If you want to unstake, you have to wait up to a maximum of two days. Also if you are, you know, you're a defi degen or whatever, you can't go and use that as collateral. Your native stake as collateral and defi with an lst, you can also on the other end though, to talk about the risk was LST is there are more risks and it's not namely smart contract risk. Right. You know, so really we're just looking to meet clients. Where they're at in terms of, you know, on our staking side is, you know, whatever your risk tolerance is, you know, we want to offer you a fantastic product, you know, and the Last, the last thing I'll say is this, is that, you know, one of the things that's been new over the last year, like just for Solana in General, has been ETFs launched. Right. Which is really, really, really cool. We are the sole staking provider right now for Vanex Solana etf. Right. So that was a lot of work and actually a lot of it was kind of this, like, really boring work of like, you know, like, obviously we had the validator stuff built out, but like, you know, if I were to throw out these terms to beginners, like epochs, mev, inflation rewards, block rewards, like, none of those make sense to like, you know, the average person, especially, like suits and tradfi. Right. We have to build this whole reporting layer that we talked about, like on our earnings calls to like, you know, map in, okay, this is this. This is this type of revenue and you accrue this at this time. But, like, we can't use this epoch, you know, standard that's in crypto. We have to map this back to, like, how these ETFs report. You know, that's really been what we've been up to over the last couple months. You know, that recently, last quarter has been launched in the lst and then, you know, maybe the quarter before that was the etf. So a lot of exciting things. We're growing and it's fun to watch.
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Brendan (Podcast Host)
Yeah, I'd say that one of. I really like that you said this to begin with is that you're not a dat. You don't like to be called a dat. Because I think the best way to describe what you do is that you guys are big fans of the Solana ecosystem. You want to support the Solana ecosystem, you do it through your liquid staking token. You do it through all the other things that you talked about. And I think one of the best ways to prove that or validate that is to say, hey, because we're big fans of the Solana ecosystem, we're going to own a lot of Solana because we are betting on the thing that we're so bullish about. And I think that's, you know, arguably, correct me if I'm wrong here, but that's the way that I like to view what you all do is to say, hey, we're bullish on Solana, but we want to support all ends. We don't want to just buy the tokens and prop the token price up, because overall, you guys are bullish on Solana not just to make money, but you guys are bullish on it because of the ecosystem and what they're working towards. Hence why you're working with Vaneck, you're working with ETFs, you're working as a validator, you're working in the defi side, you have your kind of hands plugged into all these different areas because that is the first and foremost mission of Sole Strategies, which is supporting Solana. And it just so happens to be, you know, hey, a good way to do that, sure, it's all these other things, but a really good way to do that or prove that you guys actually believe in it, is also owning a bunch of Solanas, which I would say goes back to the core principles here. And listen, we have people on from all ends. That's one of our favorite things about the podcast, is that we get to have people who have worked on Bitcoin on and bitcoin developers, and some of the earliest ones we get to have on some of the lead Ethereum developers, we get to have all these other projects and all these other layer ones and layer twos, but, you know, we like it all over here, right? We're huge fans of Solana. If you're new to the podcast, welcome. You know, hopefully that's a good thing for all you listeners out there, but truth be told, we are. And so a lot has changed in the last year or so. Maybe not even changed is the right word, but a lot's going on, right? So I guess just catch us up to speed a little bit more. You talked about some of the new upgrades and products and all that. Maybe what has changed from your perspective has the way that you all have tried to do business or any of that changed
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Max Kaplan (Guest, CTO of Soul Strategies)
a little bit. You know, I would say this, that, like, you know, I think you're pretty spot on in terms of, like, what our bet is in terms of, you know, like, we, we're, you know, like I guess I'll say this, but, you know, like, we, we want to be like a, a tech company in Solana. What I mean by that is that, you know, like a lot of people, they conflate Sol the Token and like Solana the network as the same thing. And, you know, they're like, very strongly correlated. But, you know, if you just look at, if you just zoom out and you look at all the stuff that came out, like over the last year, I mean, you have the head of the SEC talking about right now that all of finance is going to be tokenized in two years, right? And it's Fair to say something like, okay, if that happens and it happens on Solana, you know, the price of Seoul will go up. Right. But, but also too, it's that like we want to be there and help like all of finance move to Solana as well. And like the best way to do that is to be hands on building stuff, making the network better. Right. Whether it's like just raw, raw infrastructure. Like that's my background. Like I'm a DevOps guy by trade. Right. You know, running like really, you know, just, you know, highly powered validators. Right. You know, well run validators, you know, and then also, but like building products and services on top of that. Right. So like our belief, and my strong belief is that, you know, finance will move on.
