Ep. 535 Bringing Speed as a Layer 1 Blockchain with Sei Network

May 11, 2023 #CRYPTO101

In this episode of Crypto 101 we talk to Jayendra Jog who is a Co-Founder of Sei Network which focuses on speed, reliability, and security for a unique Layer 1 Network. Sei’s focus is continuing to evolve with the space as it is built with interoperability and language compatibility in mind, Sei is capable of evolving alongside the industry as developers and users progress.

— TRANSCRIPT —

SPEAKERS

Jay, Bryce Paul

Bryce Paul 00:09

All right, everybody. Welcome back to another episode of the crypto one on one podcast. I’m Bryce, back as always ready for another deep dive on a very interesting project. This is say network and I’m joined by one of the co founders, Jay Young. Jay, welcome to the crypto 101. Podcast.

Jay 00:28

Awesome. Victor having you on, sir.

Bryce Paul 00:31

Very, very pleased. Before we dive into say, network, let’s dive into where your background and get acquainted here. What were you doing before you started, say, network? And what was the main motivator to do this?

Jay 00:44

Yeah, so my background is I grew up in the Bay Area, everyone surrounded by tech all the time. So I ended up going to UCLA to study computer science. And I ended up getting into crypto back in 2017. At that time, I roommate, he was going through by Nance Launchpad. So we worked on a couple of different projects together. And then afterwards, I ended up joining Robin Hood. Right? Cool. Robin Hood. And I spent almost four years over there. I saw the company 10x. And I was an engineering lead when the Gamestop saga happened. Oh, boy. Yeah.

Bryce Paul 01:17

I remember writing about that and having people on the podcast and

Jay 01:20

that was a fun time. Fun is definitely one way to describe it. From our side from your side. Wow. Crazy. Yeah. So I mean, for anyone who’s listening in that isn’t super familiar. There was this entire meme stop saga happening at that time, right? There was GameStop, AMC roughly 1015 other stocks that were just basically, retail was getting behind them. And the price was rising very quickly. There are hedge funds that were shorting them. And then hedge funds were getting short squeeze. So hedge funds were losing money. And in the middle of all this chaos, like Robin Hood was the one that everyone was using to purchase stock stocks, like on GameStop. And then just one day out of the blue Robin Hood just turned off buys, right. So a lot of the buy pressure for these stocks suddenly went away. And Robin Hood did not tell anyone why they decided to turn off these buyers. As you can imagine, it was just complete and utter chaos, both externally and internally. So for I mean, the outside world, they’re just super pissed off, right? Like Robin Hood suddenly went from being like the good guy to being the bad guy. Everyone was like, oh, Robin is colluding with like Citadel and all of these, like bad firms to help make profits for established institutions. And I mean, honestly, that’s that’s not what happened. But Robin Hood just did not do a good job of communicating at all around what was happening. So there was just complete radio silence, no one had any clue what was going on. And as you can imagine, like as an insider, it was just terrible. Because you put your reputation on the line to join a place like Robin Hood. And then when there’s like dozens of people hitting you up, like, Yo, what the hell is happening? Why can’t I buy Robin stock anymore? There? Why can’t I buy game stock Gamestop anymore on Robin Hood? It’s just it feels really bad, right? Your team is also asking you questions like yo, what is going on, and I mean, back then I had nothing to be telling them. And you just feel really, really powerless when all of this is happening. And it just there’s not great. So that’s why after going through that experience myself, I became much more of a decentralization Maxi Right. Like the issue with Robin Hood is sudo, which is a centralized institution that was just being completely opaque. That led to a bunch of issues. Anything that happens in a decentralized way is inherently trustless, inherently transparent. And it would have avoided a lot of the issues that Robin itself. And I mean, we see this time and time again, right. Like it’s not just a Robin Hood issue, whenever you have these centralized institutions that are opaque, things can just become very messy very quickly. We saw this with the BAC, we tried to do this with FTX. And I’m sure there’s going to be more opaque centralized institutions that lead to issues in the future as well. So I mean, after going through all of this, myself, my co founder and I, we originally wanted to start building a decentralized exchange, we thought that we it’d be cool to build something like Robin Hood, except build it in an on chain, decentralized, trustless transparent manner, that would have avoided a lot of the issues that result. So that was the kind of inspiration for all of this, this was back in 2021, we got set out to build a decentralized exchange. This then led to us looking into all the infrastructure we could use, right? Every layer one every layer to all the other infrastructure we could use to build an exchange and realize that it was lacking, like building a good on chain exchange just did not work. And that was the inspiration for what is now safe. So says layer one blockchain that is building the best infrastructure for exchanges. And we can go more into what that looks like. But that was the original inspiration for our entire journey.

