Is Solana Dead Yet?
It has been some time since I began writing this article, and during that period, the cryptocurrency landscape has undergone significant change. Most notably, the FTX collapse, which occurred over a year ago but still feels like yesterday, has had a major impact on the industry. Time is fleeting, especially in the cryptocurrency market.
Given the recent developments in the cryptocurrency industry, I now feel confident in providing a fair assessment of Solana’s current state. First, I would like to clarify that I am not an Ethereum maximalist. Although I am biased towards Ethereum, I strive to remain objective in my analysis of other ecosystems and protocols. I have previously critiqued Ethereum, as well as Bitcoin, which was a topic of passionate interest in the past. I would be lying if I asserted that I do not have a soft spot for any particular cryptocurrency ecosystem or protocol, or that I do not pledge allegiance to any of them. However, I do have a soft spot for Ethereum, and I believe that everyone else does as well, even if they have not yet realized it or are afraid to admit it. I enjoy trading shitcoins, regardless of the underlying ecosystem. Fun fact: In early 2021, I traded Solana from $20 to $100. Although I have always had a foot in Solana, the majority of my attention has been focused on Ethereum. Cosmos is another ecosystem that I closely monitor. Solana and Cosmos are the two primary ecosystems that interest me outside of Ethereum and Bitcoin.
Now, returning to the question at hand: Is Solana dead?
Not yet.
However, it is on thin ice.
To determine whether Solana is dead, we must first understand what it means for a blockchain to be classified as such. Some people refer to dead blockchains as “ghost chains.” There is no universally accepted definition of a dead/ghost chain, but the following interpretation is widely accepted
A dead chain, also known as an inactive or ghost chain, is a blockchain network that has low or no activity or usage. It may have a functioning blockchain, but there are few to no transactions being processed, few to no new applications being built, and few to no users interacting with the network.
There are many reasons why a chain may become inactive. Some of the most common reasons include:
● Technical problems: Some chains may have technical problems that make them difficult or impossible to use. For example, a chain may have scalability issues, security flaws, or bugs.
● Lack of funding: Some chains may not have enough funding to support development and marketing. As a result, they may lose users and developers to other platforms.
● Competition: Some chains may face stiff competition from other platforms that are more popular or offer better features. As a result, they may lose users and developers to these other platforms.
Solana, a popular blockchain platform, has had technical problems in the past. However, it is well-funded and has a large and active community. It is facing competition from other platforms, but it remains to be seen whether this will be enough to kill the chain.
The framework I am about to propose is not definitive, nor is it a law. It is simply my opinion on how to assess whether a blockchain is dead. I will consider three categories:
- Technology Development: This category evaluates the technical progress of the blockchain, including the development of its protocol, infrastructure, and applications.
- Ecosystem Analysis: This category evaluates the health and vibrancy of the blockchain’s ecosystem, including the number and quality of its developers, users, and projects.
- On-chain Comparison: This category compares the blockchain’s on-chain metrics to those of other blockchains, such as transaction volume, TVL, Fees and Revenue.
A blockchain will need to have three “Nays” to be considered dead
Technology Development
In this section of my essay, I will explore the recent technological upgrades and developments that Solana has undergone in the past year. Although this topic may seem technical, I will do my best to explain it in a clear and concise manner
QUIC TPU (Transaction Processing Unit)
QUIC TPU (QUIC Transport for Processing Units) is a significant upgrade to the Solana network that enables it to utilize the QUIC transport protocol for communication between validators. QUIC is a novel transport protocol that is designed to be more efficient and dependable than TCP, the protocol that Solana previously employed.
QUIC provides several benefits over TCP, including:
● Improved performance: QUIC can considerably enhance Solana’s performance by reducing transaction latency and increasing network throughput.
● Reduced overhead: QUIC has less overhead than TCP, which means it can process more transactions per second.
● Increased reliability: QUIC is more dependable than TCP, which means it is less likely to experience errors.
QUIC TPU works by using the QUIC transport protocol for communication between validators. This means that validators send and receive transaction data using QUIC. QUIC employs several methods to improve performance and reliability, including:
● Multiplexing: QUIC allows for the transmission of numerous data streams over a single connection. This improves performance by lowering the number of connections that must be created.
● Head-of-line blocking: QUIC prevents head-of-line blocking, a problem that can arise with TCP. Head-of-line blocking occurs when all subsequent packets can be delayed by a single packet loss. QUIC employs a strategy known as packet pacing to prevent head-of-line blocking. Packet pacing ensures that packets are sent at a controlled rate, which helps to prevent packet loss.
● Forward error correction: QUIC uses forward error correction to detect and repair packet errors. This contributes to QUIC’s increased dependability.
QUIC TPU is a significant improvement to Solana that has the potential to significantly improve the network’s performance, reliability, and scalability. It is still under development, but it has the potential to make Solana one of the most efficient and reliable blockchain networks available.
Another key feature of QUIC that QUIC TPU uses is flow control. Flow control allows devices to control the rate at which data is sent to them. This is important because it prevents the network from being overloaded with data. This can lead to reduced congestion and improved performance. Another important feature of QUIC is stream priority. Stream priority allows devices to specify which data streams are most important. This allows the network to prioritize the most important data streams, which can improve the performance of critical applications. QUIC TPU is a significant upgrade to Solana that can improve the performance, reliability, and scalability of the network. QUIC TPU works by using the QUIC transport protocol for communication between validators.
