Original author: BUBBLE
The Libra incident a while ago completely exposed the dark side of Crypto. Platos allegory of the cave has come true again. On the most transparent blockchain, we can only glimpse the shadows cast by the torches outside the cave. However, the Libra incident has unprecedentedly shown the scene outside the cave to the people inside the cave, a Rashomon involving the national power center, market makers, Solanas core DeFi project, and many core influencers in the industry.
After the incident, many problems were left that needed to be solved by the entire industry. Among them, Solanas core Dex, Jupiter and Meteora were involved in the vortex of the incident. The statement issued by BenChow, co-founder of the two projects, made people rethink a long-standing problem in the blockchain, the debate between permission and no permission in blockchain projects, which represents the two factions of the blockchain. For this reason, BlockBeats invited MinDao, the founder of dForce, to discuss the thinking behind this incident.
The boundaries of “permission”
When Jupiter and Meteora were in deep trouble, social media was full of discussions about whether they were involved in the incident. DForce founder MinDao said, The focus of the incident is not on sniping, but on sniping after knowing the authenticity of such incidents in advance through insider information. I dont understand why Libra has to make such a complicated setting through Meteora, and can easily issue tokens without using UniSwap.
When Ben pointed out that Meteoras DLMM liquidity pool needs to be manually customized, the market naturally compared it with the unilateral pool mechanism of Uniswap V3. Back in 2018, Vitalik initiated a landmark vote - more than 80% of users supported Uniswap should be free to list coins, which pushed the blockchain from ICO to the DeFi permissionless era. Uniswap occupied more than 80% of the DeFi market share at its peak with this mechanism, and its permissionless underlying logic still profoundly affects the industrys DeFi standards.
At the same time when Uniswap dominated the market, Meteora quickly developed into a leader in Solana DEX after its launch in the Solana ecosystem. It was the DeFi Summer when many stars gathered. However, Meteora effectively solved the slippage problem with its innovative routing algorithm, thereby gaining a part of the DeFi market share. After the team split off to create the aggregator Jupiter, the Jupiter ecosystem took the lead in market share, once occupying more than 70% of Solanas liquidity entrances, becoming the most dominant entrance infrastructure during the outbreak of Solana DeFi technology.
Both of them have unilateral liquidity pools. One is Uniswap, the absolute monopoly in the golden age of DeFi, and the other is Jupiter, a grassroots counterattack. Why, even though Uniswap has existed for 5 years, experienced multiple rounds of bull and bear markets, and countless Rug tokens have been launched on it, it has not suffered such a big public opinion as the Jupiter incident. The reason is that this is a struggle between open source and closed source.
Open source or closed source? Ethereum or Solana?
The liquidity rules of Uniswap V3 are enforced by mathematical formulas, and all parameters (fees, price ranges) are open, transparent and cannot be tampered with afterwards. Therefore, even if there is unilateral liquidity, on-chain arbitrageurs can balance the market by real-time monitoring and arbitrage through on-chain data, which is a very high sunk cost for project parties who expect to control the market through some price ranges. For DLMM, the project party needs the help of the Meteora team to create a customized liquidity pool. This process involves quite subjective judgments (only Meteora can judge the reliability of the project party) and information asymmetry. For example, the Libra team may require the setting of unconventional slippage parameters or hidden liquidity lock-up periods in special intervals on the grounds of optimizing user experience, and these details often make it difficult for on-chain arbitrageurs to execute strategies and balance market prices in a short period of time.
The closed-source protocol and the special liquidity pool settings also make it very convenient for celebrity tokens such as $Libra to exit liquidity with low risk when using Meteora DLMM. This indirectly allows the teams behind the malicious tokens to carry out targeted harvesting. According to the conclusion of Nansens subsequent analysis report, among the 15,000 wallets with PNL exceeding US$1,000, the number of losses was as high as 86.07%, with a total loss of US$250 million, and the remaining 2,100 wallets made a profit of US$180 million. Hayden, the founder of KelsierVentures, the main market maker in this incident, bluntly stated that he made a profit of US$100 million from the transaction, in addition to more than US$10 million in handling fee income.