Bryce Paul 04:34

Love it. Man. That’s impressive. And tell us about your co founder, Jeff, while we’re on the basis of introductions, what’s Jeff like? And how are you guys the perfect complement to be accomplishing what is a really, you know, big undertaking?

Jay 04:47

Yeah. So my co founder, Jeff, he grew up in the bay as well. We both knew each other from high school speech in a bit. Did you by any chance to speech and debate in high school?

Bryce Paul 04:56

I did not do Speech and Debate. Believe it or not, I was doing like Comedy Sports and like theater and stuff like that. And well, yeah, didn’t didn’t do speech and debate, but I still love getting in front of people.

Jay 05:06

Gotcha. Yeah, I mean, honestly, comedy, I feel like it’s very similar to some events in speech where it’s just like humorous interpretation, for example, on film. In our case, we both met each other by doing public forum debate back in high school, we’re gonna be debated against one another. And then afterwards, we started just hanging out more from Sweden a bit. And then in, I guess, we just stayed in touch back in 2020, or 2019. We tried starting our original company together. And then that company didn’t really work out. But we did realize that we work well together, which is then why we started working, again together back in 2021. In terms of like his background, he has more of a business development background. So he spent time at Goldman Sachs, he spent time at Cotu. And I think it ends up being is phenomenal, kind of, like his background, and his skill set complements mine very well. Because in terms of like, if you have like two technical co founders, there tend to be a very large overlap in terms of the skills that they have. Whereas if you have someone from a more of a BD background, and someone from more of an engineering background, you end up supporting each other’s skill sets very strongly. So I think, from that perspective, it’s a phenomenal kind of match. And I mean, beyond that, like what is the layer one blockchain, right? Other one blockchain, you’re building really, really complicated technology, like cutting edge technology that is really hard distributed systems problems. But beyond that, it’s also a sales problem, because you have to go and convince teams to go and start building on top of that layer on the blockchain. So I think our combination is one of the best combinations you can have for building any kind of crypto infrastructure project.

Bryce Paul 06:41

And there’s a lot of interesting things happening there. Especially to that last point, you said, you know, I know projects like actual are and pith and sushi, and they’re choosing to build on say, network, and we’ll talk about those. But I want to go back to really the beginning of of say network, you said you were going to build a decentralized exchange. And I guess my question is, at what point did you say we’re not going to use Aetherium? Or we’re not going to use something that’s already out there? We’re gonna have to, like we by necessity, have to build our own chain. Is that how it unfolded?

Jay 07:12

Yeah, that’s exactly what happened. So we wanted to go out and build a derivative exchange, right. And then we wanted to build it on chain, we wanted to use an order book model, because that’s at the time, we thought it was going to be more performance than building it using an underlying automated market making model.

Bryce Paul 07:26

Right? So something more like serum, as opposed to uniswap exactly what you’re looking for.

Jay 07:32

Yeah, so we considered Aetherium. If your image is horrendous in terms of both gas fees are just ridiculous on Ethereum melawan. And so I guess so are the actual throughput that you can get on Aetherium. One is abysmal right now, like you can get like 1000s of TPS on a theory about one so we could quickly crossed that out of our list, then there were more of the high performance are ones like I think slano with Tyrion would be like the most clear example of something that was close to working, I don’t really think it really made sense on any of the other like higher performance lower ones at the time. The issue with building on top of a general purpose chain, like building a serum on top of a general purpose, shame, is from Stern’s standpoint, you inherit all the limitations of the underlying layer one without being able to make any optimizations to benefit your exchange, right. And with a sense of meaning and practice, for serums cases, there’s a bunch of congestion, which ended up being catastrophic ly bad for serum, like one an order book based exchange, if there’s congestion and ends up being worse than for other types of product, because if there’s still quote to some market makers are able to pick off, whereas you’re not able to cancel them, then as a market maker, it just suddenly becomes very difficult for you to make markets on that exchange. So condition just ends up being really bad for building on top of a general purpose chain like that, in certain states are also a couple of other issues. But we realized that this zero model wouldn’t really work, which is then when we consider it Okay, should we start building our own layer two, right, basically taking the same approach that dy dx was doing with DY DX v3, and having a separate roll up, that was only for an exchange, that approach also did not work. That’s just because building roll ups right now, do not scale. Specifically in terms of the throughput, you end up having an upper bound throughput of around 6000 TPS on any Aetherium roll up right now, if you’re writing data to the layer one, and the way that that works is we’re going to theory

Bryce Paul 09:23

and roll up. For those who don’t know, is that like optimism and arbitrage them, or is there something else?