Stake-Weighted QoS
Stake-weighted quality of service (QoS) is a feature of the Solana blockchain that allows nodes with more SOL to have their transactions prioritized. This is done by giving nodes with more SOL a higher chance of being selected to produce the next block. This feature is important because it helps to ensure that all transactions are processed fairly, regardless of the size or complexity of the transaction. It also helps to prevent spam attacks, as attackers would need to have a significant stake in the network to prioritize their transactions.
Stake-weighted QoS works by assigning a weight to each transaction based on the amount of SOL that the sender has in the Solana network. This weight is then used to determine the order in which transactions are processed. Transactions with a higher weight will be processed faster than transactions with a lower weight.
There are a few different ways to implement stake-weighted QoS. One common approach is to use a lottery system. In this approach, each transaction is assigned a random number, and the transactions with the highest random numbers are processed first. The probability of a transaction being selected is proportional to the transaction’s weight.
Another approach to implementing stake-weighted QoS is to use a queueing system. In this approach, transactions are placed in a queue, and the transactions with the highest priority are processed first. The priority of a transaction is determined by the transaction’s weight.
Stake-weighted QoS is an important feature of the Solana blockchain that helps to ensure that all transactions are processed fairly and efficiently. It also helps to prevent spam attacks and other malicious activity.
Benefits of Stake-weighted QoS
Stake-weighted quality of service (QoS) is a novel consensus mechanism that prioritizes transactions based on the amount of SOL staked by the sender. This mechanism offers some advantages over traditional first-come-first-served (FCFS) transaction processing, including:
● Fairness:Stake-weighted QoS ensures that all users have an equal opportunity to have their transactions processed, regardless of their network resources or transaction fees. This is because nodes are more likely to select and process transactions from users with higher stakes. This helps to prevent wealthy users or large exchanges from monopolizing network bandwidth and processing power.
● Spam prevention: Stake-weighted QoS also helps to deter spam attacks, as attackers would need to stake a significant amount of SOL to prioritize their transactions. This makes it more costly and difficult for attackers to launch spam attacks, which can improve the overall performance and reliability of the network.
● Performance: Stake-weighted QoS can also improve the performance of the Solana blockchain by reducing the time it takes for transactions to be processed. This is because nodes are more likely to select and process transactions from users with higher stakes. As a result, users with higher stakes can expect their transactions to be processed more quickly.
Stake-weighted QoS is a valuable feature of the Solana blockchain that offers some advantages over traditional FCFS transaction processing. It helps to ensure that all users have a fair and equal opportunity to have their transactions processed, deters spam attacks, and improves the overall performance and reliability of the network.
Here is a specific example of how stake-weighted QoS can benefit the Solana blockchain:
Imagine a scenario where a large exchange is trying to process a high volume of transactions at the same time as a regular user. Under a traditional FCFS system, the exchange’s transactions would likely be processed first, as they would be submitted sooner. This would leave the regular user’s transaction waiting in line, which could take a significant amount of time to be processed.
However, with stake-weighted QoS, the regular user could have their transaction processed more quickly if they have a higher stake in the network than the exchange. This is because nodes are more likely to select and process transactions from users with higher stakes. This helps to ensure that all users have a fair and equal opportunity to have their transactions processed, regardless of their network resources or transaction fees. Stake-weighted QoS is a powerful tool that can help to improve the fairness, security, and performance of the Solana blockchain. It is a key feature that distinguishes Solana from other blockchains and makes it a more attractive platform for users and developers alike.
Localized Fee Market
A localized fee market is a type of fee market that allows for the dynamic pricing of transaction fees based on local demand. In the context of Solana, this means that the price of transaction fees can vary depending on the type of transaction and the current demand for blockspace.
There are several advantages to using a localized fee market. First, it can help to improve the performance of the network by incentivizing users to pay higher fees for transactions that are more time-sensitive. This can help to reduce the backlog of transactions and improve the overall throughput of the network. Second, a localized fee market can help to reduce spam by making it more costly to send unnecessary transactions. This can help to improve the security of the network and make it more efficient. Third, a localized fee market can help to create a more equitable marketplace for transaction fees. By allowing fees to fluctuate based on demand, the network can ensure that all users have a fair chance of having their transactions processed.
Solana’s move to a localized fee market is a significant step forward in its evolution as a blockchain platform. It is a move that is likely to benefit all users of the network, from developers to investors to consumers.
One example of how a localized fee market works on Solana is as follows:
Imagine that there is a new Solana-based NFT marketplace that is launching. On the day of the launch, there is a lot of demand to mint NFTs on the new marketplace. This means that the fees for minting NFTs will be higher than usual. This is because there is more competition for blockspace from users who want to mint NFTs. Blockspace is a limited resource on blockchains, and users who are willing to pay higher fees are more likely to have their transactions included in the next block.
