This episode reveals how Sovereign Labs is tackling crypto's core throughput and latency problems, offering a new stack for developers to build high-performance, specialized applications without the constraints of traditional blockchains.
Preston Evans on Pushing Crypto's Frontiers
- Preston Evans, CTO at Sovereign Labs, introduces himself with a background at Amazon Web Services and a long-standing passion for crypto, dating back to the early days of Bitcoin and Ethereum. His core interest lies in expanding what is possible on-chain.
- Preston argues that the primary bottleneck for crypto adoption has been the low throughput of major chains like Bitcoin and Ethereum, which limits their use to core financial applications.
- His goal is to enable a "less intermediated world" where more real-world interactions can occur directly on-chain, from financial rails to contracts and identity.
- While not a hardcore libertarian, Preston sees crypto's greatest potential in providing stable, opt-in systems for people in regions with dysfunctional or unreliable legal and governmental infrastructure. He compares its potential utility to a global tool like WhatsApp, rather than a full-fledged network state.
The Developer's Dilemma: Where to Build Today?
- The hosts ask Preston where he would launch a crypto application today. Preston uses this question to frame the core problem Sovereign aims to solve: developers and users shouldn't have to care about the underlying chain.
- He points out that while crypto-natives have strong allegiances to chains like Ethereum or Solana, mainstream users are indifferent to the backend technology, much like they don't know or care what stack WhatsApp runs on.
- Preston’s vision is a future where the blockchain is just a means to an end. He states, "If users don't care, then we shouldn't care. It should just be a means to an end."
- Acknowledging the current landscape, he credits Solana for its pragmatic approach to solving the throughput problem, making it a strong contender for developers if not for the Sovereign SDK.
Introducing the Sovereign Stack: Solving Scale and Control
- Preston outlines the two primary goals of the Sovereign SDK, which is designed to give developers the tools to build applications that can succeed at scale.
- Solving Scale: The first goal is to provide dedicated, predictable throughput. This prevents applications from failing when they become popular or when another app on the same network causes congestion—a common failure mode in crypto.
- Developer Control: The second goal is to empower builders to focus on user-facing features rather than wrestling with the limitations of an L1. Preston highlights how the lack of control over core primitives, like account security, has stifled innovation.
- Account Abstraction: This refers to a set of features that allow for more flexible and programmable user accounts, moving beyond the simple private key model. It enables functionalities like social recovery, multi-signature wallets, and paying gas fees in different tokens, significantly improving user experience and security.
- Sovereign gives developers the freedom to experiment with the entire stack, from wallet experiences to transaction processing, enabling them to build truly differentiated products and eliminate user-experience hurdles like the "two-click" approve-and-transact process.
Technical Deep Dive: A Reimagined Blockchain Stack
- Preston details the technical architecture of the Sovereign stack, which was built from the ground up to be modular and high-performance.
- Interoperability: The stack is designed to be deployable on any base blockchain, including Celestia, Ethereum, Solana, and even Bitcoin, allowing developers to choose their preferred DA (Data Availability) layer. This layer is responsible for ensuring that the data for all transactions on a rollup is published and accessible, which is critical for security and verifiability.
- Rollup-Focused Architecture: Sovereign prioritizes censorship resistance and verifiability—the key benefits of decentralization—while leveraging a centralized sequencer for performance. This hybrid model avoids forcing users to run a full node.
- Ultra-Low Latency: The sequencer can process transactions and provide definitive outcomes (e.g., the exact price of a trade) within 10 milliseconds. This is crucial for on-chain financial markets where high-frequency trading (HFT) bots compete.
- Preston explains that for market makers, this speed is essential to update their orders faster than HFTs can exploit price movements, preventing significant losses.
Practical Application: The Bullet Use Case
- The discussion turns to Bullet, a perpetuals exchange building on the Sovereign stack as a Layer 2 on Solana. This example illustrates the concrete advantages Sovereign provides.
- Performance: Bullet chose Sovereign for its industry-leading latency and throughput. Preston notes, "As far as we know, we are the fastest chain. In fact, according to our internal benchmarks, we're actually faster than Binance in most cases."
- Customization and Control: Sovereign allows Bullet to offer a native Solana user experience, using Solana wallets and addresses. It also enables custom features like "speed bumps" to level the playing field between market makers and HFTs—a modification that would be nearly impossible on a general-purpose chain like Ethereum.
