Former Solana Executive Employs Wall Street Strategy to Foster Fairness in DeFi

Austin Federa, the former head of strategy at the Solana Foundation, left his position in 2024 to address the perceived injustices in the cryptocurrency trading landscape. 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 minimizes latency. This approach aims to create a more equitable environment, even if regulators and traders are not yet demanding it. According to Federa, the issue lies in the fact that the crypto industry often confuses decentralization with distribution. While DeFi protocols are decentralized due to their open-source code and permissionless validator sets, the physical laws governing data transmission lead validators to cluster in the same data centers, giving some traders a significant edge. For instance, traders based in Tokyo enjoy a 200-millisecond advantage over their international counterparts on platforms like Hyperliquid. Federa notes that this problem has already been encountered in traditional finance. The New York Stock Exchange, for example, implemented cable-length equalization in its Mahwah, New Jersey data center over a decade ago to prevent asymmetric access, which can be detrimental to business. DoubleZero's solution involves timestamping, which aggregates private bandwidth from operators to route blockchain data over dedicated links. This approach enables venues to timestamp orders across global entry points and reconstruct a fair sequence, similar to the cable equalization used by the NYSE. The main challenge is not only speed but also verifiability. On a venue using the public internet, a trader who experiences delayed orders cannot distinguish between ordinary network congestion and intentional interference. DoubleZero's managed network with deterministic latency makes it possible to prove the distinction. Although physics still applies, and a New York trading desk routing through DoubleZero to reach Hyperliquid in Tokyo will not outrun a competitor in a nearby region, the gap and variance in latency shrink. Traders benefit from lower and more predictable latency, which is a valuable property in traditional markets. Federa argues that the crypto industry misunderstands what makes traditional markets fair. While regulators play a role, they are not the primary drivers of fairness. Instead, exchanges themselves work to maintain fairness because their business depends on it. Venues with a reputation for asymmetric access lose volume to those that do not. If Federa is correct, the latency problem in DeFi is not waiting for regulatory intervention but rather for a major venue to recognize fairness as a competitive advantage worth investing in. The next decade will test whether the industry is willing to build distributed systems, where the advantage is not based on the physical location of servers.