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Advertiser/Promotional Speaker
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- [09:32]
Max Kaplan (Guest, CTO of Soul Strategies)
Right. I, I definitely think that Solana will have like a very, very big part of that. And we're looking to, you know, if, if that is the case and our bet is correct, which I think it is, you know, we're, we're going to be rewarded for that as a public company, but. Right. And we're really trying to, you know, make this big bet there. So, you know, to come back and answer your question, like, has anything changed? You know, I think we're, we're actually focusing more and more and more on how can we get deeper and deeper and deeper ingrained into the network in products and services that, you know, you're going to see come out over the next couple of months that like, we're working really hard towards. And then I think just like one other thing that I think is like kind of unrelated but it's, it's kind of interesting. It's just like over the past few months, like, especially since like November, AI has just made things just like so much easier to, to build. And you know, we've really focused a lot on like, how can we optimize like, like not only our tech, but like all of our workflows as well, you know, because like we are a public company and you know, like reporting on a public company just sucks. Right? I mean it just, it's not fun.
- [10:45]
Brendan (Podcast Host)
A lot of work.
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Max Kaplan (Guest, CTO of Soul Strategies)
It's a lot of work. It's a lot of work and I take zero credit for it because my background is certainly not a cfo. And you know, our, our CFO is amazing. I love a guy, but you know, also just like, how can we make our business more efficient as well? And I, I just never had more fun building in my entire career. It's just such a cool, cool time,
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- [12:39]
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- [13:10]
Max Kaplan (Guest, CTO of Soul Strategies)
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- [13:27]
Brendan (Podcast Host)
Well, you know, I think one of the, the the big I don't want to say new ideas. One of the big pushes that I've seen from your end is saying that you believe that revenue will be A bigger driver for, for protocols and crypto related companies moving forward with. And that has been something I completely agree with. I've been saying the same thing over here, where you start having a lot of these altcoin projects that have been around for years, or you start having all these different crypto companies and projects. And I, I think now we're getting to the point where people said, hey, we're kind of exiting out of like the early baby stages and people are starting to say, okay, you know, where's the working product, where's the working service, where's the money that's being made? And people are starting to look for that. And you know, I agree. I think that that will be a huge driver moving forward. But walk us through kind of your thought process and what you're expecting for the crypto industry, because people hear that and I think prior to maybe the last year or so, there really wasn't, I don't want to say any emphasis, but very minimal emphasis on how much revenue are you actually driving as a protocol or a project. Whereas again, I think that's going to be increasingly more common to see that as a basic expectation.
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Max Kaplan (Guest, CTO of Soul Strategies)
Absolutely. Great, great. Fantastic question. I think before I answer that, like I'll separate, I want to separate it out between like tokens, which, I mean like non layer one assets. Then I want to separate it out with like layer ones. So to talk about tokens, right? There's been so much debate since like 2017 on like the proper way to do a token, like back in, you know, the ICO days. And we've seen like incredibly interesting projects that have amazing products that, you know, I've launched the token and almost all of them, like the chart looks like that, right? Just like, you know, the wrong way that, you know, like that the wrong way of like what everyone wants, right? And there's been so much talk about like the proper way to do a token, right? And you, there's like one angle on the launch side, then there's like another angle on like how you keep that value up. But you know, potentially a controversial statement. Like the way I kind of look at this is like there's like a right curve and a left curve way of looking at this and like, you know, on the, you know, like I, I tend to think about it more like this. Like I don't think tokens are that much different than, than equities, right? And like what, what I mean by that is that if the token itself doesn't accrue revenue, then like what Are like, what is. What are investors actually buying, right? You know, yeah, you're buying just like some form of hype, right? You know, and like, listen, like, if you want to play that game and you want to speculate, like, you know, I'm not here to tell you what you should and shouldn't do with your money. I'm not going to do that, right? But, you know, that's a choice, like, you as the listener, have to make. But, you know, these products, like the tokens right now, don't really represent true equity ownership in the company. And we have to get more and more towards that. And there's really interesting things that are coming out. Like, I'm a big fan of like, what Metadao is doing, right? Like, I think there's like that, like, on that end, I just think we have to get closer to, like, we've had this instrument that has worked for what, hundred, like 100 years, which is like equities, right? And that's like a proven model and it works. And it's really comes down to, you know, you have an ownership in the actual company, you have ownership rights to the revenue. Like, that's. That's the right model on like the layer 1 assets. This is like a different argument, right? It's that, like, my belief and I, you know, there's a. There's a strong. There's like a lot of people that believe this. My belief is that layer one sell block space, right? That's what they do. And anytime they're selling block space, and what I mean by that is that when someone is submitting a transaction, that is a user going and putting a fee, saying, hey, I'm willing to spend this much, whatever that fee is, to get my transaction put into a block to do whatever. It might be sending stable coins, it might be buying a meme coin, might be buying an rwa, whatever, right? The. If a layer one is not selling block space, meaning it's not being used, then the value of that layer one is very, very low, in my opinion, regardless of what coin market cap says, right? You know, the. These things will only stay valuable so long as they're actually useful and so long as people are paying fees for them. And layer ones should be judged based upon the fees that users are willing to pay. Like when I broke this out in like right curve versus left curve. Like on the right curve, like, sometimes you have these people just like, overthinking this so much. Like, I do think that they have points, right? But like, it has to come down to, like, something is only worth as much as someone is willing to pay for it. And on the layer one side, if people aren't willing to spend fees to use the chain, it's like, you know, if they're not willing to spend it all, it's worthless. Right. So that's kind of my mental model for how things are going. The industry is moving more towards that, which, like, I'm very, very excited about. And I think we just have to move more towards that.