However, the fees for other types of transactions, such as sending SOL tokens to a friend, will not be affected. This is because the demand for blockspace for these types of transactions is lower. As the demand for minting NFTs decreases, the fees for minting NFTs will also decrease. This is because there will be less competition for blockspace.
Localized fee markets can help to improve the performance of blockchains by reducing congestion. When users can pay different fees for different types of transactions, they are more likely to submit their transactions to the most efficient parts of the network. This can help to free up resources for other users and improve the overall performance of the blockchain.
Localized fee markets can also help to improve the security of blockchains by incentivizing miners to process transactions from all users, regardless of the fee they are paying. When miners/validators can earn fees from all types of transactions, they are more likely to participate in the network and help to secure it.
Solana’s fee priority system is a unique and innovative approach to transaction processing. It leverages the power of the market to prioritize transactions based on their importance to users. The system works by charging users a base fee and a priority fee. The base fee is paid to the validator who processes the transaction, while the priority fee is paid to the validator to prioritize the transaction. The base fee is calculated based on the demand for blockspace, while the priority fee is set by the user.
This system creates localized fee markets, which are different types of transaction markets that emerge based on the priority fees that users are willing to pay. For example, if there is a lot of demand for NFT mints, then the priority fee for NFT mints will be higher than the priority fee for other types of transactions. This means that NFT mints will be processed sooner than other types of transactions.
Localized fee markets have many benefits; They reduce the backlog of transactions, they reduce spam, and they encourage users to pay for the resources that they need.
QUIC TPU and Stake-Weighted QoS are not user-facing technologies, meaning that everyday users may not immediately see the value in these upgrades. The localized fee market, on the other hand, is more user-facing and is likely to resonate most with NFT enthusiasts. While I am not a developer and cannot arbitrarily score these technology developments, I can say that they appear to be well-conceived and will help to improve the Solana ecosystem overall. The fact that the developers are continuing to ship updates, even during a bear market, is a positive sign for the ecosystem.
In conclusion, Solana receives a “Yeah” in this section.
Ecosystem Analysis
In this section, I will examine the evolution of the Solana ecosystem, including the launch of decentralized applications (dApps), partnerships, and integrations.
1. Solana and Google Cloud ☁️
On November 4, 2022, Google Cloud and Solana announced a partnership at the Solana Breakpoint conference. The partnership includes several initiatives that will help to accelerate the adoption of the Solana blockchain:
● Google Cloud becoming a Solana validator: Google Cloud will run a Solana validator node to help secure and validate the Solana network. This will help to improve the security and reliability of the network.
● Integration of Solana into Google Cloud Blockchain Node Engine: Google Cloud Blockchain Node Engine is a managed service that makes it easy to deploy and manage blockchain nodes. Solana will be integrated into Google Cloud Blockchain Node Engine, making it easier for developers to build and deploy Solana applications on Google Cloud Platform. This will help to reduce the barrier to entry for developers and make it easier for them to build on Solana.
● Indexing of Solana data in Google BigQuery: Google BigQuery is a fully managed, petabyte-scale analytics data warehouse. Solana data will be indexed in Google BigQuery, making it easier for Solana developers to access and analyze historical data. This will help developers to build better applications and make better decisions.
This partnership is significant because it shows that Google Cloud is committed to supporting the Solana ecosystem. Solana is one of the fastest-growing blockchains in the world, and Google Cloud’s support will help to accelerate its adoption.
Benefits of the partnership:
For developers:
● Easier and more efficient launching and management of Solana nodes using Google Cloud’s Blockchain Node Engine
● Access to Google Cloud’s BigQuery data warehouse service for more effective data analysis
For users:
● Increased security and reliability of the Solana network due to Google Cloud’s infrastructure.
2. Solana and USDC 🪙
The Solana and USDC partnership, announced on November 8, 2022, is a significant development for both ecosystems. The partnership aims to bring the second-largest stablecoin by market capitalization to the Solana blockchain, making it easier for developers to build decentralized finance (DeFi) applications on Solana and for users to access these applications. It will also facilitate payments and remittances using USDC for Solana users.
Circle, the company behind USDC, is committed to supporting the Solana ecosystem, one of the fastest-growing blockchains in the world. Circle’s support will accelerate Solana’s adoption and benefit both ecosystems.
Here are some of the benefits of the Solana and USDC partnership:
● Developers can build DeFi applications on Solana more easily and efficiently using USDC.
● Solana users will have access to a wider range of DeFi applications.
● Solana users can make payments and remittances more easily using USDC.
● The partnership will help accelerate the adoption of both Solana and USDC.
The Solana and USDC partnership is a positive development for both ecosystems. It will benefit developers, users, and the crypto industry as a whole.
3. Solana and Opera Browser 🌎
The Solana and Opera Browser partnership was announced on January 12, 2023. The partnership is aimed at bringing Solana dApps to Opera Browser’s built-in crypto wallet.
Opera Browser is a popular web browser that has over 380 million users worldwide. It is one of the first web browsers to integrate a crypto wallet and support Web3 applications.
The integration of Solana dApps with Opera Browser will make it easier for users to access and use Solana dApps. It will also help to increase the adoption of Solana and Web3.
