Logan Jastremski: Will Hyperliquid Flip Solana?

**Robbie** (0:00)
Logan, welcome to the show, man.

**Logan Jastremski** (0:02)
How's it going, gentlemen?

**Andy** (0:03)
Good, man. It's good, man. It's a little chilly up here.
I need to make it first, guys. You guys are within half an hour of each other. I'm over here in New York.

**Logan Jastremski** (0:14)
Robbie, where are you?

**Robbie** (0:16)
I am around the Fort Lauderdale area, so. Okay, cool. It's beautiful around here, as you know. Logan, man, we were just celebrating the lack of World War III.
I mean, what was... We were just talking about how it was difficult to focus and concentrate yesterday. There was so much happening. We were monitoring the situation, and it didn't leave much time for much else. What was going through your mind yesterday?

**Logan Jastremski** (0:44)
Honestly, I didn't think about it too much. Obviously, it's more fun when number goes up versus down. I think it's easy to kind of get distracted with short-term things. Obviously, you don't want the world to blow up. I think there is some famous quote from an investor. It's like, you don't want to invest in the world going to end because if you're right, that's not a good outcome. And if you're wrong, then it doesn't really matter anyways. So just playing long-term games, I think, as you guys know, crypto is very whiplashy. So just trying to focus on the things that I can control. Yeah.

**Robbie** (1:27)
That's extremely reflexive, which is why we were saying, look, it kind of felt like we needed a full reset in order for the crypto reflexivity to sort of lead the way again. Is that kind of how you're thinking about it as well?

**Logan Jastremski** (1:42)
I think about it more from a product lens. My background, I was at Tesla and was running the software side of the supercharging network. When I first got into crypto, I started asking, I was like, hey, what are the daily active users? Like, where's the revenue? And then I quickly learned you don't ask those questions. And that was in 2020 I think now it's much more about the products and the revenues. And so I think it's differentiated now in terms of people need to build real applications with real money. I think for us at Frictionless, we were fairly early to the understanding that blockchains had a scale. And so we were, I would say, one of the kind of few funds that understand that we had to go from low throughput to high throughput. I think that was directionally correct. I think the part that we have gained a greater appreciation for over time was the fact that throughput enabled scale, but execution was how you monetize. And so really, blockchains are asset ledgers and they're good for trading and money movement. And so we've kind of been doubling down on that subsect here.

**Andy** (2:52)
Yeah. Yeah. So this thesis ultimately is kind of centered around the idea that trading is the number one use case of a distributed set of nodes at scale, scale this up as high and as fast and cheap as possible, enable global trading. This is essentially the Solana thesis. Wanted to talk today about kind of the state of the high throughput chains versus more of the kind of like very specific perps platforms, which are seemingly dominating on the revenue side, on the kind of TPS side, less nodes, less redundancies. I'm just curious how you're seeing this play out. Let's just start like super high level Solana, Hyperliquid.
How do you see the kind of state of execution, value, revenues, businesses when it comes to these types of basic products? So you've got like the very high throughput L1s and you've got a you've got kind of like the perps platforms, like I mean, app chain. Haven't used that word in like a year and a half, but like kind of app chains are very like specific use case products. How do you think about this right now at a high level and then we'll get into some of the nuance?

**Logan Jastremski** (4:08)
Yeah, I mean, if you go back to like kind of the start of the industry, Ethereum was very interesting because it enabled smart contracts and allowed you to build turned complete applications. The hard part is because of the limited throughput and the 12 second block times, it was not super useful for trading and because it also didn't do parallel execution, it did not enable kind of localized fees. And so we had to really graduate from these low throughput chains to high throughput just to enable more expressive applications at the really the product level. I think now though, the industry is really asking, hey, why are these blockchains value and call it the tens of billions or hundreds of billions? And the true answer is, I think really kind of boils down to the execution point, as you mentioned. I think on our side, how we're really approaching it is we call it kind of two schools of camp where you have either co-location, which is the traditional TradFi system, which is why we were never super bullish, kind of call it layer twos, like a bucket like, essentially, base, Arbitrum, MegaEath, all in that same bucket, Hyperliquid kind of as well. And the reason why we put those in the same bucket is because really the focus is more so on trading from the co-location standpoint. As a former engineer, I like to think of things in the extreme. And so if you push them to kind of the end state, what would they actually look like if trading continued to be successful? We know from traditional finance that you have market makers and trad-fi firms wanting to co-locate next to the matching engine because you get better information flow being closer to the execution engine. And so this entire kind of complex was set up for private fiber lines, microwave towers, to get information closer to the matching engine to be able to trade upon that. I would say this new system that is unproven and TBD, if it actually works, but I think is the first principle's correct solution is kind of this, what we call localized ingestion, where when information that can be traded upon happens around the world, instead of propagating to that single place in the world, if we use kind of the New York stock exchanges, an example that data centers in New Jersey, instead of propagating that trade information through private fiber lines and microwave towers to New Jersey, you'd actually be able to trade on that information in a specific region.