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Brendan (Podcast Host)
Yeah, I had a long conversation a few weeks back with a buddy who is a developer on Solana. Worked on it for years now, built his own project, and we had a long conversation about this, about, you know, what inherently gives a blockchain as a layer one value, what keeps it sustainable and, like, builds value because it's built different from an equity, right? With an equity, it's different. And you have earnings calls and you're getting, you know, ownership of the company and all of that stuff, right? And then obviously, the more money they make, the more, you know, you make and the more price goes up. But it's a bit different with layer ones, and I think it's even more so different with individual projects. And so we had this long conversation about the importance of revenue and how do you pass over actual progress, Right? Because Solana can be wildly successful. It can grow its market share, it can grow its activity, but while that should be reflected in price, it's not forcefully reflected in price. And again, so we had this long experience, which is why I think this conversation is so important. But, you know, we've seen a lot of comments as well, saying, hey, guys, while that should be the case, there's also all these different competitors, right? There's people saying, you should be doing this on Ethereum, you should be doing this on Solana, you should be doing this on Sweet. You should. You know, the list goes on, right? There's a million options now, you know, for the people out there. Let's play a little bit of devil's advocate here. Why should or why do you believe that Solana should be one of the big winners here? You know, we're actually big theorists, and I'll preface this by saying, you know, we believe that more than one blockchain can survive, right? We don't think it's going to be a one winner takes all, at least not, you know, over here on our team. But, you know, why do you think that Solana is in, like, prime position to be one of the biggest beneficiaries over some of these other competitors.
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Max Kaplan (Guest, CTO of Soul Strategies)
Yeah, fantastic question. And I, I do agree. It's, it's. I don't think it's winner take all. I think it's winner takes most. I think there's going to be a few that, that stick around. My view is this, is that, you know, if you go back like all the way to like even the, the bitcoin block size wars, right? There was so much debate about fee markets. And what I mean by that was that, you know, there was, you know, like there was a time where, you know, on bitcoin you need to spend a hundred dollars to submit a transaction, right? Like when you think about like all the people that you are pricing out of the market, meaning you're pricing out people from actually using that blockchain, like barely anyone. Like, why would I spend $100 to move $20 worth of bitcoin? It makes no sense. Like no one is going to do that. Solana. The thing that interested me with Solana so much is like, especially like in the early days, back in the days was that, you know, even Ethereum went down this route of saying that like you, you can make an argument that like the higher the fees are, the, like the better, right? Because okay, cool. People are willing to spend this much money. That's awesome. That was like the argument that like bitcoin made in the early days and Ethereum, I think that's completely wrong. And that's like the Solana stance. And Solana went the complete other way and said, how do we like we're going to make fees as cheap as possible through scaling. Which is like the key point why I think Solana is going to win. And if you make cheap fees as cheap as possible, more people are going to use the chain so that the aggregate sum of the fees is more than the aggregate sum of like these like people, like fewer people submitting fee submitting transactions on chain that are paying a lot, right? Solana is more a model of let's have many, many people submit transactions on chain that are paying very little. That is the reason I think Solana is going to win. Low fees is what is going to take. It's what it's going to going to take for finance to move on chain. And if we think about just where we're at today, like so little of finance is on chain right now that like, you know, we could scale 100x and be nowhere close to like what Tradfi is doing, right? And to be trying to maximize on fees right now is completely missing the Forest for the trees. You know Solana is the only, has proven itself as the only layer one that can actually scale and support volume. And like just let me like put some like hard data on this. But you know, I mean we, we saw this like you know the, and I listen like I don't want to talk about meme coins here but like you know like you could replace meme coins with any asset for this analogy. But the day the Trump meme coin launched, Solana Dexes did double the volume of both Kraken and Coinbase combined, the two biggest US exchanges out there. Right. You can't say the same for any layer one that did that much volume. And Solana has proven itself through and through that. It is the only layer one that could support that. And the last thing I'll say is this is that like I think there's two main use cases where blockchain is going to win, but I think most of the value is going to come from the one I'm about to talk about which is trading. Right? Trading is where most of the value is going to come from. I think it's for so many reasons. I think it's for like 24, 7 access. I think it's for cheaper access. Um, I think it's for like people who can't buy certain products. Like if you want to buy US equity and you're in like you know, in Latin America somewhere or something like that, you know, it's very hard to do so. Right. So in order to be, in order to capture most of the value from trading you need to be extremely, extremely fast. Ethereum's block, Ethereum's block times are 12 seconds. Okay. Solana's block times are 400 milliseconds where we'll be down to sub 100 very, very soon. You just can't compete with that. Right. So that's why I think Solana is going to win. I think Solana is going to capture most of the trading volume.