In fact, even if the product cannot be open source or needs to be customized due to the niche environment, there are many ways to prevent the market makers behind it from doing evil. Olympus Pros Bond mechanism market makers pledge token requirements to prevent evil and Trader Joes liquidity books time-weighted exit model phased unlocking based on trading volume and survival time can both take into account the needs of large-scale token launch customization and the purpose of protecting users.
DLMM TVL rose rapidly after the Trump incident. Data from DeFiLlama
“There is no middle ground between permissionless DeFi and compliant CEX,” MinDao also said, adding, “Where is the boundary? What kind of product is called DeFi? I think a clearer framework is needed on this point. I think everyone in the currency circle is also looking for various compromises and working hard to achieve a balance between compliance and decentralization.”
Indeed, as long as people are involved in the process, it cannot be called DeFi decentralized finance, and this product must face regulatory compliance issues. Faced with this problem, even Uniswap Labs, which completely separates the protocol and the company entity, cannot escape. The US SEC has attempted to accuse Uniswap Labs of operating unregistered brokers, exchanges and clearing agencies, and issuing unregistered securities. From warnings, sending Wells Notices, investigations to formal charges, Uniswap has gone through 3 years of self-certification to the SEC, forcing the team to waste a lot of time and millions of dollars. Until now, on February 26, 2025, the US SEC finally gave up the investigation of Uniswap Labs. We are in the gap between the policy of abandoning the use of traditional financial rules to enforce the control of DeFi and the upcoming DeFi regulations.
The double-edged sword of traffic
The risk of artificial permission mentioned above is only one of the reasons for the communitys opposition. Meteora itself does not have a large market share and cannot shake the entire industry. What is really worrying is the vertical dominance of the ecosystem occupied by Jupiter Ecosystem.
According to Dune data, Meteoras market share is only 5%.
Since 2024, Jupiter has frequently acquired projects in various ecological niches, from the user portal Ultimate Wallet, to the data analysis tool Coinhall, the blockchain browser SolanaFM, from the back-end liquidity pool Meteora to the front-end Moonshot. By integrating core infrastructure such as wallets, data, and transactions, Jupiter has built a self-contained DeFi service collection. Users can complete the entire process from depositing funds, trading to optimizing returns in this ecosystem, and the Jupnet launched some time ago shows that its intention is not limited to Solana, but to get involved in the full-chain DeFi ecosystem.
Such a strong influence and product is like a double-edged sword. When nothing happens, it is undoubtedly the best path for new users to enter the blockchain through Mass Adoption. This can be seen from the hundreds of thousands of non-cryptocurrency users added by Moonshot during the Trump coin period. When it was involved in the insider trading incident, the market naturally became anxious about how such complex DeFi functions and processes should be regulated. After all, it is tied to Solana, which currently has the largest liquidity in Crypto.
Just as the saying goes Everyone in the cryptocurrency world is looking for various compromises, the open source Uniswap has set the shackles of BSL Commercial Source License on V3 and V4 for its own business logic, or removed certain tokens from the front-end for regulatory legalization. How will the closed-source Jupiter compromise the balance between its own business territory and user trust and compliance?
Cultural genes
When we extended the topic of Uniswap and Jupiter to discuss whether ETH and Solana products will be affected by the underlying culture of these two chains, MinDao believes that Solana is closed-source and pragmatic, pursuing efficiency and value chain integration, which is conducive to rapid expansion; while Ethereum is open-source and free, with a diverse ecosystem, but the direction of development requires more considerations, and the underlying culture of the chain will profoundly affect the product path.
Vitalik mentioned in the article Layer 2s as cultural extensions of Ethereum that the underlying subculture of Ethereum is roughly divided into three camps: cypherpunks, Regens, and Degens. Now, Ethereums cypherpunk culture is more prosperous, while the Degens culture is flourishing in Solana. Ethereum is more inclined to white left, and its cultural genes are rooted in the spirit of open source and decentralized idealism. In fact, it is the continuation of the BTC spirit, and its ecological evolution follows the logic of commons collaboration.
Ethereum core protocols such as Uniswap and Aave are completely open source. Any developer can fork and iterate (such as Sushiswap forking Uniswap, etc.), forming a free market competition. This also allows Ethereum to have more vertical products. Each product is responsible for shining within its own field, and the product moat is the brand itself. The speed of iteration and the solidity of the community greatly affect the dominance of the project, and its development path is more horizontal.
