Former Solana Executive Tackles DeFi's Latency Issue with a Lesson from Wall Street

Austin Federa, the former head of strategy at the Solana Foundation, left his position in 2024 to address the unfairness he perceived in the crypto trading landscape. Eighteen months later, his company, DoubleZero, claims to have a solution. The goal of DoubleZero is to eliminate the proximity of traders to exchange servers as a competitive advantage, thereby introducing a more equitable environment for all traders, even if regulators and traders are not yet demanding it. According to Federa, the issue stems from the fact that the crypto industry often confuses decentralization with distribution. Although DeFi protocols are decentralized due to their open-source code and permissionless validator sets, the laws of physics cause validators to cluster in the same data centers when milliseconds determine the outcome of a trade. For instance, on platforms like Hyperliquid, traders based in Tokyo have a roughly 200-millisecond advantage over their international counterparts. Federa explained in an interview with CoinDesk that "Hyperliquid may be a decentralized system from a governance and user perspective, but it is not a distributed system. It is still co-located in the same environment, even if it's run by multiple different entities." Traditional finance has already encountered this problem. When the New York Stock Exchange developed its Mahwah, New Jersey data center over a decade ago, it implemented cable-length equalization to within a nanosecond, not because regulators required it, but because asymmetric access was detrimental to business. Simply put, traders who felt disadvantaged would route their orders elsewhere. DoubleZero's solution involves timestamping, which aggregates private bandwidth from operators to route blockchain data over dedicated links. This provides venues with tools to timestamp orders across global entry points and reconstruct a fair sequence, similar to the cable equalization used by the NYSE. However, the challenge lies not only in speed but also in verifiability. On a venue operating over the public internet, a trader whose order arrives late has no way to distinguish between ordinary network congestion and something more deliberate. Federa pointed out that "the counter-factual is really hard to prove." DoubleZero's pitch is that a managed network with deterministic latency makes it possible to prove this distinction. While physics still applies, and a New York trading desk routing through DoubleZero to reach Hyperliquid in Tokyo will not outrun a competitor in AWS's ap-northeast-1 region, the gap narrows, and more importantly, the variance shrinks. Traders receive not just lower latency but also predictable latency, a property that high-frequency trading firms actually pay for in traditional markets. Federa's broader argument is that the crypto industry is misinterpreting what makes traditional markets fair. Regulators play a role, but they are not the primary driver. FINRA, the body responsible for policing most of Wall Street's day-to-day conduct, is technically a voluntary self-regulatory organization. The Securities and Exchange Commission and Commodity Futures Trading Commission serve as backstops with enforcement teeth, but the day-to-day work of maintaining fair markets is done by exchanges themselves. They do this because their business depends on it. Venues that gain a reputation for asymmetric access lose volume to venues that do not. If Federa is correct, DeFi's latency issue is not waiting on regulators; it is waiting for the moment a major venue decides that fairness is a competitive advantage worth investing in. The crypto industry has spent a decade demonstrating its ability to build decentralized systems. The next decade will test whether anyone is willing to build distributed ones, where the advantage is not based on the location of a server in Tokyo. As Federa stated, "No one wants to trade on an unfair platform."