- [24:23]
Brendan (Podcast Host)
Do you find it, I don't want to say like intimidating, but it does seem like Ethereum is getting a little bit more competitive. One of the stats that I saw and we've talked about is that from the prior cycle, so looking around the 2021 era, Ethereum has been able to double its all time high in pre previous cycle transactions while getting gas fees pretty consistently under $0.01. Now it's still not as fast to your point, it's still, you know, I would say significantly slower than Solana. And Solana is still cheaper from A gas standpoint. So you, you have that going. But you do see Ethereum at least the main chain scaling pretty quickly. What are your thoughts on that?
- [25:05]
Max Kaplan (Guest, CTO of Soul Strategies)
Yeah, great question again. And I do think Ethereum is now moving in the right direction and I think the Ethereum L1 is going to continue to scale and I think a lot of their problems like will be, will be solved. But it's a question to me, for me of is it too late? And there's two things I want to really talk about. There is. The first one is a little more obvious. It's that the Ethereum scaling roadmap is very long, right? And to their credit, like they are building some of the coolest technology that is out there and zero knowledge proofs. And you know, like there's a saying in cryptography that a lot of people say that I don't, I don't necessarily agree with, but there's a saying in Blockchain that if you can scale with cryptography you should. And Ethereum is trying to do that. But you're talking like a five year roadmap. Okay, Is it going to be too little, too late? I don't know. I think it might be. But the second thing is the most important to me is that in trading, not only is it important to be fast, but you need to, you need to be liquid, right? You need to have liquidity and you know, if you have something that's really fast but with no liquidity in trading, it's worthless. Now the problem that Ethereum faces is that for so long they went down this layer two roadmap and you know, like, I think that was like, okay, but you know, if you really think about layer twos, they're like, I think it's objective that they're parasitic to the layer one, you know, like, you know, these, I don't know how much we want to get into it but you know, like the analogy that I like to make is that you know, like in the early days of centralized exchanges they were going down all the time, right? You know, like I worked at Kraken and like I used to say my job was if Kraken went down, it was my fault. And there's a lot of times where like, you know, like listen, we went down and you know, I had the battle scars to prove it. But like, you know, imagine I'm trying to think of myself like the equivalent of what Ethereum did with layer twos was like, you know, if I went to the CEO of Crack and I said, listen, we can't scale anymore. We just got to ship out our order flow over to Coinbase, you know, because we just can't do it. Like, I would be fired instantly, you know, like, and rightfully so. And right now Ethereum has this problem where they have liquidity fragmented across all their layer twos. They're not composable in the sense that you can't have, like, know if you have $100 worth of USDC in some liquidity pool that can't be used on Arbitrum in base, that can't be used on Arbitrum, that can't be used on any other layer two, and it can't be used on Ethereum as well. And now Ethereum, like, you know, these layer twos, you know, you're talking about Coinbase, who, you know, has, you know, is a public company where they're, you know, incentivized to increase revenue. Right? You know, so Coinbase has base. They're not going to be giving that up anytime soon. You have Robinhood coming out with their own layer two, right? They're not going to be willing to give up that revenue. So I don't know. I don't think they're going to be able to get back to liquidity.
