Balaji Srinivasan and Raj Gokal: The Network State (Breakpoint 2024)

Raoul Pal (0:00)

Hey, everyone, as you know, Solana is one of the ecosystems I'm the most interested in. I've been incredibly bullish. I love to see the vibrancy of what is happening in the space. Unfortunately, I couldn't make Breakpoint this year, but the stories have been amazing. I heard the talks are incredible, and we're really proud of Real Vision to give you talks from Solana Breakpoint 2024 in Singapore. I really hope you enjoy them.

Raj Gokal (0:38)

Welcome.

Balaji Srinivasan (0:39)

All right.

Raj Gokal (0:41)

Well, we're really far apart.

Balaji Srinivasan (0:43)

I know. Yeah, we got, it's like Romeo and Juliet.

Raj Gokal (0:47)

Thank you so much for coming, and thanks everybody for coming to Singapore if you flew in. Baljana, I know you don't do in-person appearances very often, so this is really meaningful.

One of the themes of Breakpoint this year, there are many themes, but one is just be as efficient as possible. We want to be like a firehose of information, so I'm going to skip your bio, you have a Ph.D., Master's, Council, earn, A16Z, you're on the network state now. And I know you have a lot to say about the network school, which you're building here nearby in the Singapore area. We'll get to that. What I'd love to start with is, what has your experience been maybe putting a network state lens on Solana, the network and the ecosystem? What's your experience been with Solana?

Balaji Srinivasan (1:35)

Great. So, yeah, the main thing right now is, so I think Solana is awesome. I wouldn't be on stage if I didn't think it was awesome. It's actually useful, which is the highest compliment I can give. USDC on Solana actually works. Tip Link works for sending NFTs and so on. So I think of Solana as important infrastructure for network states and startup societies, because it just means that a lot of stuff we were talking about theoretically for 10 years and it was kind of possible with high fees or kind of possible, but you had to really hack a smart contract. Basically, it just works and once that goes into infrastructure, you can build on top of it. So I look at Solana as being an important piece, not the only piece certainly. I think of Bitcoin and other things as crucial components as well, but I think of Solana as a crucial piece of infrastructure for the network state.

Raj Gokal (2:23)

Yeah. Well, your definition of decentralization, the way you brought a harder quantified approach to how to measure censorship resistance has been an important part of the Solana roadmap. So first of all, thank you for saying all these nice things, but also I want to stress that we focused on decentralizing Solana and making sure we deliver that kind of user experience while actually having a censorship-resistant network. And a lot of that came from your thinking.

Balaji Srinivasan (2:51)

Thank you.

Raj Gokal (2:52)

Do you have a similar way of sort of quantifying success as a network state? Like if you look at Solana, the ecosystem, the founders, as a network state, how do we define success?

Balaji Srinivasan (3:02)

Great question.

So on quantifying decentralization, that was a paper from several years ago. And I'll just describe that for those who don't know how that works. So lots of people argue about decentralization as almost a theological concept, like something is either not decentralized or it's centralized or it's decentralized. But between that zero and one, you have many intermediate states, levels of decentralization. And I had this paper from seven years ago, that I think has held up reasonably well on looking at all the choke points in a system and saying, how many actors do you need to choke to choke off a system? For example, if you capture three miners or 70 validators, does that compromise the system? And the Nakamoto coefficient is like the minimum number of entities you need to capture to choke point the system, and that's a measure of decentralization. And so, Slot has built, I think, in part on that. Obviously, you have a lot of other technological breakthroughs, but to your second question, which is what are the key metrics for a network state? So, you know, everybody here is familiar with CoinMarketCap and MarketCap and a few other metrics like that have become things that people refresh every day. They're flawed, they're imperfect, but they still are, you know, let's say roughly correlated with the important success of an asset. People talk about top five, top 10 coins or whatever, fine. So, in the same way, I think we have started cloud currencies that compete with fiat or land currencies. We are going to start cloud countries that compete with fiat countries. And what are the metrics? It's population, real estate, and annual income, which are comparable to the population of a fiat state, the real estate footprint of a fiat state, and the annual income. So the population annual income, you can think of it, let's take all Solana holders, for example. You can count their population, and you can count their annual income. The part that we haven't really focused on yet is how the cloud takes land. That's the next step for us as a community. How does the cloud take land? And we actually have done this in implicit ways. For example, Facebook's data centers, or Google's offices, or Solana's validators all around the world are actually taking up significant physical footprint. If you had some NFT that proved how much real estate there was, for example, you have a surveyor go there, and that surveyor is like a notary, or an auditor, or a proctor of some kind, and they say, okay, this is 50,000 square feet data center, or whatever it is, right? And then that's put on chain, and you sum up all of those proof of space NFTs, that would give you a real estate footprint of a decentralized structure, right? And of course, it's not just space, because you could say, all right, you know, maybe this is the built-up building, and this is the land parcel around it, but there's a whole set of things in real estate that you can do in this. You start arguing like you do on MarketCap. The point is, you start actually now seeing the physical footprint of the Google offices, and the Facebook data centers, and the Solana data centers.