Opera Browser uses a software development kit (SDK) from Solana to integrate Solana dApps with its built-in crypto wallet. This SDK allows Opera Browser to interact with Solana dApps and process transactions.
When a user wants to access a Solana dApp in Opera Browser, they are first prompted to connect their crypto wallet. Once the wallet is connected, the user can interact with the dApp as they would any other website.
The Solana and Opera Browser partnership is a significant development for both ecosystems. It will make it easier for users to access and use Solana dApps, and it will also help to increase the adoption of Solana and Web3.
Here are some of the benefits of the Solana and Opera Browser partnership:
● Users will be able to access and use Solana dApps directly from Opera Browser.
● Users will not need to install any additional software to use Solana dApps.
● The partnership will help to increase the adoption of Solana and Web3.
The Solana and Opera Browser partnership is a positive development for both ecosystems. It will make it easier for users to access and use Solana dApps, and it will also help to increase the adoption of Solana and Web3.
4. Solana and Metaplex
The Solana and Metaplex partnership was announced on February 7, 2023. The partnership is aimed at accelerating the adoption of Solana NFTs and Web3.
Metaplex is an open protocol and toolset for NFT creators and developers on Solana. It provides a set of tools and standards that make it easy to create, mint, and sell NFTs on Solana.
The Solana and Metaplex partnership will make it easier for developers to build NFT applications on Solana and for users to access these applications. It will also help to increase the adoption of Solana and NFTs.
Metaplex uses a set of on-chain programs and a self-hosted front-end web application to provide its services. The on-chain programs are responsible for managing NFT metadata, royalties, and other aspects of NFT ownership. The front-end web application provides a user interface for interacting with the on-chain programs.
The Solana and Metaplex partnership will allow Metaplex to integrate directly with the Solana blockchain. This will make it easier for developers to build NFT applications on Solana and for users to access these applications.
Here are some of the benefits of the Solana and Metaplex partnership:
● Developers will be able to build NFT applications on Solana more easily and efficiently using Metaplex.
● Solana users will have access to a wider range of NFT applications.
● The partnership will help to increase the adoption of both Solana and NFTs.
The Solana and Metaplex partnership is a positive development for both ecosystems. It will make it easier for developers to build and users to access NFT applications on Solana, and it will also help to increase the adoption of Solana and NFTs.
5. Solana and Coinbase
The Solana and Coinbase partnership was announced on March 8, 2023. The partnership is aimed at bringing Solana staking and other products and services to Coinbase users.
Coinbase is one of the largest cryptocurrency exchanges in the world, with over 110 million users. It is one of the most popular ways for people to buy and sell cryptocurrencies.
The integration of Solana staking with Coinbase will make it easier for Coinbase users to stake their Solana tokens and earn rewards. It will also help to increase the adoption of Solana staking and make it more accessible to a wider range of people.
In addition to Solana staking, the partnership is also expected to include other products and services, such as Solana dApp integration and Solana asset support.
Coinbase will use a Solana staking provider to stake its users’ Solana tokens. This staking provider will be responsible for running Solana nodes and validating transactions on the Solana blockchain.
Coinbase users will be able to earn rewards for staking their Solana tokens. The rewards will be paid out in SOL, the native token of the Solana blockchain.
The Solana and Coinbase partnership is a significant development for both ecosystems. It will make it easier for Coinbase users to stake their Solana tokens and earn rewards, and it will also help to increase the adoption of Solana staking and make it more accessible to a wider range of people.
Here are some of the benefits of the Solana and Coinbase partnership:
● Coinbase users will be able to stake their Solana tokens and earn rewards without having to run their own Solana nodes.
● The partnership will help to increase the adoption of Solana staking and make it more accessible to a wider range of people.
● The partnership is also expected to include other products and services, such as Solana dApp integration and Solana asset support.
The Solana and Coinbase partnership is a positive development for both ecosystems. It will make it easier for Coinbase users to stake their Solana tokens and earn rewards, and it will also help to increase the adoption of Solana staking and make it more accessible to a wider range of people.
6. Solana and Shopify
The Solana and Shopify partnership was announced on August 23, 2023. The partnership allows merchants on Shopify to accept Solana payments through Solana Pay.
Solana Pay is a decentralized payment protocol built on the Solana blockchain. It allows users to send and receive Solana payments quickly and cheaply.
Shopify is a leading global commerce platform that provides essential internet infrastructure for commerce. It powers over 1.75 million businesses in more than 175 countries.
The Solana and Shopify partnership is significant because it makes it easier for merchants to accept Solana payments. This could help to increase the adoption of Solana and make it more accessible to consumers.
Merchants on Shopify can integrate Solana Pay into their Shopify store by installing a plugin. Once the plugin is installed, merchants can start accepting Solana payments from their customers.
When a customer wants to pay for goods or services with Solana, they are prompted to connect their crypto wallet. Once the wallet is connected, the customer can confirm the payment, and the merchant will receive the funds immediately.
The Solana and Shopify partnership is a positive development for both ecosystems. It will make it easier for merchants to accept Solana payments and for consumers to use Solana to pay for goods and services.
Here are some of the benefits of the Solana and Shopify partnership:
● Merchants will be able to accept Solana payments quickly and cheaply.
