Former Solana Executive Utilizes Wall Street Strategy to Foster Equality in DeFi

Austin Federa, the former head of strategy at the Solana Foundation, left his position in 2024 to address the perceived unfairness in the crypto trading environment. Eighteen months later, his company, DoubleZero, claims to have found a solution. The goal of DoubleZero is to remove the proximity to an exchange's servers as a competitive advantage for traders by utilizing a private fiber network that eliminates latency. This latency, which is the time it takes for an order to reach the platform from a trader's desk, is a significant factor in determining the outcome of trades. Despite the lack of demand from regulators and traders, DoubleZero aims to introduce a more equitable environment. According to Federa, the issue lies in the conflation of decentralized and distributed systems in crypto. While 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, giving some traders an edge. For instance, traders based in Tokyo enjoy a roughly 200-millisecond advantage over their international counterparts on platforms like Hyperliquid. Federa notes that this issue is not unique to crypto, as traditional finance has already faced similar challenges. The New York Stock Exchange developed its Mahwah, New Jersey data center over a decade ago, implementing cable-length equalization to within a nanosecond to address asymmetric access. DoubleZero's solution involves timestamping orders across global entry points, allowing for the reconstruction of a fair sequence. This approach aims to provide verifiable and deterministic latency, making it possible to distinguish between ordinary network congestion and deliberate actions. By utilizing a managed network, DoubleZero's pitch is that traders can enjoy not only lower latency but also predictable latency, which is a crucial property for high-frequency trading firms. Federa argues that crypto is misinterpreting what makes traditional markets fair, emphasizing that regulators are not the primary drivers of fairness. Instead, exchanges themselves play a significant role in maintaining fair markets, as their business depends on it. If a major venue decides that fairness is a competitive advantage worth paying for, DeFi's latency problem may be addressed without relying on regulators. The next decade will test whether the crypto industry is willing to build distributed systems, where the advantage is not based on the location of a server.