- [27:56]
Brendan (Podcast Host)
Well, let's stir the pot there, because myself and TiVo, who's in the background of the podcast, we've talked about this in depth and so some of the other analysts over here, and my stance on this is for people who don't know, Vitalik came out, you know, creator of Ethereum, and he basically came out and said, hey, L2s have not lived up to what I've expected them to be. They haven't fulfilled the role the way that I wanted them to. And he could see Ethereum moving forward and starting to steer clear of layer twos or thinking of that as a. As a potential possibility. And so that's what we're referencing here in this conversation. I. It's a big, long post, right? I'm oversimplifying it. You should go read it for yourselves, everyone. But I actually agree with that post because he's right. So some of these L2s at certain points are more expensive than the base chain now, which is crazy. And then you have the transactions getting faster, you have more features, you have it getting more complex. And a lot of these tokens have done, have kind of just become somewhat complacent. They've seen really large unlock events. People have been able to sell off those, those tokens for those layer twos have crashed and it's created kind of a handful of issues. My stance on this is that I largely agree with, with Vitalik stance. My caveat is that I think that there is a place for purpose driven L2s. I think general purpose L2s are. I think he's spot on with. I agree with everything, almost everything that he said. I think general purpose L2s should. It probably be better off giving that liquidity back to the main chain and giving all of those the transactions and everything and doing it on main chain. I think very purpose driven L2s or layer twos that function with a hyper specific purpose in mind. I think that makes sense to me because it's companies saying, hey, we don't want to be on the main chain. We do need something that's a little bit more fine tuned to exactly what we need and I think that will have a place and it should continue to have a place. And so that's my stance on this. I think like Robinhood saying, hey, we have this gigantic exchange, we have all this capital, millions and millions of users. Same thing with Coinbase. You could argue that as well and say for, for those maybe specific use cases and other ones, you could argue that it makes sense for them to have something that's hypertuned to exactly what they need. But yeah, loop you in.
- [30:19]
Max Kaplan (Guest, CTO of Soul Strategies)
I completely agree with you actually. I think that generic layer twos make no sense. But it's not only that they make no sense, it's that they're parasitic, right? It's that Ethereum was shipping volume where it was telling people, bridge your funds off the Ethereum layer one and move them to a layer two. Right? So you had base get like, you know, this huge inflow of liquidity, right? I don't see that. Like I don't see Coinbase saying, hey, yeah, awesome, you know, like we're completely aligned with Ethereum, we're going to shut down base, everyone move your funds back to the layer one. Even if that was like something that they could do, I don't see that happening. To your point though, there are places where layer twos make sense and I think you nailed it. It's that if we're Talking about perp STXes or something that use extremely specific sequencing and application logic, I think that makes sense. I think if you're doing something in Stablecoins where you want to have on and off ramps built into it, great, use a layer too, right? I think those are fine and I think those are actually value adds. I just don't I disagree with. I agree with you that I don't think generic layer twos make sense. And I think they have. There's so much liquidity locked up in those. I don't. I don't know if they're going to be able to get it back.
- [31:33]
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- [34:34]
Brendan (Podcast Host)
Well, I've seen you talk a little bit more about this and you said there's a reason for why you're primarily potentially bearish on both Bitcoin and for Ethereum. And you said for Bitcoin you're nervous about the quantum threat, and for Ethereum you're nervous about the L2 Civil War. As I think what you put it as is that, like, what we're kind of referencing here.
- [34:55]
Max Kaplan (Guest, CTO of Soul Strategies)
Yeah, definitely. Like, I am on the Ethereum side. Yes. I think, and I want to be clear, I think Ethereum is moving in the right direction. And, like, I don't want Ethereum to fail. Right. Like, I think if Ethereum failed, it would be terrible for the industry, including Solana. Right. It's just that, like, if you just look at how much liquidity is trapped up in these layer twos and how big some of these companies are where they're like, Coinbase is a public company. They are incentivized and they have to, they have a mandate to increase their revenue. Right. Like, they, they, like Ethereum is just, you know, like, listen, I think there's great people at Coinbase. I'm not talking about anyone individually here, but if you're talking about Coinbase, the company, like, they, they are incentivized to maximize their own revenue and profit and they are going to do everything that they can to keep that liquidity inside of base. And, you know, now Ethereum has to fight against Coinbase, who they shipped their customers off to. Right. And it was that, that was like my analogy of, like, when I was back at Kraken, like, you know, if I told someone that we needed to ship our order flow over to Coinbase or, you know, you know, insert any other competitor in there, I would have been fired, and rightfully so. And, you know, if someone in the audience is like, you know, listening and they don't work in crypto, you know, just. But, like, you could insert that as well. Like, think about, oh, you can't serve your customers, let me go and ship them off to a competitor. It makes no sense. Crypto is no different.
