How DoubleZero Built a Faster Internet for Crypto and Helped All DePIN - Ep. 914
🎯 Summary
Podcast Summary: How DoubleZero Built a Faster Internet for Crypto and Helped All DePIN - Ep. 914
Quick Analysis for Crypto Professionals
1. Crypto Focus Area: DePIN (Decentralized Physical Infrastructure), blockchain scalability, validator infrastructure, and the intersection of traditional finance with on-chain trading systems.
2. Key Technical Insights: • Modern blockchain software can handle 100K-1M+ TPS locally, but public internet latency/routing is now the primary bottleneck for distributed networks • DoubleZero uses “proof of utility” with Shapley values instead of traditional proof-of-stake, rewarding contributors based on actual network value rather than token holdings • The network operates as a parallel internet using dedicated fiber, reducing jitter and providing deterministic routing for blockchain validators
3. Market/Investment Angle: • Enables more sophisticated trading strategies by providing deterministic latency for arbitrage opportunities across global markets • Could accelerate blockchain parameter improvements (faster block times, higher throughput) once network constraints are removed • Positions crypto infrastructure to better compete with traditional finance execution speeds
4. Notable Crypto Projects/People: • Jump Trading (28% token allocation, contributed existing fiber infrastructure) • Solana/Fire Dancer team (demonstrated 1M TPS using early DoubleZero network) • Multiple L1s mentioned: Solana, Sui, Aptos, Monad, Alana as primary beneficiaries
5. Regulatory/Policy Discussion: Received SEC no-action letter for contributor reward mechanisms, potentially setting precedent for DePIN projects and helping traditional infrastructure companies participate in crypto networks without securities law concerns.
6. Future Implications: Could enable true competition between on-chain and traditional finance by removing infrastructure bottlenecks, potentially facilitating tokenized equity trading and NASDAQ on-chain integration.
7. Target Audience: Validators, RPC providers, institutional traders, DePIN investors, and infrastructure-focused crypto companies.
Comprehensive Episode Analysis
This episode features Austin Federer, co-founder of DoubleZero (00.Finance), discussing a fundamental infrastructure problem that most crypto professionals overlook: network latency and bandwidth limitations that prevent blockchains from reaching their true potential.
The Core Problem and Solution
The central thesis challenges conventional wisdom about blockchain scalability. While the crypto community has focused intensively on software optimization, Federer argues that modern blockchain clients can already process hundreds of thousands to over a million transactions per second when running locally. The real bottleneck has shifted to network infrastructure—specifically, the public internet’s inability to handle the low-latency, high-bandwidth requirements of truly distributed blockchain networks.
DoubleZero’s solution involves creating a parallel internet using dedicated fiber infrastructure contributed by independent operators. Unlike traditional corporate networks (used by Facebook, Google, Amazon, and major trading firms like Jump and Citadel), this network operates as a decentralized protocol where multiple entities contribute fiber capacity and earn tokens based on actual utility provided.
Technical Innovation and Architecture
The project introduces several novel concepts to crypto infrastructure. Their “proof of utility” consensus mechanism uses Shapley values—an economic concept that measures how much worse a system would perform without each component. This creates a more nuanced reward system than traditional proof-of-stake, where a critical connection to a remote location like Perth might earn more rewards than redundant infrastructure in oversupplied markets like New York.
The network operates statelessly, focusing on data in transit rather than securing stored value. This fundamental difference allows for a different security model than traditional blockchains, requiring less capital security since no permanent state is at risk.
Business Model and Token Economics
The 2Z token serves multiple functions: payment for network access, rewards for infrastructure contributors, and a deflationary mechanism where approximately 50% of usage fees are burned. The system accommodates both crypto-native users (who can pay in native tokens like SOL) and traditional infrastructure companies (who pay directly in 2Z tokens).
The controversial 28% allocation to Jump Trading reflects their multiple roles: core technology contributor (Fire Dancer team), first major infrastructure contributor (providing existing fiber network access), and early investor. This allocation structure highlights the capital-intensive nature of physical infrastructure compared to software-only blockchain projects.
Regulatory Breakthrough
Perhaps most significantly for the broader DePIN sector, DoubleZero obtained an SEC no-action letter covering their contributor reward mechanisms. This regulatory clarity addresses a major adoption barrier for traditional infrastructure companies—entities like NTT or Lumen that operate fiber networks but lack crypto-specific legal expertise. The precedent could accelerate institutional participation in decentralized infrastructure projects.
Market Implications and Future Vision
The conversation reveals ambitious long-term goals extending beyond crypto. Federer envisions enabling on-chain trading of tokenized equities at parity with traditional markets, potentially bringing NASDAQ trading on-chain. This infrastructure could eliminate the latency disadvantages that currently prevent blockchain-based financial systems from competing directly with traditional finance.
For traders, the network promises deterministic latency—knowing exactly how long transactions take rather than dealing with public internet variability. This predictability enables tighter market making and smaller arbitrage opportunities, potentially improving overall market efficiency.
Industry Context and Challenges
The episode illuminates the physical realities underlying crypto’s digital aspirations. While Ethereum’s design philosophy
🏢 Companies Mentioned
đź’¬ Key Insights
"When I got into crypto, it was sort of the end of 2017, beginning of 2018, and back then, software was 100% the limiting factor in blockchain scale and power... We're in a very different place now. If you look at the fast L1s, whether it's Monads, Alana, Apto, or Sui, in their test nets, and if you benchmark the actual validator clients, you can get hundreds of thousands, if not a million transactions per second."
"If we do our job correctly, this is what gets NASDAQ trading on-chain. This is what gets better connections between tokenized equities and traditional equities, allowing those markets to trade at closer parity."
"These projects allocate tokens as compensation for work performed or services rendered, not as investments with an expectation of profit."
"Rather than relying on centralized corporate structures to coordinate activity, DeFi projects enlist participants to provide real-world capability such as storage, telecommunications, bandwidth mapping, or energy through open and distributed peer-to-peer networks."
"We received what's called relief for two components covered as part of the no-action letter. The main one that was the most important to us is the contributor reward payouts. Most of our potential contributor groups are not crypto-native people at all. They're companies like NTT or Lumen that sometimes are public or owned by private equity firms, but they operate fiber cables."
"We literally just got a no-action letter from the SEC for portions of the 00 token. We don't know if this will last forever; politics change quickly in the United States and internationally."