Jay 09:29

Yeah, optimism arbitrage like all those optimistic NGK roll ups. And the way that these roll ups work is you have some off chain execution happening. So in the case of optimism, they would have like the optimism sequence here that is handling all of this off chain execution. And then afterwards, there’s data that gets written on chain. So specifically, they take all of the transactions that happened, they compress those transactions, and then they write those transactions on chain. And on Ethereum, there’s a target limit of 15 million gas per block, and every single byte of data that is written to theory Boom, costs 16 gas. So first things like simple ether transfers, like just transferring ether from my account to your account, that would end up having a cap of 6000 TPS, assuming the entirety of the Ethereum gas block or Aetherium block was used exclusively for these roll ups, right. But in reality, that’s never what happens. In reality, you end up having other stuff happening in that block as well, like you end up having open sea uniswap competing for that one block space. So we quickly crossed that out as well. Because I mean, realistically, if you look at real estate, now, they’re not really getting even hundreds of QPS, let alone 1000s Of TPS. So that’s not particularly scalable. And that’s when you realize, okay, it makes more sense to just build our own layer one. And then we considered like, does it make sense to start building everything completely from scratch? Or should we take some tooling that already exists, and then avoid recreating the wheel. And that’s why we decided to get started building with the way that we were building. And then very quickly, we also realized that it doesn’t make sense to be solving two of the hardest problems in crypto, namely building exchange, and also building the underlying infrastructure. So then pretty quickly, pretty early on as well, we realized that building the exchange ourselves doesn’t make sense if the problem is that the infrastructure is not scalable right now. So that’s why we decided to only build the underlying layer one infrastructure, we are not building any applications on top. And at this point, there are over 150 applications that are building either exchanges or other types of products as well, just on top of this core sailor one blockchain. I love it. And

Bryce Paul 11:28

kind of just on that last note, you said, you know, those those two big problems with building a blockchain? What what are the big challenges with launching your own chain? I mean, it can’t, can’t be very easy to launch your own chain with, you know, having to think about how to validate it and get all the security up and make it fast. And, you know, it seems like it’s it’s one of the hardest things to do like, what what do you think about launching the chain?

Jay 11:55

Yeah. So I mean, there’s like two buckets of volumes. Right. bucket number one is technical problems. And then bucket two is ecosystem building problems. I think the technical problems are really hard, like distributed systems like building something like a blockchain is one of the hardest distributed systems problems out there. But it’s solvable. And there’s very objective criteria for what good performance looks like. There’s people that have built similar systems before, so it’s easier to hire for those roles as well. So I think from our standpoint, it’s say, like, we were able to build a really good engineering team very quickly, very early on as well, right, like so most of our engineering team has backgrounds from places like Databricks, where they’re solving really hard distributed systems problems, and Robin Hood as well, right. Like in rottenness case, we’re also solving distributed systems problems like it, we are seeing a type like Robin Hood, we’re seeing a type of flow that most companies never ever see in the entirety of their existence in Robin Hood was on having that load on a basically day by day basis. So most of our team is really good engineers in Silicon Valley. So we did get lucky. From that standpoint, we were able to hire well. So we didn’t really run into that many technical issues. The bigger thing that makes launching infrastructure difficult is getting people to use that infrastructure. Because right now in crypto, there’s a lot of infrastructure that’s out there on the bigger question is just who’s going to start building on top of your infrastructure and using it? So from an ecosystem building standpoint, I think the reason that SE has been getting a lot more attention recently is not purely because of the technology. It’s also because there’s been a lot more ecosystem traction happening on, right, like there’s been over 150 projects building on say, and this is all without giving away any money and grants. So the kind of thesis that we have internally is definitely resonating with teams. And I think that’s why I say it’s been just a much more interesting project from a public optics endpoint.

Bryce Paul 13:38

And what is that thesis that’s really incentivizing people like how do you get people to come on the chain and build without having incentives or monetary sort of incentives or liquidity mining? And, you know, I guess Yeah, how do you guys think about that?

Jay 13:55

Yeah. So internally, we just have one core thesis, essay labs, just one. Right. And that is the exchanges are the most important application in crypto, both on chain and off chain.

Bryce Paul 14:07

It’s proven true so far. I mean, that’s pretty much all there is. That’s useful.