Most of the protocols on EVM are multi-chain
Solana embraces efficiency, and its culture is based on competitive sportsmanship and unremitting execution, which is closer to the winner takes all of Web2. This also allows the Degen culture to take root in this soil on a large scale. The Solana Foundation is very good at actively integrating resources such as capital and government relations, which also allows them to develop extremely rapidly. This also permeates into various products below. Most of the mainstream projects on Solana choose closed source because the underlying technology is difficult to be compatible with other chains, or to prevent competitors on the same chain from copying, and are very good at mobilizing various resources for development, giving priority to creating value chain monopolies with the highest efficiency, and controlling the interest chain throughout the entire chain, similar to Tencents super application strategy. For example, Jupiter achieved transaction-issuance-liquidity through the acquisition of Meteora (DEX) and Moonshot (fiat currency entrance), or recently Pumpfun announced that it would abandon Raydium and directly carry out product business of adding AMM pools on Pumpfun.
Most of the protocols on Solana are single-chain
In the future of blockchain, Ethereum is on the left and Solana is on the right
“Liberal” Ethereum
The underlying culture of both parties also gave birth to the path they are on now. First, environmentalist Vitalik proposed that due to the excessive power consumption of PoW, he chose to promote the transition of Ethereum from PoW proof of work to PoS proof of equity. In September 2022, Ethereum completed The Merge and officially switched from PoW to PoS. Energy consumption dropped from about 78 TWh per year (equivalent to the national electricity consumption of Chile) to about 0.01 TWh. The pledge mechanism 32 ETH threshold and the deflation model EIP-1559 burning mechanism introduced by PoS changed the token economic model of Ethereum. After the merger, the circulation of ETH decreased by 3 million, the annual inflation rate dropped from 3.5% to -0.2%, and the number of validator nodes after the merger expanded from thousands of miners in the PoW era to more than 1 million pledgers.
However, the original choice triggered a phenomenon. The PoS staking threshold of 32 ETH limited the participation of most ordinary users. The top three staking service providers Lido, Coinbase, and Kraken controlled more than 35% of the staking volume, triggering criticism that the market the rich get richer. Even Ethereum core developer Dankrad Feist admitted that if Lidos share exceeds 33%, it may trigger social consensus intervention. Coupled with the extremely high GasFee, big players have become the main users of Ethereum. This is also the origin of Ethereum becoming an aristocratic chain.
The voting process of EIP Ethereum Improvement Proposal is lengthy, and community consensus is difficult to reach quickly unless core members vigorously promote it. It is reported that 68% of Ethereum Improvement Proposals are implemented by 10 people related to the Ethereum Foundation. Ecological decision-making will fall into multi-party games, resulting in inefficient key upgrades. For example, innovations such as account abstraction have not been fully promoted so far, and the Pos transformation mentioned above has also been promoted for 6 years, and the matching EIP-1559 burning mechanism took two years of discussion to land. Zeke, a researcher at YBB Capital, believes that the EIP has lost its original intention of democratic will. Governance tokens are meaningless before solving the witch problem. Democratic voting can never be reflected in governance proposals. In the current Ethereum, large institutions like a16z can veto the approval vote of a large community with only a few wallets, so voting loses its meaning.
On the same day that Trump announced that he would strongly support the American blockchain, Vitalik posted a tweet stating that The Ethereum Foundation will avoid including: implementing a certain ideology, actively lobbying regulators and powerful politicians especially in the United States and any major country, risking the damage to Ethereums position as a global neutral platform, becoming an arena for vested interests, and becoming a highly centralized organization. Vitalik still hopes to maintain Ethereum as a digital Babel that resists authoritarianism, a global open network guarded only by global validators with mathematics.
Solana: A pragmatic approach
Image source: Blockworks
On the other hand, Solana, which is moving to the right, has gradually realized the vision of Mass Adoption with ultra-high transaction efficiency and throughput. It has formed an overwhelming advantage in a blockchain. From transaction volume, activity to liquidity, Solana has become a well-deserved leader. The launch of Trumpcoin can be said to be the best stress test of Solanas performance. $560 million in real value was produced in one day, and half of the value was generated by outsiders who had never participated in the blockchain. Polygon co-founder Brendan Farmer expressed concern about Solanas structural problems. Most of Solanas economic value output comes from pumpfun and trading robots, which are derivative industries of Meme coin. This does not create any economic value, and the consequence is that they will extract liquidity from the ecosystem. Every dollar paid in REV means that the funds for future Meme coin transactions will decrease, forming a vicious circle.