● Consumers will have more options for paying for goods and services online.
● The partnership could help to increase the adoption of Solana.
The Solana and Shopify partnership is a significant development for the crypto industry. It makes it easier for merchants to accept Solana payments and for consumers to use Solana to pay for goods and services. This could help to increase the adoption of Solana and make it more accessible to the general public.
7. Solana Saga
Solana Saga is a flagship Android smartphone with unique functionality and features tightly integrated with the Solana blockchain making it easy and secure to transact in web3 and manage digital assets, such as tokens and NFTs.
It was developed by Solana Mobile, a subsidiary of Solana Labs, and was released on May 8th, 2023. The Saga is the first smartphone to be specifically designed for the web3 era, and it offers several features that make it ideal for users who want to interact with Solana dApps and manage their digital assets securely and easily.
Some of the key features of the Solana Saga include:
● A built-in Solana hardware wallet called Seed Vault provides a secure way to store private keys and manage digital assets.
● A decentralized application (DApp) store that allows users to discover and install Solana dApps directly on their phone.
● A mobile wallet that allows users to send and receive SOL tokens and other Solana-based assets.
● Support for Solana Pay, which allows users to make payments at merchants that accept Solana.
The Solana Saga is also a powerful and capable Android smartphone, with a 6.67-inch OLED display, a Snapdragon 8+ Gen 1 processor, and 512GB of storage. The Solana Saga is still a relatively new device, but it has the potential to revolutionize the way that people interact with the web3. It is the first smartphone to be specifically designed for the web3 era, and it offers some features that make it ideal for users who want to interact with Solana dApps and manage their digital assets securely and easily.
● Seed Vault is a secure hardware wallet that is built into the Solana Saga. It uses several security features, such as a tamper-proof element and a secure enclave, to protect private keys.
● The Solana dApp store is a decentralized app store that allows users to discover and install Solana dApps directly on their phones. It uses a peer-to-peer network to distribute dApps, and it does not require any third-party intermediaries.
● The Solana mobile wallet is a mobile wallet that allows users to send and receive SOL tokens and other Solana-based assets. It is integrated with Seed Vault, so users can manage their assets securely and easily.
● Solana Pay is a payment protocol that allows users to make payments at merchants that accept Solana. It is integrated with the Solana mobile wallet, so users can make payments quickly and easily.
The Solana Saga is a powerful and innovative smartphone that has the potential to revolutionize the way that people interact with the web3. It is the first smartphone to be specifically designed for the web3 era, and it offers many features that make it ideal for users who want to interact with Solana dApps and manage their digital assets securely and easily.
Solana gets another “Yeah”.
Onchain comparison
It has been an entire year since I embarked on the task of crafting this article. This extended period has witnessed significant transformations, including a notable surge in Solana’s value earlier this year and an even more pronounced upward trend in recent weeks. Though I hold no personal stake in Solana, my perception of the project has evolved.
In all honesty, when I initiated this writing process over a year ago, I approached it from the perspective that Solana was on its last legs. However, as I delved deeper into my research and engaged in the recent Breakpoint conference, coupled with the remarkable rally of the Sol token, I’m beginning to reconsider my stance. Perhaps there is more to this project than meets the eye, and Solana is far from succumbing to its demise.
Before diving into the specific details, it’s crucial to establish a clear understanding of the fundamental distinctions between monolithic and modular blockchains. Monolithic blockchains represent the oldest and most prevalent form of blockchain architecture. In this model, all core blockchain functions, encompassing consensus, data availability, and execution, reside on the same layer. While monolithic blockchains offer the advantage of relative simplicity in design and implementation, they are also burdened by inherent limitations.
One of the primary drawbacks of monolithic blockchains is their inherent scalability constraints. This limitation stems from the requirement for all network nodes to process all transactions and smart contracts. Furthermore, monolithic blockchains lack the flexibility of their modular counterparts, making it challenging to implement changes to core functions without disrupting the entire network. Additionally, monolithic blockchains are more susceptible to security vulnerabilities, as a flaw in one core function can potentially jeopardize the entire network.
Enter modular blockchains, a novel architectural approach designed to address the scalability and flexibility shortcomings of their monolithic predecessors. In this paradigm, the core blockchain functions are meticulously divided into distinct layers or modules. This compartmentalization permits the optimization of each layer for its specific purpose, fostering enhanced performance and scalability. Modular blockchains also excel in their superior flexibility. Changes to individual layers can be implemented without disrupting the entire network, a stark contrast to the monolithic model. Moreover, modular blockchains offer a more robust security posture, as a vulnerability in one layer is less likely to compromise the entire network.
Ethereum, the pioneer of smart contract blockchains, has embarked on a journey towards becoming a modular blockchain. This shift is driven by the realization that a monolithic blockchain like the one Ethereum initially ran on, faces scalability limitations. By adopting a modular approach, Ethereum aims to distribute its functionality across various layers, each optimized for a specific purpose. This modularity is evident in Ethereum’s rollup-centric roadmap. Rollups are a type of Layer 2 (L2) scaling solution that bundles transactions together and processes them off the main chain, reducing congestion and transaction fees. By leveraging rollups, Ethereum can achieve greater scalability without compromising on security or decentralization.