- [36:20]
Brendan (Podcast Host)
Right?
- [36:21]
Max Kaplan (Guest, CTO of Soul Strategies)
On the bitcoin side, I think there, there's kind of two things that I'm, I'm really worried about. They're both long term, just to be fair. So I think that I'm talking like 10, 20 years down the line. I think bitcoin might go to a million dollars in a short. I, I'm not saying that, I'm just saying it wouldn't surprise me. But the two things that make me bearish on bitcoin long term is, number one is the quantum threat. I think that bitcoin potentially, and in no particular order I want to hat bitcoin has, like, the beauty of bitcoin is it's so decentralized, but also the con of that is it's so hard to get anything done in that ecosystem. I used to be like, deep in bitcoin. I mean, I was like, at one point I was one of the. I was the top contributor outside of Lightning Labs to the light, the first Lightning wallet. So I lived in this space for a while, but it's become so ossified now that it's like so hard to do anything. There's people out there, like huge institutions. Bitcoin is a store of value. That's the narrative. There's institutions out there that are worried, like, I don't want to put money into bitcoin if they're not going to fix the risks that come with quantum computing. And, you know, if you look at the response from bitcoin developers, it's like, oh, this is 10 years away, blah, blah, blah. Like, humans always have a problem dealing with exponentials. It's not the way our brains work. And like, even if you just look at AI, you know, there's like, you know, Mark Cuban like famously kind of went out and said, oh, we're like 100 years away from, you know, this is like four years ago. Saying, like, oh, like we're like 100 years away from or you know, like AI, like, replacing people's jobs. Look how quickly like that's happening, right? I think quantum is going to come much faster. The second thing is one of the Things I'm really worried about Bitcoin is it kind of like it, it kind of ties into what we talked about with revenue is if you look at the bitcoin network in terms of how value gets back to miners, only 1% of like what miners revenue actually comes from block fee, like block rewards, right? Which is people actually submitting transactions on chain. The 99% of it comes from inflation, which is, you know, bitcoin is always talked about is this. It's a deflationary asset. And that's true depending upon your time horizon. But like, if you look at how much bitcoin is inflating month over month, you know, this is before it crashed, but like at one point it was like a billion dollars or something, you know, like a month. And you know, if inflation goes like the, you know, bitcoin's inflation is going to go down. And that's a good thing. Right? But bitcoin will die if people don't use the bitcoin blockchain. Like, you know, when, when inflation goes to zero, miners will have to shut down because they can't go and pay their electricity bills, which they need to. And you know, bitcoin is a beautiful proof of work protocol, but miners have to be incentivized to run the chain if people aren't using the chain, which they're not. And like you have so many decentralized services, you know, that like, you know, centralized bitcoin so you don't have to use the chain. There's no way it survives. There's a zero chance. So those are my worries.
- [39:18]
Brendan (Podcast Host)
Yeah, no, I think it's good to hear both sides. You know, over here again, I want to reiterate this. You know, we're big fans of Bitcoin, Etherium, Solana and many other projects. We're, we're fans of all of crypto. And I think it's so important because we want to look at everything through both lens. I think it'd be stupid if all we did was have guests on who. All they did was glazed crypto, their favorite project. They glazed bitcoin, glazed ethereum, glazed Solana. And they said everything's going to the moon. Like, it'd be such a silly podcast if that was the only point. And so I think it's good to have hard conversations, important conversations, good conversations, but also let's have some, some constructive criticism and let's talk about some of these harder to talk about things, some potentially negative catalysts, and let's actually talk about them and then you, all the listeners get to hear both sides from leaders in the industries and then you get to make your own decisions. And so again, I think it's important that we have these conversations and you know, we've gone back and forth about maybe some of the cons that you are seeing and maybe some of the ones that I felt with Ethereum, but I think it comes from a place of love, at least on my end, because, you know, truth be told, I own probably about an equal amount of both Ethereum and Solana. I'm betting on both of them and because of that, I want to see both of them survive. So what we were saying earlier might have sounded a little bit harsh, but it's because we want what's best for the industry. And to your point, we don't want Ethereum to go away, we don't want Bitcoin to go away. We, we bring this up because we want to actually see the best possible changes. Because if either one of those disappear, I think it's pretty safe to say that crypto as a whole is, is going to be in a little bit of trouble. Not a little bit, it's going to be in a lot of trouble. So again, I think it's important to have these harder, tougher conversations because it comes from a place of us wanting to see the industry thrive and succeed in the most impactful, valuable way possible, which is really where it all comes from. But I want to transition us back to Solana here.