Jay 14:12

Yeah, exactly. I mean, I do think exchanges have the most clear product market fit. There’s a couple of other things like stable coins that might come close, but exchanges inherently are where is where like most of the activity and demand in crypto comes from right now. Like, if you look at by Nance, for example, the reason people go to buy nance.com day in and day out, is to be able to trade on their exchange, and all the other services they offer, like staking and lending. Those all result in just demand going back to the exchange. Same thing on Aetherium, right, like you have the core applications like open C uniswap. And these are like the most important applications in a theorem. And then there’s a lot of other applications that are built up around these exchanges. Like if you want to take out a loan, for example, you would go to have it borrow money and then afterwards you would just go and traded on an exchange again, and This isn’t just true for Diffa. That’s a common misconception that people have that exchanges are only related to defy. But exchanges are necessary for literally everything in crypto right now. Like if you look at NF T’s, for example, you have these non fungible tokens, and candidly, their core utility right now is just to trade them, right. Like you can’t really do that much with most of us and a few collections, but you can trade them. So you go to an NFT marketplace. And guess what, that’s just an exchange. Same thing with games, you get in game assets, and then you go to like axes decks, or steppin stacks, and then go and trade these in game assets. Right? So exchanges have are one of the most or arguably the most important application crypto, the RuneScape, auction house, anybody? The question then becomes how you help them grow? How do you help them scale, right? And the core promise that we make to teams is we will focus on the infrastructure, we will help you build that infrastructure that helps you grow your exchange scalar exchange, and you can focus on user acquisition, you can focus on mechanism design, and you don’t need to worry about the infrastructure. And I think that’s what has really strongly resonated with teams. And that’s what led to the initial growth of exchanges that we’re building on to

Bryce Paul 16:07

are we, you know, are you is the ecosystem building towards are envisioning a world where it’s multi chain and like, all these fragmented liquidity pools, on all these different chains, like are kind of coalesced in some capacity? Or are we going to just be in a world with all these different siloed liquidity pools?

Jay 16:28

So we think in long term, the way that exchanges are going to work, is it’s going to be a winner take most market, right? Okay. And it ends up being a much better experience, if there’s no, I guess, the less friction there is, the better the experience ends up being. So our thesis is that it’s going to end up being single change that end up having more liquidity, and that just based liquidity comes from successful exchanges that are able to draw on users. So we think five years from now, there’s going to be a winner take most market where like the top five exchanges, or top end exchanges will have most of the liquidity most of the trading volume. And what we think is that the reason that like, what’s lacking right now in terms of people being able to build those solid exchanges is just not having the right infrastructure. So that’s why we’re building the correct infrastructure to help five years from now, the top exchanges out there will be built on said,

Bryce Paul 17:17

so So there’ll be several different decentralized exchanges probably built on top of say, Is that the correct understanding? Yeah, okay. Got it. And they’ll all each have their own liquidity. And who knows, maybe there will be an application that could aggregate all that. But yeah, that sounds really cool. And with projects, like actual are who’s really focused on cross chain stuff, and peth, who seems like they’re building on a lot of different chains, I’m curious what their what, you know, those two guys in particular, are using, say, network for or how are they thinking about partnering with you guys?

Jay 17:51

Yeah, so I mean, obviously, I would be in terms of a bridge to be able to help bridge assets from other chains, chains like Aetherium. From say, standpoint, one of the biggest things you want to make sure is there from day one, is having all the infrastructure set up to enable seamless, just bring the enough liquidity from other ecosystems and being able to interact with the chain through like wallets and other tooling, right. So actually, it’s going to be instrumental from that side. And then in terms of pit, like getting more involved, from an Oracle standpoint, there’s going to be a lot of different types of products that are getting built on it. And having reliable data feeds is where people can get involved. So that’s what that collaboration would look like.

Bryce Paul 18:29

Super cool. And now, I don’t know if it’s just me, or if this is like a common misconception, but I think it might just have to do with the spelling, because it’s so close. But say is sometimes compared to sweet. I don’t even know if I’m pronouncing that right. But, and also Aptos. And I think it just because Aptos is really high performance, it’s new day is high performance, it’s new, it’s sexy, it’s got some of the same kind of key concepts. But can you actually elaborate on these differences? And maybe even the similarities if there are any between those? Those three?

Jay 19:00

Yeah, of course. So yeah, I mean, when we got started, we picked the namesake, because we wanted to have an ecosystem that is fast and has deep liquidity, say is the name of a Norwegian wheel that lives deep in the water. And it’s one of the fastest tools out there. So that’s how we ended up getting the name very, very early on. And then afterwards, it turned out that we have a similar name, which we did not back then. But yeah, so I guess in terms of if you look at like, progression of blockchains, you had like layer one block chains like Aetherium, for example. And now we’re starting to see many more kind of generation to blockchains, like app DOS and Sui and se as well. And I think that’s why they’re all being compared against one another because they’re all roughly launching at similar timeframes. They’re all quickly getting a lot of ecosystem traction as well, which is why I think we’re being kind of compared to them right now. And in terms of the kind of technical differences, I think the biggest difference between say in the other two ecosystems would just be the time to find out you. So from a technical center When we’re building the best infrastructure for exchanges, and one of the most important kind of points around that is how quickly it takes for a transaction to be finalized. Because if you have lower time to finality, let’s say 300 milliseconds versus three seconds, that leads to a substantially improved user experience, and also a substantially improved market maker experience. Specifically for market makers, the lower the time to finality is the less risk that they’re taking on when they place a trade. And as a result, they’re able to quote, tighter spreads that users can benefit from on chain, so you have tighter liquidity, or you have tighter spreads, which also leads to greater liquidity as well. So that’s why we chose to focus very early on on building essentially, very fast infrastructure. And say, is currently the fastest chain to find out there in our internal test net we’re seeing or in the current Public Test net, we’re seeing five during the second time to finality. And this is with conditions that will mimic main net, and then an internal tests that we’re seeing closer to 300 milliseconds, which is those are conditions where every node is co located in the same geographic zone. So say is just pointing to fastest chain out there anything that’s going to end up being the main differentiator between say and apt, Austin swing, it just ends up being better to build an exchange on set, because your users your marketing makers will have better experiences on say,