In contrast to Ethereum’s modular approach, Solana remains committed to a monolithic blockchain architecture. This means that all transactions and data are processed on the main chain, offering high throughput and low transaction fees. However, this approach also raises concerns about scalability, as the main chain could become overwhelmed as network usage increases. Proponents of Solana argue that its monolithic architecture is necessary to achieve the performance and scalability needed for widespread adoption. They believe that technological advancements, such as parallel processing and data sharding, will enable Solana to overcome its scalability limitations.
Comparing Ethereum and Solana in 2021 would have been an unfair comparison, as Ethereum was still in its early stages of development. Instead, a more appropriate comparison is between Ethereum and Arbitrum, Ethereum’s largest and most mature L2 solution. Arbitrum, an optimistic rollup, leverages Ethereum’s security while offering significant scalability improvements. It has attracted a growing number of developers and users, becoming a major force within the Ethereum ecosystem.
TVL and Volume
I trust that most of my readers are crypto natives and already know what most of these metrics mean. Regardless, I will give a brief overview of each.
Total Value Locked (TVL) is a metric used to measure the total value of digital assets that are locked or staked in a particular decentralized finance (DeFi) platform or decentralized application (dApp). This includes assets that are being used for lending, borrowing, trading, and other financial activities. TVL is an important metric because it can be used to gauge the popularity and adoption of a DeFi platform. It can also be used to assess the overall health of the DeFi ecosystem as a whole.
For example, if a DeFi platform has a high TVL, it means that users are confident in the platform and are willing to lock up their assets there. This can be seen as a positive sign for the platform and its potential for future growth. On the other hand, if a DeFi platform has a low TVL, it could be a sign that users are not confident in the platform or that there are better alternatives available. This could be a negative sign for the platform and its potential for future growth.
TVL is calculated by adding up the value of all of the digital assets that are locked or staked in a DeFi platform or dApp. This value is typically expressed in US dollars, but it can also be expressed in other fiat currencies or cryptocurrencies.
It is important to note that TVL is not a perfect measure of the health or success of a DeFi platform. For example, a platform could have a high TVL but still be vulnerable to security attacks or other problems. However, TVL is still a useful metric for investors and users to consider when evaluating DeFi platforms. By considering several different metrics, investors and users can get a more comprehensive understanding of the health and potential of a DeFi platform.
While Solana boasts a higher market capitalization of approximately $24 billion, its total value locked (TVL) stands at a mere $550 million, resulting in a utilization rate of 2.3%. This meagre utilization rate pales in comparison to Arbitrum’s 150% utilization rate, achieved with a market capitalization of $1.4 billion and a TVL of $2.1 billion. Even the venerable Ethereum, with its massive market capitalization, exhibits a utilization rate of 10%, significantly surpassing Solana’s lacklustre performance.
In terms of daily volume, Arbitrum reigns supreme, generating an impressive $900 million, while Solana struggles to reach $300 million. This substantial difference in volume further underscores Arbitrum’s dominance, with 4 times Solana’s TVL and 3 times its daily volume.
The evidence is clear: Arbitrum emerges as the clear victor in this comparison. Its superior utilization rate, higher TVL, and impressive daily volume paint a picture of a vibrant and thriving ecosystem, poised for continued growth and success in the ever-evolving landscape of decentralized finance.
Users and transaction
In the dynamic and ever-evolving world of blockchain technology, a paradoxical situation has emerged: the existence of advanced and scalable platforms that, despite their technical prowess, lack widespread adoption. This conundrum is exemplified by Solana, a blockchain known for its exceptional transaction processing speed (TPS) of over 4,000. Despite its technical superiority, Solana’s usage slightly exceeds that of Arbitrum, a Layer 2 scaling solution for Ethereum.
To gain a deeper understanding of this paradox, it is crucial to examine the concept of user activity in the Web3 landscape. Unlike traditional Web2 platforms, where daily, weekly, or monthly active user metrics provide valuable insights into user engagement, these metrics are somewhat misleading in the context of blockchain technology. In the Web2 realm, social media applications are used on an almost daily basis, justifying the relevance of such metrics. However, in the Web3 space, trading and other on-chain activities do not occur with the same frequency. Therefore, a more holistic approach is necessary to assess user adoption, focusing on the overall number of active users rather than variations in usage patterns.
Applying this holistic approach to Solana and Arbitrum reveals an intriguing disparity. Despite its superior transaction processing capabilities, Solana’s user base slightly exceeds Arbitrum’s. Solana boasts 37 million transactions and 133,000 returning users, compared to Arbitrum’s 1,000,000 transactions and 135,000 returning users. This counterintuitive finding underscores the complexities of user adoption in the blockchain realm, where technical prowess alone may not guarantee widespread usage. Further exploration of this phenomenon requires a thorough examination of the factors influencing user adoption in the Web3 space. User experience, ecosystem diversity, and the overall maturity of the platform all play a significant role in attracting and retaining users. A comprehensive analysis of these factors should provide valuable insights into the underlying reasons behind Solana’s relatively low user adoption despite its technological advantages.