- [41:18]
Max Kaplan (Guest, CTO of Soul Strategies)
Right.
- [41:18]
Brendan (Podcast Host)
I played a little bit of devil's advocate. We've stirred the pot. We probably have people already typing some comments about, you know, their opinions. But let's transition back to Solana here because there's a lot of good stuff to come. Right. The future, I think, for all of crypto is packed with a lot of great stuff. But what are you most excited about in the coming year?
- [41:38]
Max Kaplan (Guest, CTO of Soul Strategies)
Yeah, great, great question. I think I have a technical answer and a non technical answer. I think the, on the technical side, and I won't go too deep into it, there's a new upgrade coming which is called Alpenglow. And just think of Alpeng Glow as something that's going to make Solana. It could be up to like 4x faster. Right. You know, which is, it's going to reduce the block time down to, you know, could be around 100 milliseconds, could be less, could be more, but you know, around that I think it's pretty safe. And you know, when you get to those levels like the, the, the Smaller the block times are, the more interesting, interesting things that you can do. And the better trading experience, the, the better the trading experience becomes. That's what I'm very excited about on the technical side. On the non technical side, the thing I'm most excited about is some of these really cool, unique assets that are coming out. And there, there's like a few angles I could take from it, but the one of the ones I find extremely interesting is RWAs, right?
- [42:42]
Brendan (Podcast Host)
Yeah.
- [42:42]
Max Kaplan (Guest, CTO of Soul Strategies)
So you know, like there, there's like two good examples that I like to bring up. Number one is prime, right? Which. And prime is a tokenized fund. It's basically tokenized credit that gives access to HELOCs in the U.S. so prime is. There's a company behind prime, there's two. One of them is prime is. Sorry, excuse me, is figure which is a public company that's NASDAQ listed. Right. If you wanted to go and get exposure to yield on HELOCs, how can you do that today? Right. You can't really. Right. I mean you could go and buy stock and whatever. Right. And hope that like, you know, the value accrues there. But you know, that's, it's very difficult to do. The other one is another company called onra, which is reinsurance, which if you're not familiar with reinsurance, it's insurance companies buying insurance from other insurance companies. Right. So there's insurance companies that will issue insurance to other insurance companies. And some of the yields on these things are like, you know, I mean like if you just look at the actual policies and from the issue is they're like 40%. There's no way to get access to those markets today without these tokenized funds. These, these like that is beautiful in my opinion because it gives investors exposure to things that you know, typically only like the top 1% of people by net worth could get access to. And also like, you know, the more obvious answer is tokenized stocks, right. You know, I think those are really cool. And also like all of the native at all of like other layer one assets that are also coming to Solana. Right? So like, you know, there's XRP on Solana, there's hype on Solana, there is, you know, like bitcoin on Solana. Right. Like that is really, really cool. And I think the better the asset quality on the network, the more activity we're going to see regardless of the network. But on Solana, I've been, you know, I was talking to one of my buddies. Sorry, I was just talking to one of my buddies in Ethereum. And, and you know, the other day he was like, you know, like, some of the assets on Solana are so cool. Like, I agree. And like, I don't know, for whatever reason, Solana just had so many cool assets.
- [44:46]
Brendan (Podcast Host)
Well, I think, you know, I would agree with you. And Salon is growing and you've seen some big institutional partnerships. People still look at Ethereum, and I think Etherium to this date still has a higher level of maybe institutional adoption. And this is the way that I look at it is that I think Ethereum might be seeing a higher level of institutional adoption, but it would seem that Solana seeing a higher level of retail adoption.
- [45:09]
Max Kaplan (Guest, CTO of Soul Strategies)
Yeah.
- [45:09]
Brendan (Podcast Host)
And you see a lot of retail users, traders, whatever it may be, they really do enjoy Solana for a lot of the reasons that you mentioned. It's cheap, it's fast, it's efficient, it does the job. What will it take to maybe get some more? Because we, again, we've seen it growing. You've had some big names already enter in. But what will it take for, for you seeing a world where Solana sees more institutional adoption and more institutional capital on chain than Ethereum is like. I would assume your answer to this is. I was going to say, do you think that's possible? I'm like, I assume your answer there is yes, but how do we get to that point?