In the past five years, Solana has experienced a total of seven independent outages, five of which were caused by client errors and two were due to the networks inability to handle a large number of spam transactions. However, some community leaders, including Helius founder Mert Mumtaz, predict that outages will continue. The problem of Solanas excessive centralization was widely discussed around 2022, but as the market trend shifted from geek culture to application-dominated thinking, Solana showed a transaction throughput comparable to that of the Web2 network, and few people cared about this issue.
Source: Helius’s report on Solana’s downtime history
Unlike Vitalik, Lily Liu, the head of the Solana Foundation, mentioned in an interview that I believe the new government will recognize the role of blockchain in supporting the US strategy, so we very much hope and have plans to cooperate with the US government in the future. Facts show that the excellent resource integration ability of the Solana Foundation has made opportunities from government support to the US presidents memecoin issuance in this round of market conditions tend to Solana, but MinDao believes that if Solana is too politically inclined, its excessive attributes at the political level will make it subject to corresponding potential political influences in the future global ecological process. For example, if a Chinese company wants to issue Layer 2, it is highly likely that it will not want to issue it on a chain representing the United States.
At the crossroads, move forward
We are wandering at the crossroads of left and right. Ethereums governance deadlock and Solanas capital carnival seem to have reached a dead end, but this evolutionary movement that seems to betray its original intention may be forging the holy grail of the financial system that can accommodate both Hayek and Keynes.
Ethereum, which is moving to the left, has become an aristocratic chain after the PoS transformation to reduce resource consumption and the possibility of centralized supervision. The EIP process, which was originally intended to accept democratic voting, has become a difficult process for Ethereum. The idea of resolutely not being linked to politics has also made it lose to Solana in this round of large-scale applications. ETH, which has always been a concentrated area of ecological development, will also be surpassed by Solana in the growth of ecological developers in 2024.
Solana, which is heading to the right, has become the well-deserved King of Liquidity in the Meme craze with its efficient performance and wealth effect, but the production of hundreds of thousands of Meme tokens every month has also turned Solana, which was originally envisioned as a decentralized Nasdaq, into a perfect decentralized casino, which also devours the value that Solana may create in the future. Excessive involvement in geopolitics also limits its future global application.
It seems that no matter which path you take, you will encounter difficulties.
However, MinDao is optimistic about the left-right tendencies of Ethereum and Solana. He believes that the competition between them is not a zero-sum game. The ultimate blockchain may not be Ethereums utopia or Solanas efficiency empire, but a new species born from the confrontation and integration of the two. This will definitely include the utilitarianism of human nature, while forcing the mechanism to improve decentralization through economies of scale. This revolution is not a betrayal, but a redefinition of revolution itself.
As for the future path, Vitalik gave an answer in a recent Tako QA. He believes that this is no longer the era of infra, but the era of application, so these stories cannot be abstract freedom, openness, and anti-censorship, etc., and some clear application chain answers are needed. He proposed Ethereum as the concept of world finance, and will support more application layer products such as info finance, AI + crypto, high-quality public goods financing methods, and RWA in the future. It is very interesting that the two factions represented by ETH and Solana are becoming more and more like each other in the development process, just like the front and back of a coin and the double helix of DNA. Only by transforming the human nature game into a verifiable public knowledge core in the future can the blockchain evolve into a trustworthy value network.
Chris Dixon, partner of a16z, believes that AI, the Internet and Crypto all have their ups and downs. When we wait until the situation improves before taking action, we find ourselves doing the same thing as a large group of people. So when people think that a certain technology has come to an end, it often hides the best opportunities.
We are at a crossroads, both horizontally and vertically. Whether we go left or right, the final result will be moving forward. Perhaps the ultimate form of blockchain is neither the utopia of the saviorists nor the hegemonic empire of the adventists, but a hybrid that finds a dynamic balance between openness and efficiency, ideals and reality. The future belongs to those who can embed imperfect human nature in the code while still maintaining the robustness of the system.
