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

After leaving his position as the head of strategy at the Solana Foundation in 2024, Austin Federa dedicated himself to addressing the unfairness he perceived in the crypto trading landscape. Now, eighteen months later, his company, DoubleZero, claims to have found a solution. DoubleZero's goal is to eliminate the proximity advantage that traders have when they are closer to an exchange's servers. By utilizing a private fiber network, the company aims to minimize latency and create a more equitable environment for traders, 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. 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, giving some traders a millisecond advantage over others. For instance, traders based in Tokyo who use platforms like Hyperliquid have a roughly 200-millisecond advantage over their international competitors. Federa explained in an interview with CoinDesk, 'While Hyperliquid may be a decentralized system from a governance and user perspective, it is not a distributed system. It is still co-located in the same environment, even if it is run by multiple entities.' This problem is not unique to the crypto industry, as traditional finance has already faced similar issues. Over a decade ago, the New York Stock Exchange developed its Mahwah, New Jersey data center, which included cable-length equalization to within a nanosecond. This was not done to meet regulatory requirements but rather because asymmetric access was detrimental to business. Traders who felt disadvantaged would simply route their orders to other venues. DoubleZero's solution involves timestamping. The network aggregates private bandwidth from operators to route blockchain data over dedicated links, providing venues with tools to timestamp orders across global entry points and reconstruct a fair sequence, similar to the cable equalization used by the NYSE. The challenge is not only about speed but also about verifiability. On a venue using the public internet, a trader whose order arrives late has no way to determine whether the delay is due to ordinary network congestion or something more intentional. As Federa pointed out, 'It's difficult to prove the counter-factual. Is the delay due to the public internet dropping packets, or is it because someone saw my transaction and decided not to include it in the block?' DoubleZero's pitch is that a managed network with deterministic latency makes it possible to distinguish between these two scenarios. While physics still applies, and a New York trading desk using DoubleZero to reach Hyperliquid in Tokyo will not outrun a competitor in a nearer location, the gap and variance in latency are reduced. Traders gain not only lower latency but also predictable latency, which is a property that high-frequency trading firms are willing to pay for in traditional markets. Federa's broader argument is that the crypto industry is misinterpreting what makes traditional markets fair. Although regulators play a role, they are not the primary drivers of fairness. In traditional markets, exchanges themselves are responsible for maintaining fairness, as their business depends on it. Venues that gain a reputation for asymmetric access lose volume to venues that do not. If Federa is correct, the latency issue in DeFi is not waiting for regulators to step in. Instead, it is waiting for a major venue to recognize that fairness is a competitive advantage worth investing in. The crypto industry has spent the past decade proving that it is possible to build decentralized systems. The next decade will test whether anyone is willing to build distributed systems, 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.'