Anatoly Yakovenko. Source: A video screenshot, Youtube / Solana
According to Anatoly Yakovenko, founder and CEO of the blockchain developer Solana (SOL), high transaction fees and security are the two most pressing challenges in the decentralized financial (DeFi) industry. The fee challenge can be resolved “while maintaining satisfactory decentralization,” while improving security requires industry-wide collaboration, he added in a brief interview with Cryptonews.com.
Here’s what we discussed when the Solana DeFi Hackathon started last Monday.
Cryptonews.com: What’s the most pressing challenge at DeFi right now?
Anatoly Yakovenko: Fees are currently the most delicate challenge. DeFi is based on the vision of permissionless and accessible funding for everyone, and currently high transaction fees are creating friction for [smaller users]. For example, providing liquidity to the SUSHI / ETH pool of USD 100 during times of congestion can cost network charges in excess of USD 100.
Even at 100% [annual percentage yield]one would not be able to reimburse their cost of attending over 12 months. In addition, high fees make certain use cases unfeasible. An obvious example of this is micropayments.
Several solutions are being worked on in the industry, including Layer 2 scaling solutions like plasma, rollups and sidechains, new Layer 1 [solutions] like Solana, Near, Avalanche etc.
Can these challenges be solved without compromising decentralization?
These challenges can definitely be resolved while maintaining satisfactory decentralization. However, decentralization is a multifaceted metric with multiple interpretations.
At Solana, we believe that the most important factor in determining decentralization is the network’s censorship resistance. This is relative to the minimum number of nodes within the network required to censor or stop the network.
As proof of use (not to be confused with [delegated proof-of-stake]) Networks, this threshold is made up of the number of nodes that account for up to 33% of the network’s staking performance. Blockchains like Ethereum 2.0, Cosmos, and Solana generally have the same property.
The main difference, however, is that Solana solves these DeFi challenges by leveraging hardware and bandwidth.
Nodes in Solana can increase their hardware and bandwidth to improve the network’s scalability, speed, and charges.
Ethereum 2.0 takes a different approach and attaches great importance to the fact that the hardware and bandwidth requirements for nodes are as low as possible and meet the requirements of ETH 32 [USD 61,000] at least to be authorized to execute a node. However, both networks can support tens of thousands of nodes.
There are also other solutions such as B. Optimistic Rollups. However, these solutions continue to use a trust and verification model, where the system optimistically trusts the network and relies on nodes to detect malicious behavior.
What other challenges do you see for Defi?
Security is a critical factor. However, the compositional ability is extremely powerful. As more and more DeFi protocols interact with and build on each other, the risk of system cascading errors increases exponentially. If we really want to build a settlement layer without permission to democratize the global financial system, it has to be robust and secure.
We are already moving in the right direction and many teams are already working at a high level.
However, it is important that we continue to maintain a healthy ecosystem and community so that security researchers can participate and contribute to DeFi.
Recently paradigm [a cryptoasset investment firm] launched Paradigm CTF, [an Ethereum focused security competition]which consisted of several blockchain security challenges.
Events like Paradigm CTF and well-designed security bounty programs will be critical to ensuring that these DeFi protocols continue to receive the greatest attention from security researchers, that exploits can be identified earlier, and that we can provide more robust protocols.
When could the security in DeFi improve significantly?
Security won’t improve overnight, and technology is advancing rapidly. Therefore, the attack surface is constantly changing. Also, we may never get to a point where these protocols are objectively impenetrable. However, we can improve security by enriching resources like Open Zeppelin together [a library for secure smart contract development] to ensure developers have pre-checked smart contracts that they can refer to when creating new logs.
Which defi-related solutions is Solana looking for at the hackathon?
Solana is more focused on DeFi use cases that specifically take advantage of the fast hit times, low fees, and high throughput. Therefore, payments, micro-payments and order books for central limits are use cases that we are particularly looking forward to. Because of this, we were very excited about the potential of Serum (a decentralized exchange that runs on Solana’s main network and was created by the crypto-derivative exchange FTX and Alameda Research).
Which of the many ideas announced before the hackathon are your favorite ones?
Borrow / borrow is one of my favorites. Once we have a credit / credit record we can unlock some really exciting features like margin trading on decentralized exchanges like Serum. What makes margin trading and borrowing / lending so interesting on blockchain is that all of the on-chain information is available. This information means that we have 24/7 access to transparent and verifiable collateral. We can essentially monitor and assess the risk in real time and create extremely efficient credit / credit logs around this.
At the time of writing (16:48 UTC), SOL was ranked 38th by market cap, trading at USD 9.2, up 13% in one day and 2% in one week. The price rose 144% in one month.
This interview was edited for reasons of space and clarity.
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