Bryce Paul 21:15

love it. And not not to draw comparisons too much. But I do have a question about spam and stuff like that, like, you know, the most recent one, the spam attacks that hit Solana, make saram unusable, kind of as we had alluded to earlier. And so how does say network, think about, you know, spam attacks, or all these sort of denial of service attacks that make potentially an exchange that can be built on the same network unusable for a period of time?

Jay 21:44

Yeah, so I mean, there’s different levels of spam. And we’ve thought about it pretty deeply. At first level of spam would just be like, just pure spam is people just trying to mess with the chain for malicious reasons. Say it has gas fees. So even some amount of gas fees will help in long term prevent, there’s just totally malicious type of spam. The second type of Spam is related to MeV. So in the case of SWANA, for example, one of the biggest sources of spam in their case was people trying to win liquidations or people trying to win ARVs. And if there’s no clear, like, MeV, kind of privatization framework, then it just leads to a bunch of spam. So if we, yeah, so for the audience. MeV stands for maximal extractable value. And I mean, at a high level, it’s just the block producer can order transactions in whatever that way they want to within a block. And sometimes you can make money if you’re the first one, to be like to have your transaction be prioritized at the top of the block. Like one example would be, let’s say that there’s a puzzle on chain, and whoever went whoever is able to find out the answer for the puzzle, they win $100. And then there’s 10 Different people to find out the answer for this puzzle. In that case, only the first person is going to be able to win that $100 And the other nine people, if their transactions come afterwards, in that block, they’re going to have the solution, but they’re not going to be able to make any money. So there’s a lot of incentive to be the person at the top of the block. In SES case, we’re going to be having MeV redistribution framework set up pretty early on. So what will happen over here is that people will be able to bid for the right to be at the top of the block. So in this example with like 100 Different or 10 different people that all want to win $100, they’ll progressively just keep bidding each of each other up until one of them decides that okay, $99 a barrel making it no one else wants to really make a bit higher than that, then that person who makes a $99 bid would be able to win that $100 opportunity, but they’re paying $99 for the opportunity to win it. So they end up making a $1 profit. And then the other $99 will actually get redistributed back to the chain and say excuse so validators and delegate errs will actually benefit from that MeV redistribution. But in terms of spam, like having this bidding system that happens will help prevent that spam, because now they’re no longer any incentive to just submit 1000s of transactions to the blockchain, to try to win that MEP opportunity.

Bryce Paul 23:52

And then that was a really cool description of MeV that I hadn’t really heard before. But it definitely made me think about like how there’s so much discussion right now about the diff, like Aetherium is going to try and have different differentiations between the block builder and the block validator. Because there’s kind of like an inherent conflict of interest there like you were just describing. So the fact that you guys are already thinking about that from the base layer is super cool.

Jay 24:17

Yeah, I mean, Ethereum is definitely spearheading a lot of research around PBS and around I mean, just nev in general. I think in our case, right now, we’re going to start off by just setting up MeV redistribution frameworks that does help really strongly like value incentives, and then afterwards around like proposer, builder separation and other things that Aetherium is looking into that that would be more for a longer term thing per se to focus on. But yeah, I mean, to to your original point about spam, I guess the third type of spam that we would see would be just like legitimate traffic, right? Like a lot of people that are excited about creating on state and then they’re all just submitting transactions. And that’s a really, really exciting problem to have. If you’re and there hasn’t really been a blockchain that is had an issue like that. If you do end up running into that fraud One that basically means you’re one of the top projects out there. And from sales standpoint, the main thing that we have in place to help with this is this concept of order batching. Right. So when you end up having a lot of spam, the main entities that get hurt are market makers because they’re not able to get their transactions included. So rather than let’s say there’s a market maker that’s providing liquidity to 50, separate exchanges, in other ecosystems, they would either need to submit 50 separate transactions, or they, they’d have to do something super special, like building custom smart contract. And that becomes really complicated. In sales case, the market makers who just need to submit one transaction, that transaction will be composed of average of 50 separate orders, and then the chain would be able to process all 50 separate orders independently. So what does this mean in terms of congestion, this means that the market makers just need to get in one transaction, and they can just pay gas fees to get that transaction prioritized. So that they don’t end up getting into a situation where they’re still orders are getting sniped by their market makers. And especially if they’re going through some kind of MeV redistribution or MeV auction process, they can be guaranteed that their transaction will be included in the block. So it makes it very easy for them to just make sure that they don’t run into issues. It’s been through this order batching process.