- [45:45]
Max Kaplan (Guest, CTO of Soul Strategies)
Yeah, great question. I thought about this a lot, right? So, like, you know, it is clear that, like, Ethereum, like, there's only two metrics that Ethereum really wins on. And again, just before that, like, Solana wins on, like, Dex volume. It wins on active users, it wins on transactions. Like, all those metrics Solana wins on. The two metrics that Ethereum objectively wins on, like, have a, have like one component. Like, they have a time component to it, which is like, how long the network had been out for, how long the network has been out for. But it's stablecoin supply and it's tvl. And both those things are important, right? They're, they're very important. And just to be clear, but there's also a time where Blockbuster did orders of magnitude more revenue than Netflix did. Right. You know, and like, I love it, you know, like, you know, people can go and say, like, listen, you know, Ethereum, it seems like all the institutions are, you know, on Ethereum, it's definitely not all right, but you just look at all the news coming out, you know, like, there's institutions moving to Salon every day. My, my, my response to that Is. Yeah, listen, there is. There was a time where Blockbuster was doing 10x more than Netflix was in revenue. Look how that turned out, right? The answer to the question of like, what's it going to take? Is it's going to take more time, right? So I think if we're also being objective, I think it's pretty clear that like this last cycle most users like onboarded like most new users to crypto onboarded through like Phantom and you know, we're trading their first Meme Coin and you know, things like that, right? And like, you know, historically, you know, like other cycles they were onboarding through sexes and then they were onboarding through, you know, defi summer on Ethereum. And you know, like, there's users that, you know, like those users have been in crypto for a while and you know, like, people like, you know, crypto is tribal and like, that's okay. There's like nothing wrong with that. I think it's going to take more time, right? And also like just really hard engineering work to build useful products, right? Like, Solana needs to be useful in order for people to actually use it. And you know, like Meme Coins is like, everyone likes to look at Solana is like, oh, it's this gambling chain, right? And you know, like, because like Meme Coins were, you know, like what Solana was last cycle. But I think that's missing the forest for the trees because Meme Coins contributed a lot to Solana's like, you know, economic value. But you know, like trading one token versus trading another, that like the same, like the same work applies, right? That could have very well been tokenized Tesla stock, right? And that's why if you look at like where X Stocks first launched, it was Solana because it was the only network that proved that it could actually handle the scale. And you know, I think it's just going to be continuing to do that, right? Just continue to prove that we can handle the scale month over month, day over day and then also more users to come on board, right? Like, I'm not worried one bit that like, you know, Ethereum stablecoin supply is higher. Like, you know, I just look back to Blockbuster and Netflix, I love it. I think it's just a che. It's. It's just, it's just a cheaper opportunity to buy Soul for me.
- [48:49]
Brendan (Podcast Host)
Yeah. Well, well said, man. I mean there are all sorts of opportunities out there and I'm excited. I really am. I think competitiveness is essential for any industry to, to push innovation forward, right? That's really where it all stems from is that a competitive environment inspires innovation and that's what we like to see here. It's a nice little back and forth and again, we like to always look at both sides. So Max, we appreciate your time. We appreciate you coming on any other things that we should be watching out for for from Soul Strategies. Did we miss anything? Any other final, final notes?
- [49:31]
Max Kaplan (Guest, CTO of Soul Strategies)
I think the last thing that I'll say is just, you know, like we, we've been very focused on like the validator side, like you're going to see us over the next couple months weeks transition into other areas that are really exciting. I'll leave it at that. But I'm very excited for that.
- [49:49]
Brendan (Podcast Host)
Awesome. Well, you'll have to let us know what happens. You'll have to keep us posted. Come back of course, when there's any big updates and you know we're rooting for you here. So appreciate your time. Where can people find more about yourself and Soul Strategies?
- [50:04]
Max Kaplan (Guest, CTO of Soul Strategies)
Yeah, definitely. You can always follow me on Twitter. My handle is Max E. Kaplan and Soul Strategies. You, you could go to SoulStrategies IO. You can also follow us on Twitter. Our handle is just at S.O.S. well, strategies.
- [50:16]
Brendan (Podcast Host)
Awesome. Well, once again, Max, thank you for joining us. We appreciate your time and to all the listeners out there, we appreciate you tuning in as well. We love doing these podcasts. We do them every single week. But a quick little reminder in that we not only do these podcasts multiple times a week, completely for free, but we also have a great YouTube channel called the Crypto 101 podcast on YouTube where there's all sorts of market updates, rundowns, YouTube videos, tutorials, you name it. So check us out over there. Hit the like and subscribe button. Leave us a review. If you're on Apple Podcasts or Spotify, we'll see all of you at the same time, same place next week. Take care.
- [51:03]
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Max Kaplan (Guest, CTO of Soul Strategies)
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Max Kaplan (Guest, CTO of Soul Strategies)
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