The case of Solana and Arbitrum highlights the intricate relationship between technical innovation and user adoption in the blockchain domain. While technological advancements serve as a foundation for success, they may not guarantee widespread usage. A deeper understanding of the factors influencing user behaviour and decision-making processes is essential for optimizing platform development and fostering user engagement, ultimately leading to the broader adoption of these innovative technologies. Solana is the winner here.
Fees and Revenue
Let’s delve into the world of blockchains and their battle for blockspace dominance. Blockchains, such as Solana and Arbitrum, operate by selling blockspace, the real estate on the blockchain where transactions are recorded. Solana directly sells its blockspace, while Arbitrum acts as a reseller of Ethereum’s blockspace, purchasing it at a lower price and reselling it at a higher markup. The difference between the buying and selling price represents Arbitrum’s profit margin.
Fees represent the price at which blockspace is sold, reflecting its perceived value. A blockspace in high demand will generate higher fees. Revenue, on the other hand, represents the portion of fees retained by the blockchain after covering transaction processing costs. In Arbitrum’s case, revenue is calculated as fees paid minus the cost of posting call data on Ethereum.
Solana has generated approximately $109k in fees and $54k in revenue, resulting in a profit margin of around 50%. This is a remarkable achievement for any blockchain. Arbitrum, while generating more fees than Solana ($262k), has been less successful in capturing that value as revenue, generating only $55k. This suggests that Arbitrum’s blockspace may be in higher demand than Solana’s. The upcoming EIP 4844 upgrade for Ethereum is expected to reduce transaction processing costs for L2s like Arbitrum. This could lead to a scenario where Arbitrum captures more of the fees it generates, potentially surpassing Solana in revenue generation.
Based on this analysis, Arbitrum emerges as the winner in the battle for blockspace dominance. Its ability to leverage Ethereum’s infrastructure and the potential benefits of EIP 4844 position it well for future growth. The blockchain landscape is constantly evolving, and new players are continuously emerging. While Solana has made significant strides, Arbitrum’s strategic positioning and potential for enhanced revenue generation make it a formidable competitor. The future of blockspace dominance will undoubtedly be a captivating battle to watch.
Core developers, commits and stablecoins
The ebb and flow of stablecoin market capitalization (MC) serves as a crucial indicator of capital inflow and outflow within a particular blockchain ecosystem. In the case of Solana, the declining stablecoin MC, currently at $1.5 billion, suggests a potential outflow of capital. This trend contrasts sharply with Arbitrum, where stablecoin MC is on a steady upward trajectory, reaching $1.8 billion.
Delving into the developer activity of these two ecosystems further highlights the contrasting trends. Solana boasts 16 core developers and 225 commits, while Arbitrum maintains a larger pool of 22 core developers and 252 commits. This enhanced developer activity in Arbitrum aligns with the growth in stablecoin MC, suggesting a vibrant ecosystem attracting capital and talent.
The comparison between Solana and Arbitrum underscores the importance of stablecoins as a barometer of ecosystem health. While Solana faces challenges in maintaining stablecoin liquidity, Arbitrum emerges as a frontrunner with its consistent growth in both stablecoin MC and developer activity.
In the realm of decentralized finance (DeFi), Arbitrum has emerged as a formidable competitor to Solana, consistently outperforming its rival in three out of four key performance indicators (KPIs). This impressive showing casts doubt on Solana’s ability to maintain its position as a leading blockchain platform. Hence, Solana gets a “Nay” in this section.
Conclusion
The evaluation of Solana’s potential hinges on a delicate balance between technological advancements, ecosystem growth, and on-chain metrics. While Solana excels in the first two categories, its on-chain performance falters, prompting a crucial question: which aspect should hold the most weight in our assessment?
Technological development and ecosystem analysis possess a non-fungible nature, implying that the impact of a blockchain upgrade or partnership is specific to the blockchain itself. These advancements cannot be directly transferred or extrapolated from one chain to another due to underlying architectural differences. For instance, Firedancer, a new client being developed for Solana by Jump Crypto, generates immense excitement and anticipation, on par with Ethereum’s EIP1559 upgrade. However, their technical underpinnings differ significantly. While Firedancer holds immense significance for Solana’s future, its impact on Ethereum would be negligible, as Ethereum already boasts a robust network of five major CL clients.
This non-fungible characteristic of technological advancements complicates direct comparisons between blockchains. An upgrade that revolutionizes one blockchain may have minimal impact on another, highlighting the challenge of assessing technology development across different platforms.
In the ever-evolving world of blockchain technology, every chain strives to establish its relevance and impact. The assertion that a chain’s upcoming technical upgrades can revitalize it from the brink of demise is an intriguing one. While technological advancements can undoubtedly breathe new life into a struggling chain, it is crucial to recognize the limitations of evaluating a chain solely based on its technical prowess.
Attributing a mere 5 out of 10 points to technological development as a metric for assessing a chain’s significance reflects its inherent subjectivity and limited applicability beyond its ecosystem. Consider Arbitrum, a prominent scaling solution for Ethereum. While its upgrades, such as EIP 4844, Stylus, and Orbit, are undoubtedly impressive, their relevance outside the Arbitrum ecosystem is diminished. Drawing comparisons between EIP 4844 and Stake-Weighted QoS, two distinct technological advancements, is an exercise in futility. Each innovation serves a unique purpose within its respective ecosystem, rendering direct comparisons meaningless. Attempts to compare such advancements inevitably lead to heavily opinionated and biased analyses.