Bryce Paul 26:12

I’m curious. So like when I think of like that, that that good quality problem, just like everybody’s using it is say network capable of handling like a bunch of these high frequency trading bots. And, like, I’m curious, just from like a comparison, like the NASDAQ. Like, if somebody is I’ve heard like, I think one story if somebody like shut it down, because they were making too many trades every second, like, is there a throttling mechanism? Or mean? Could it handle as much as the NASDAQ?

Jay 26:39

Yeah, so from SEO standpoint, right now, we’re seeing around 20,000 orders that can be processed per second. Wow. Yeah, on the Public Test net right now. So it’s definitely a very scalable already, that’s already, you know, magnitude higher than what you would see on other ecosystems, which tend to be between like, one to 3000 transactions that can be processed per second. But yeah, I mean, one of the fundamental differences between doing things on chain and doing things off chain right now, is that things that happen off chain, they do not have to go through decentralized consensus that they inherently end up being more performant, at least right now. So one of the things we’re going to be focusing on from say side is how do we improve the infrastructure to help get better horizontal scalability, and to be able to get better on throughput per sector throughput performance in the future? That’s not that’s something that I mean, 20,000 orders per second is good enough. For now, it doesn’t make sense to just be trying to do a bunch of premature optimizations. But in the future, that will be one thing we’re exploring in terms of how we can do horizontal scalability to support greater throughput as well.

Bryce Paul 27:43

Yeah. And then is the is the SE network proof of steak? Or is it proof of work? Or maybe it’s something entirely different? And can you kind of talk about that base layer consensus,

Jay 27:54

of course, um, so say is making use of proof of stake consensus, more specifically delegated proof of stake. So the way that that works is, there’ll be, let’s say, n different nodes. And then each of these validator nodes would be required to agree on whatever a block is before it can be added to the network. So in this case, the way that we’re approaching it is we have seamless block finality. So in order for a block to get added to the network, you need to have consensus, between two thirds of the validator nodes, you can optimistically added to the chain like you have with other ecosystems, like for example, proof of work blockchains. In the case of say, if you have n nodes, you need two thirds of them to agree on a block, and then it gets added to the chain. So a couple of things that ended up happening from that. The first is that it’s able to get really, really fast time to Fidelity, the 300 millisecond internal testing time to find out the number that I mentioned, is really only possible to do because we use a consensus mechanism that supports having all the validators have consensus between each other before a block can be added. Right with other ecosystems and ended up being a lot slower because there needs to be multiple blocks that are added to a chain before that block is actually finalized. So see ends up having much faster time to finality because of that. The second really cool thing is se does not suffer from New York’s it can happen. So on other chains, if there’s a blocked exhibit that gets added, it might get dropped afterwards, because some other block or some other chain is considered the canonical chain instead. And so on this case, for example, roughly 5% of blocks get reorg away. So they’re just dropped from the canonical chain. And this ends up being really messy from a market maker experience that point. Because if you’re a market maker, and you want to provide basically, let’s say you provide liquidity and then you’re opening a position on chain, and then you’re trying to hedge it off chain, it becomes kind of like a difficult problem to solve like when you want to actually be hedging the position, right? Because you can either hedge the position as soon as a block is added to the chain. But if that block is reorg, then you might end up in a situation where you no longer have a position on chain, but you’re left holding this hedge to short position off chain for example, and then you might just lose money on that. And the second thing that could happen is you wait until multiple blocks are added to the network, and then things are finalized, that might take 1015 seconds. And that’s when you hedge your position off chain. But that means that you just experienced 10 seconds of price volatility, and you’re basically eating that risk yourself. So that’s not the ideal kind of outcome either. So that’s why if you have single slide finality, and it ends up leading to much better market maker experience, and I mean, that’s one thing the market makers have been pretty happy about, just with the processes taking. Yeah, that’s awesome.

Bryce Paul 30:29

Is that I think I read twin turbo consensus, is that the mechanism that you just described?

Jay 30:35

Exactly, yeah, so we’ve called the twin turbo consensus. And there’s a bunch of cool stuff that we’ve done around that with regards to block propagation block processing as well. But the core output that people care about from that is it’s just really, really fast time to finality. And also singles block time to finality. So it ended up being just really good for the user experience.

