Dragonfly Partner: How did I miss the $0.04 SOL seed round? The worst decision of my life.

Author | Hosseeb

Compiled | Deep Tide TechFlow

Deep Tide Note: On the occasion of the fifth anniversary of Solana's birth, Dragonfly Capital partner Hosseeb released a tweet today, reflecting on how he missed the opportunity to participate in the Solana seed round investment at a price of $0.04 in 2018, and consequently missed out on returns of over a thousand times. He also attached the original investment memo as a token of nostalgia. Additionally, we have excerpted the discussion between Solana co-founder Toly and Hosseeb under this tweet.

The following are the details of the original text:

I turned down the opportunity to participate in the Solana seed round investment at $0.04 in early 2018.

At the current price, it is equivalent to having missed out on a 3250 times return.

Solana was one of the first projects I evaluated as a junior VC. At that time, I was still adorably naive and confident, writing memos for every project I decided not to invest in.

Re-reading this memo now is simply a "peak junior VC cringe". At that time, we were all obsessed with finding the "Ethereum killer", researching consensus protocols, and what technology would replace EVM / eWASM.

So, this is the completely unedited original memo - the worst investment of my career, MISS.

Happy Birthday, Solana!

Memo content

1. After reading the white paper, my notes are as follows:

Their major innovation is proof of history (PoH). Essentially, this is a verifiable delay function that uses continuous hashing operations, similar to sequential proof of work. In other words, a timekeeper is selected, and that keeper continuously iterates hashing a certain value and publishes all intermediate hash values. Since this process must be executed serially on a single core and cannot be parallelized, nodes should be able to predict the amount of time elapsed between continuous hashes (perhaps based on their understanding of hardware performance?).

PoH nodes will also mix any current state (such as transactions to be submitted) into these hashes. This allows for the creation of an event history that can be reliably timestamped.

If a PoH node encounters problems or is unable to guarantee online status, they propose a solution that allows multiple PoH nodes to periodically mix their states with each other.

A group of validator nodes will replay and verify the operations of the PoH node (the verification process can be made more efficient and parallelized through a MapReduce architecture). These validators reach consensus using PoS through a protocol similar to Casper. If a Byzantine problem or misconduct is detected in the PoH node, the validator nodes can elect a new PoH node to take its place.

It seems they will develop payment and smart contract features.

They claim to achieve 710,000 TPS and have achieved 35,000 TPS on a single-node test network.

2. My thoughts:

Their figures are completely nonsense. 710,000 TPS is simply ridiculous; even Google's search volume is less than 100,000 per second. This data is placed in the most prominent position on their website, which makes me very wary.

Take back the previous praise for the white paper being well-written. The high-level content is good, but the technical details are very lacking and vague. As a description of a consensus protocol, the rigor is disappointing.

The team is primarily composed of underlying engineers from Qualcomm. The CEO and CTO mainly work on operating systems, embedded systems, GPU optimization, and compilers. Their background in distributed systems and cryptography is clearly not strong enough, which is evident in the paper. The handling of Byzantine fault tolerance issues is poor. It reminds me of the white paper of Raiblocks/Nano (they are also underlying engineers).

And such content in the white paper raises doubts in me:

[Solana White Paper Original, Section 5.12]

"PoH allows network validators to observe past events and their timing with a certain degree of certainty. When the PoH generator produces a message stream, all validators need to submit their signatures on the state within 500ms. This value can be further reduced based on network conditions. Since each validation is input into the stream, everyone in the network can verify whether all validators submitted their votes within the specified timeout without directly observing the voting process."

This is not a consensus protocol. Assuming that limiting the messaging to 500ms is a consensus is quite problematic, and there is no meaningful implementation of Byzantine fault tolerance. Moreover, how do they measure 500ms? Given that they will estimate the passage of time based on the number of iterative hashes executed, how can other nodes in the system reach consensus on the elapsed 500ms? Additionally, how will they address the deviations in clock speed over time caused by hardware improvements, hardware failures, or noise? The time issues in distributed systems are very complex, and I don't think they realize how difficult it is.

Besides, who cares about time? Is this a big issue in the blockchain space? Are people not satisfied with block time granularity of 15 seconds/1 second (like DFINITY and similar)? I don't think this is much of a problem; the complexity and confusion they introduce in the protocol doesn't seem to bring much value.

They have a section dedicated to discussing the issues of attacks and incentive misalignment. Their response to attacks is completely unconvincing and similarly lacks rigor or detailed explanation.

They have an entire chapter discussing proof of replication, just like Filecoin. What’s going on? Tell me about your consensus protocol and how transactions and accounts are implemented, what features your blockchain will have. I don’t care about data storage proofs.

There is also a long section that begins to describe smart contracts, but it only states that they will use LLVM as a backend to support multiple platforms. However, nothing else is mentioned.

A lot of content about GPUs and parallelization. This exposes a strange focus — if they need to implement a BFT consensus protocol and an available smart contract platform, they shouldn't be obsessed with the parallel processing of their packet format. I remember they were like this in the presentation I saw — spending most of the time discussing how to optimize processing with these nodes, and almost no time actually describing their consensus protocol.

Conclusion: I will definitely not invest in this project.

Interestingly, five years later, when Haseeb tweeted to congratulate Solana for successfully establishing itself in the crypto space and teased his younger self for missing a big opportunity, Solana co-founder Toly replied to the tweet: "All your concerns back then were indeed reasonable. Essentially, this is a bet — betting on whether we can solve these issues while maintaining the underlying advantages that other teams do not have."

Haseeb then replied to Toly: "I think this is one of the lessons. Your dedication to underlying optimization and unique attack angles is something other teams lack. This extreme focus on leveraging strengths while avoiding weaknesses is the most important. At that time, I was completely unaware of this."