In essence, while technological development plays a vital role in a chain’s success, its significance extends beyond a mere numerical score. A holistic evaluation must consider factors such as user adoption, developer engagement, and overall ecosystem growth. Only by examining these multifaceted dimensions can we truly assess the vitality of a blockchain network.
When it comes to ecosystem analysis, evaluating ecosystem strength through partnerships alone is a rather superficial approach. While partnerships do hold some significance, they’re often not indicative of a project’s overall ecosystem health.
Take, for instance, the partnership between Solana and Circle’s USDC. While this alliance might seem significant, it’s important to recognize that Circle, as a major stablecoin issuer, can and often does partner with multiple blockchain ecosystems. It’s not uncommon for Circle to have partnerships with direct competitors of the projects they’ve already partnered with. Consider the partnerships between (insert your favourite chain) and Google Cloud or Microsoft Azure and other popular blockchains. Every major blockchain project likely has some form of partnership with either Google or Microsoft. This abundance of partnerships dilutes the impact of any single partnership, essentially cancelling out their significance.
While partnerships can be valuable components of an ecosystem’s growth strategy, they should not be overemphasized when assessing a project’s overall health. A more holistic approach that considers a broader range of metrics will provide a more accurate and insightful evaluation of an ecosystem’s true potential. Hence, will give ecosystem analysis a 3/10.
In the realm of blockchain analysis, onchain metrics provide a crucial lens through which to assess the health and vitality of a given ecosystem. These metrics, derived from data directly observable on the blockchain, offer insights into network usage, transaction volume, and overall developer activity. In the case of Solana, an onchain comparison is particularly illuminating, as it reveals a project that, while currently facing challenges, holds significant potential for future growth. When examining onchain metrics, a score of 8 out of 10 emerges. This assessment is reinforced by the fungible and chain-agnostic nature of onchain data, further bolstering its reliability. One could argue that solely focusing on the onchain comparison section would suffice in determining Solana’s current status — it’s not dead yet.
A cursory glance at Solana’s onchain charts paints a compelling picture. The data speaks for itself, highlighting a network that, while not without its challenges, is far from defunct. Onchain metrics, as history has demonstrated, can experience significant rejuvenation during bull markets, breathing new life into struggling ecosystems. While Solana’s current onchain metrics indicate a state of relative health, the possibility of future decline cannot be ignored. The project’s resilience hinges on the ability of onchain metrics to regain momentum. At this juncture, Solana appears to be overhyped, a phenomenon that, while not mutually exclusive with project viability, raises concerns about potential unsustainable growth. Despite the overhype surrounding Solana, it’s crucial to acknowledge the role that hype can play in a project’s trajectory. In some instances, the hype that initially propelled Solana into the spotlight could prove to be the catalyst for its resurgence. Hype, while often dismissed as ephemeral, can generate the momentum necessary to attract new users and developers, fostering renewed growth and revitalizing onchain metrics.
Solana’s current state is one of delicate equilibrium. While the project’s onchain metrics paint a picture of relative health, the spectre of future decline looms large. The path forward for Solana is contingent upon its ability to harness the power of hype to translate into tangible growth and sustainable development. If Solana can successfully navigate this challenge, it has the potential to emerge as a dominant force in the blockchain landscape. However, failure to do so could lead to a gradual decline, ultimately resulting in the project’s demise. The future of Solana remains uncertain, but its potential for success cannot be denied. Only time will reveal whether Solana can overcome its current hurdles and fulfil its promise of revolutionizing the blockchain space.
Does that mean I’m bullish Sol? Will I long Sol now? Over the years, I’ve learned to approach every project with an open mind and a critical eye. While I’ve been following Solana’s development with great interest, I’m not yet ready to make a definitive call on its long-term prospects. I’m not bullish on Sol at the moment, but I’m also not bearish. I’m simply indifferent. This doesn’t mean I’m dismissing Sol’s potential; it simply means that I’m not convinced that it’s the right investment for me at this time. Given my current stance, I wouldn’t be buying Sol right now. Even if Sol were to surge back to its all-time high of $260, I would be content to miss out on that potential 450% upside.
I’m not afraid to admit that I’ve experienced FOMO (fear of missing out) in the past. However, I’ve learned that making investment decisions based on emotion often leads to poor outcomes. I’m committed to making sound investment decisions based on thorough research and analysis. If I were feeling particularly adventurous, I could always choose to invest in one of the many other promising projects in the crypto space. There’s no shortage of “shitcoins” with the potential to make significant gains. Only time will tell whether my current stance on Sol is the right one. I will revisit my assessment in a year or so to see how well my thesis has played out.
The crypto market is constantly evolving, and it’s important to be adaptable in one’s investment approach. While I may not be bullish on Sol right now, I’m not ruling out the possibility that it could become a valuable investment in the future. I’ll continue to monitor its development with interest and will be ready to adjust my position accordingly.