- Preston emphasizes that Sovereign gets out of the developer's way, providing the flexibility to build precisely what their users want without being locked into a pre-existing chain's design philosophy.
Future Applications Uniquely Enabled by Sovereign
- Preston identifies several application categories that are uniquely suited for the Sovereign stack, moving beyond the obvious use case of financial exchanges.
- Payments and Stablecoins: The high throughput and low latency make it viable to build payment systems where transactions are instant and fees are low, avoiding bottlenecks that plague existing chains.
- Developer Tooling and Immutable Records: He envisions a world where on-chain transactions are so cheap they can be used for non-financial records, like creating a verifiable, undeletable log of tweets to combat misinformation.
- Privacy and Identity: Preston expresses personal excitement for privacy-preserving applications. He highlights the potential for using ZK proofs (Zero-Knowledge proofs) for age verification.
- A ZK proof allows one party to prove to another that a statement is true without revealing any information beyond the validity of the statement itself. For example, proving you are over 18 without revealing your birthdate or name.
- This technology could solve major privacy issues, referencing the recent "The Tea" app data leak where users' personal information was exposed.
The Endgame for On-Chain Exchanges (CLOBs)
- The conversation explores the future of on-chain exchanges, specifically the CLOB (Centralized Limit Order Book) model, which is standard in traditional finance.
- Preston asserts that to build a viable CLOB, low latency (sub-200 milliseconds) and high throughput are non-negotiable. Without them, market makers cannot operate profitably, and the exchange will fail to attract liquidity.
- While acknowledging that the Sovereign SDK is new, he argues it is a far more efficient, secure, and cheaper path for building a high-performance exchange than attempting to build a new chain from scratch, unless a team has years of time and an "army of PhDs."
Sovereign vs. Solana: A Competitive Analysis
- Preston offers a nuanced take on how specialized solutions like those built on Sovereign will compete with general-purpose L1s like Solana.
- He expresses deep respect for the Solana team, stating, "Never fade Solana." However, he points out that Solana faces a much harder challenge in optimizing for high-performance finance because it cannot risk breaking its existing ecosystem of diverse applications.
- In contrast, a specialized chain like Hyperliquid or Bullet can make aggressive, targeted optimizations. Preston believes that in a direct head-to-head for exchange use cases, a purpose-built solution has a significant advantage over a general-purpose one.
- This dynamic mirrors the L2 scaling strategy on Ethereum, where specialized rollups offload activity and bring new capabilities to the ecosystem.
Why the World Needs More Than One Exchange
- Robbie asks why a diverse ecosystem of exchanges is necessary instead of a single "endgame" CLOB where all liquidity consolidates.
- Preston draws a parallel to traditional finance, where different exchanges (NASDAQ, NYSE, CME) cater to different asset classes (equities, futures), geographies, and regulatory environments.
- In crypto, this diversity is even more pronounced, with distinct markets for perps, spot, stablecoin-to-stablecoin swaps, real-world assets (RWAs), and NFTs, each benefiting from unique architectural designs.
- He concludes that the design space is wide open, with no single dominant player in most of these emerging categories.
Developer Feedback and Sovereign's Business Model
- What Builders Value: Developers have praised the ease of building on the stack, as it removes painful constraints like contract size limits found on chains like Solana, making the development process feel more like writing standard, verifiable code. The demand for ultra-low latency was also a strong signal from the market that shaped Sovereign's focus.
- Surprising Feedback: The team initially overestimated the demand for advanced block explorer infrastructure and fully trustless, proof-based bridging. For now, most teams are comfortable with more trusted bridging solutions like Hyperlane.
- Business Model: Sovereign's model is a simple revenue share. Teams can deploy permissionlessly, and Sovereign takes a percentage of the revenue generated by applications using its proprietary high-performance components, like the low-latency sequencer. This aligns incentives, as Sovereign only succeeds if its customers do.
Conclusion: The Shift to Specialized, High-Performance Rollups
- Sovereign's stack signals a market shift towards specialized, high-performance rollups. Investors and researchers should evaluate infrastructure that offers application-specific advantages like ultra-low latency and dedicated throughput, as these features will define the next generation of on-chain financial products and capture significant value.
