Scalability is an ongoing challenge in the blockchain space, with the consequences only too obvious following the explosive growth of decentralized finance. That increased demand resulted in high fees and congestion delays on the dominant Ethereum dApp platform during peak periods.
Various scalability solutions are attempting to tackle these issues predominantly via sharding, layer 2, and sidechains. Solana takes a different approach, delivering an ultra fast, secure, and censorship-resistant blockchain on layer 1, to provide the open infrastructure required for the global adoption of scalable decentralized applications.
Though the Solana mainnet did not launch until March 2020, the scalability, low cost, and composability of the layer 1 solution have led to a rapidly expanding ecosystem of over 200 dApps building on Solana for the defi niche. With Serum, Raydium, and Bonfida already generating significant growth in popularity in the crypto space, among the most anticipated projects include:
- DeFi Land - An agriculture simulation to gamify the experience of decentralized finance protocols.
- Symmetry - A decentralized index protocol and portfolio management platform.
- Nova Finance - A framework for building programmable tokenized assets.
- Cyclos - An aggregated liquidity automated market maker platform.
- Parrot - A synthetic asset generation protocol.
- Solrise - A decentralized fund management and investment protocol.
Like other smart contract blockchains, Solana’s native gas token, SOL, is used to pay for transactions and operational resources on the network, as well as for future on-chain governance. Users can also stake SOL to participate in consensus and help secure the network, earning staking rewards in return.
Rising quickly to become a top 20 crypto asset by market cap, veteran crypto investor Adam Cochran believes the growing strength of the ecosystem will allow Solana to "easily become a top 3-5 project" over time.
Solana v Ethereum
Solana’s third-generation Proof of Stake blockchain leverages a unique trustless system for confirming the order of transactions called Proof of History, as well as several other breakthrough innovations to allow the network to scale at the rate of Moore’s Law. Nodes need less time to validate transactions, and block times are as low as 400 ms, compared to Ethereum’s 15 seconds. As a result, Solana can handle a throughput of more than 50,000 transactions per second (TPS), rather than around 30 TPS on Ethereum.
Fees are also substantially lower, with the average transaction costing just 0.000005 SOL - equivalent to a fraction of 1 cent and in stark contrast to the average cost on Ethereum, currently over $3. Ethereum transaction fees even reached as high as $70 during extreme periods of congestion, rendering many applications unusable.
Unlike some blockchains, any user can set up and run a Solana validator permissionlessly. With the network boasting around 1,000 validators, it is already one of the fastest growing and most widely distributed, though significantly smaller than the estimated 6,500 current Ethereum nodes and over 90,000 validators on Ethereum 2.0. Solana’s validator hardware requirements have come under some criticism, though with a stake of 32 ETH required to run an Ethereum 2.0 validator, it’s still likely to be a lot cheaper.
Solana’s single global state ensures composability between projects, as on the Ethereum base layer. However, the native layer 1 scalability of Solana offers levels of composability not possible when scaling Ethereum transactions across different layers or shards, vital for defi applications.
Similar to ERC20 tokens on Ethereum, Solana also uses the SPL protocol standard to deliver a program for creating both fungible and non-fungible tokens for decentralized application utility on the network.
Solana lacks compatibility with the Ethereum Virtual Machine, making it more difficult for existing projects to migrate or plug into the Solana ecosystem compared with other blockchains like Binance Smart Chain. However, independent cross-chain bridges make Solana interoperable, and with Ethereum-compatible execution environments coming, Solana will become as portable as any EVM-based layer 2 solution.
More Crypto Exchanges Show Support for Solana Projects
With its connections to Solana investor Almeda Research, the cryptocurrency exchange FTX was one of the first to support SOL and SPL tokens like USDT, among a list that now extends to Binance, Coinbase, Huobi, OKEx, Bithumb, and Bitfinex.
Bitrue became the latest major exchange to add support for SOL on June 11, which also saw Solana added to its investment earnings product, Power Piggy. In addition to SOL being available for trading on Bitrue, it meant holders who did not wish to sell could passively invest their SOL at 2% APR, automatically adding interest to their SOL balance daily. Users can also pledge it as collateral for Bitrue’s loan service at 65% LTV to borrow USDT, ETH, XRP, or BTC.
Having done the work to integrate SOL support on the exchange, Bitrue was keen to reach out to its community for nominations of additional Solana SPL tokens for integration, leading to a vote among the four most popular suggestions - Kin (KIN), SolanaSail (SAIL), MoonLana (MOLA), and Rope (ROPE). Amassing over 75,000 votes so far, the winner will become the first SPL token listing on the platform.
What’s Next for Solana?
Solana has already generated significant traction and demonstrated the scalability and composability of the platform. Adoption is likely to grow within its ecosystem as congestion on the Ethereum blockchain continues to push projects toward alternative blockchains to maintain the usability of their decentralized applications, especially with Ethereum 2.0 still a long way off.
With increasing external support in the form of cryptocurrency exchange listings, and investment from the likes of Andreessen Horowitz, Alameda Research, and Sino Global Capital, the future looks bright for this next generation platform.