Bryce Paul 30:52

Love it. Let’s talk about an ecosystem fund. I think I read as well, that there was an ecosystem fund that was launched around the same network to encourage people to build. How has that been going?

Jay 31:07

Yeah, so for context for the audience, we’ve had over $120 million dollars that have been committed to this ecosystem fund. So the way that ecosystem fund works is there’s market makers, there’s investors, they’re all contributing to this fund. And the core objective is to help grow this ecosystem. And this specific things that the say projects building on say, typically need help with is first of all, getting investor capital, and secondly, getting liquidity on chain. Right. So the 100 $20 million ecosystem Fund is a commitment that all of this money will be getting deployed on, to either invest directly into projects building on site or to help provide liquidity on chain. So that’s been really a strong motivator for projects that have been building on say, like, initially, when we got started, they weren’t sure if there’d be any investors that were interested in investing, they weren’t sure if there’d be liquidity for them. But this commitment has made it very clear that it’s very safe to build on safe, and there will be a lot of help once they are ready to receive that help. So that’s one of the reasons that we started seeing so many different teams building on set, just because there’s very clear support that they’ll be getting. Love it.

Bryce Paul 32:10

Jay, before I kind of move on to some higher level questions just on what it’s like to build through a bear market and things of that nature. Are there any, you know, points that I didn’t mention, or that we didn’t hit on yet on, say network that you’d like to mention?

Jay 32:26

I think the main thing would just be there’s 150 projects that are building on set. Some of these projects are purely exchanges. So these are projects that are building or their purpose exchanges, or like normal spot a MEMS, one of the projects to highlight over there would be sushi. So sushi is one of the biggest projects in the theorem ecosystem, they’re going to be one of the first projects leave Aetherium ecosystem or launch an instance outside of Aetherium ecosystem and build on today. So that’s massive, and they’re going to be launching their first crypto exchange. And what makes this cryptic chain special is it’s going to support cross margining. So different assets will be able to use will be able to get used as collateral for the positions that are opened up. So that’s one of the really exciting projects. And yeah, I mean, outside of that. We also have other projects that are building core defi protocols. There’s projects that are building stuff related to gaming, and fts. And there’s also two different roll up. They’re getting built on say right now, one of those roll ups is Nitro, which is a Solana VM roll up. And another one is called paddle. And that is a movie and roll up.

Bryce Paul 33:27

Very cool. Love it. And so there’s a lot of big things going on. I encourage everybody to check out say network and you guys will be able to check it out. In the show notes, we’ll have links, and we’ll get every everything dialed in there. But before we let you go, I just want to know what you know, this has been a really tough market. I mean, Bitcoin fell 69,000 down to 15. Now we’re around 30 or 25, depending on when people are hearing this podcast here. But but you know, you’re a leader, do people come to you and on your team and ask you like, Hey, am I going to have my job tomorrow? It’s, you know, everybody’s saying there’s gonna be a recession. And you know, morale is low, because everybody’s in portfolios are down. What’s it like, from your perspective as a leader in the space through this period of time?

Jay 34:10

Yeah. I mean, so I guess a couple of thoughts on that. First of all, within our team internally, we just announced a $30 million fundraise for sale labs. So I guess from our side, we have several years of runway. And if anyone is interested in learning more about se, we’re aggressively hiring right now. So please reach out to me on Twitter, if you’re interested in talking about that. More broadly building in a bear market, I think that it actually ends up being really, really positive, because there’s absolutely no other external noise, right. And during a bull market, everyone might be trying to hop onto that ecosystem that has like the most short term liquidity or the most short term traction. In a bear market builders are objectively always considering what is the best ecosystem for me to build on so that I’ll be able to get greatest adoption in the longer term. So bear markets are phenomenal for building because it just helps make sure that everyone’s interests are aligned. And it helps people that are actually chasing after more long term adoption, rather than people that are just trying to make like money in the short term. So, personally, I mean, internally, we don’t really think too much about whether it’s a bull market or a bear market, we have a very clear mission that we’re chasing after. So we’re just heads down and going towards that goal. And we have no control over the macro perspective. So we don’t really think about it very much, we have noticed has actually been easier to build in the middle of the bear market than it used to be would have been during the bull market.

Bryce Paul 35:28

You can iterate a lot quicker in a bear market when I guess you’re not being pestered by the community all the time. And there’s all this traffic and hustle bustle and these conferences and you know, distractions right, you know, bull markets are just basically a lot of distraction and bear markets are where the builders double down. Exactly. So no, I’m curious, your thoughts here, not to get like political or diving into regulation or any sort of stuff like that. But I am curious, your thoughts on Coinbase announcing an offshore derivatives exchange? Do you have any general thoughts that you’d like to talk about?

