Dragonfly partner: How did I miss the opportunity to invest in Solana's seed round?

Original author: @hosseeb

Original text compilation: Gate.io TechFlow

Shenzhen Tidal Note: At the 5th anniversary of Solana's birth, Dragonfly Capital partner @hosseeb released a tweet today, reviewing how he missed the opportunity to participate in Solana's seed round investment at a price of 0.04 USD in 2018, and missed out on over a thousandfold return. At the same time, the original investment memorandum was attached to commemorate. In addition, we also excerpted the discussion between Solana co-founder Toly and Hosseeb under this tweet.

The following is the original text details:

I declined the opportunity to participate in the @solana seed round investment at 0.04 USD in early 2018.

Based on the current price, it is equivalent to missing out on a return of 3250 times.

Solana is one of the first projects I evaluated as a junior VC. At that time, I was still cute, naive, and confident, writing memos for every project I gave up on investing in.

Rereading this memo now is like 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 memorandum - the worst investment MISS in my career.

Happy Birthday, Solana! 🎂

Memo Content

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

• Their major innovation is Proof of History (PoH). Essentially, this is a verifiable time-delay function that uses sequential hashing, similar to Proof of Sequential Work. In other words, a timekeeper is selected to continuously iterate hash functions on a value and publish 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 time elapsed between consecutive hashes (presumably based on their understanding of hardware performance?).
• The PoH node will also mix any current state (such as transactions to be submitted) into these hashes. This can create an event history that can be reliably timestamped.
• If a PoH node encounters issues or cannot guarantee online availability, they have proposed a solution for multiple PoH nodes to periodically mix states with each other.
• A group of validator nodes will replay and verify the operations of the PoH node (the verification process can achieve more efficient parallelization through the MapReduce architecture). These validators reach consensus using PoS through a protocol similar to Casper. If a PoH node is found to have Byzantine problems or behave improperly, validator nodes can elect a new PoH node to replace it.
• It looks like they will develop payment and smart contract functionality.
• They claim to achieve 710,000 TPS and have achieved 35,000 TPS on a single-node test network.

2. My thoughts:

• Their numbers are completely ridiculous. 710,000 TPS is simply laughable; 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 cautious.
• Withdraw the previous praise for the well-written whitepaper. 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 mainly composed of Qualcomm's underlying engineers. The CEO and CTO are mainly engaged in operating systems, embedded systems, GPU optimization, and compiler work. 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 very poor. It reminds me of the white paper of Raiblocks/Nano (they are also underlying engineers).
• And the content in the whitepaper raises doubts for me:

[Solana White Paper Original Text, Section 5.12]

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

• This is not a consensus protocol. Assuming that limiting 500 ms for consensus in message passing is quite problematic, and it does not make sense to implement Byzantine fault tolerance. Moreover, how do they measure 500 ms? Considering that they will estimate the passage of time based on the number of iterative hashes executed, how will other nodes in the system reach consensus on the passing of 500 ms? In addition, how will they address the deviations in clock speed over time caused by hardware improvements, hardware failures, or noise? 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 the block time granularity of 15 seconds/1 second (such as DFINITY)? I don't think this is a problem, the complexity and confusion they introduce in the protocol don't seem to bring much value.
• They have a section specifically discussing the issue of misalignment of attacks and incentives. Their response to the attack is completely unconvincing and lacks rigor or detailed explanation.
• They have a whole chapter discussing proof of replication, just like Filecoin. What's going on? Tell me about your consensus protocol and how transactions, accounts are implemented, and what features your blockchain will have. I don't care about data storage proof.
• There is another large section that starts describing smart contracts, but only mentions that they will use LLVM as the backend to support multiple platforms. But nothing else is mentioned besides this.
• A lot of content about GPU and parallelism. This exposes a strange sense of focus - if they need to implement the BFT consensus protocol and a usable smart contract platform, they should not be obsessed with parallel processing of their data packet format. I remember it was the same in the demos I watched - they spent most of the time discussing how to optimize the use of these nodes, and almost no time actually describing their consensus protocol.

Conclusion: I will definitely not invest in this project

Interestingly, after 5 years, when Haseeb @hosseeb tweeted blessings to Solana for its success in the crypto space and joked about how his younger self missed a great opportunity, Solana co-founder Toly @aeyakovenko replied to this tweet: "All your concerns back then were indeed valid. Essentially, this is a gamble — betting on whether we can maintain underlying advantages that other teams lack while solving these issues."

Then Haseeb replied to Toly: "I think that's the lesson here. Your persistence in optimizing the underlying and unique attack angles is not possessed by other teams. This kind of maximizing strengths and avoiding weaknesses is the most important. At that time, I was completely unaware of this."