Jay 36:03

So I think that as the builder in the United States, there is definitely a lack of regulatory clarity. And I mean, we saw this was the most recent kind of a Gary Gensler congressional, I guess what he call it congressional hearing congressional interview? Yeah, I mean, so from a business standpoint, having lack of clarity just makes things a lot harder. So it makes sense, a lot of companies that have the flexibility of operating outside of the United States are just getting licenses to operate in other countries and lodging from there. So I think that I mean, fundamentally, the United States wants to stay competitive. from a technological standpoint, I think that there should be a push to have more innovation happening in the crypto space, I think that it is possible for there to be some kind of middle ground between making sure that there’s regulation while also having enough kind of clarity around that regulation to make sure that it’s not just like, difficult for builders to know what to do. I think that an environment with zero regulation is difficult for us to get to this point. Just given all the big kind of catastrophes that happened last year with Tara that happened with FTX as well, that happened with like, three AC and like all of the other kind of institutions with similar salary scale.

Bryce Paul 37:08

I mean, I feel like I got stabbed in the back by those guys, man, come on. They were the more buttoned up guys. They lost. They were like the start of everything. What the hell? Yeah.

Jay 37:19

So I think at this point, just crypto is too big. And too many things have happened that there will like zero regulation is not really possible at this point. So I think working with regulators to make sure that there’s clarity is a much better kind of aim to go after this point.

Bryce Paul 37:37

Yeah, I definitely feel like, you know, crypto did get a little bit of a tailwind. When Silicon Valley Bank kind of blew up and signature and silver getting all that stuff. People were like, oh, shoot, like, you know, people realizing, hey, Bitcoin and Aetherium don’t have that counterparty risk that everybody’s getting licked by. And I think that really was like a big moment for us. Did you feel that same way? I mean, you’re in the heart of where it was kind of all going down where people without crypto a

Jay 38:02

lot, it was pretty crazy, because I think it just really, I mean, short term, it felt pretty bad. But whenever these like centralized blow ups happen, it just really emphasizes the core reasons, the core values that we care about, that got me into crypto in the first place, right? Anything that happens on chain, inherently trustless inherently transparent. And I think those are really strong values that are going to lead to greater adoption of decentralized technology in the future. Like, I don’t think it’s necessarily going to be the US financial system, just getting up tomorrow and be like, Yo, we’re going to become decentralized, like immediately. But I do think it’s going to like these core values definitely resonate with people, especially if trust is trust lessness. So I think there will be more of a gradual adoption that happens starting in developing countries, and then gradually moving over to developed countries. Yeah,

Bryce Paul 38:45

I couldn’t agree more. With everything you said, Jay, this was incredible. And I really want to bring you back to talk about, say, network again, as it continues to develop. I’ve got one last closing question for you. Kind of just, you know, to get a little bit more insight into who you are what motivates you, but I’m curious, who’s one person one builder in the space, academic businessman, whatever that you admire, that’s inspired you? Maybe you’ve liked how they you know, write or whatever? Anybody come to mind?

Jay 39:17

Yeah, I mean, this might be a cop out answer. But batalik is a very clear person that I regard very highly. And I mean, I think it’s for multiple reasons, like one, he definitely has a lot of like just clarity around the direction that he wants him to go into. He’s not like someone who is not willing to change his mind either. So he is open to new information comes in, but generally speaking, his plan for the direction that Aetherium ecosystem should be going in. He’s highly technical, and he’s also extremely mission driven, right? Like a lot of folks like after their project takes off, they might become a lot less than three years to keep building and to keep engaged. But I mean, metallic is just constantly grinding and I really respect that about him and he’s just really helped push the entire crypto ecosystem forward.

Bryce Paul 40:00

Yeah, no, I couldn’t agree more with that as well. Jay, this was incredible. Um, where can people go to stay in contact with you follow se network and get involved?

Jay 40:09

Yes, absolutely. So it’s a Folasade network, you could go to Twitter, and it’s at S e i n e t wo RK. So that’d be best place to learn more about se there’s a link tree over there as well where you can join discord, and learn more about the project. I’m telling me just my first name, last name, X, winter, so j, y en era J, which is my Twitter handle, so just follow me over there.

Bryce Paul 40:31

Perfect. Well, thank you for joining us today. I hope everybody at home listening, enjoyed and go follow up reach out their hiring, sir Time is of the essence to get in touch. And again, thank you so much. We look forward to having you back on soon.

Jay 40:44

Awesome. Thank you for having me on, sir.

Ep. 535 Bringing Speed as a Layer 1 Blockchain with Sei Network

Your Journey To Freedom Through Cryptocurrencies Starts Here