Explore the Solana Ecosystem
An Ethereum alternative with a rough start but potential for a bright future.
Last week we did a deep review of the Arbitrum L2 ecosystem while briefly covering some of the other Ethereum scaling solutions available - but what about potential Ethereum competitors? This week’s edition of ‘The Cortex Connection’ reviews a notable Ethereum alternative, Solana.
What is Solana?
Solana is a blockchain platform that aims to provide high-speed transactions at a fraction of the cost as an easily scalable solution for various applications for DeFi, non-fungible tokens (NFTs), and gaming. Solana claims to be the fastest blockchain in the world, with the ability to process over 710K transactions per second (tps) and potentially up to 1M tps in the future. At present, Solana actively processes an average of 5K ~ 10K tps. In comparison, Ethereum can only handle about 25 ~ 55 tps and Bitcoin about 3 ~ 7 tps.
Solana was founded in 2017 by a team of former Qualcomm engineers led by Anatoly Yakovenko. Yakovenko had previously worked on wireless technologies and was inspired by the idea of applying some of the concepts from radio networks to blockchain networks. He realized that one of the main bottlenecks for blockchain scalability was the lack of a reliable and efficient way to synchronize the state of the network across all nodes. He came up with a novel solution called Proof of History (PoH), which is a cryptographic technique that allows nodes to agree on the order and timing of events without relying on a central authority or a common clock.
How Solana Works?
PoH works by creating a sequential record of events that is encoded into a hash — a unique fingerprint of a piece of data that is generated by a mathematical function. By hashing each event with the previous one, PoH creates a verifiable and immutable history of events that can be easily verified by any node. PoH also assigns a timestamp to each event based on the number of hashes generated since the genesis event. This way, a universal source of truth is created for the network that can be used to optimize and coordinate the execution of transactions and smart contracts.
PoH is not a consensus mechanism by itself, but rather a component that can be combined with other consensus mechanisms to enhance their performance and security. Solana uses PoH together with Proof of Stake (PoS), which is a consensus mechanism that allows nodes to stake their tokens as collateral to participate in the validation process and earn rewards. PoS provides an incentive for nodes to behave honestly and avoid malicious attacks on the network.
Solana's native token, SOL, is used to pay for transaction fees, staking rewards, and network governance.
Solana also uses other innovations such as:
Tower BFT
A variant of the Practical Byzantine Fault Tolerance (PBFT) algorithm that leverages PoH to reduce communication overhead and latency.
Turbine
A block propagation protocol that uses erasure coding and gossip protocols to distribute blocks efficiently.
Sealevel
A parallel smart contract runtime that enables the concurrent execution of thousands of contracts.
Pipelining
A transaction processing unit that assigns different stages of transaction validation to different hardware components.
Cloudbreak
A horizontally scalable database that stores the state of the network.
Archivers
Nodes that store historical data and provide proofs for auditability.
Firedancer
A fully independent secondary consensus node developed for Solana by Jump Crypto.
Technical Challenges and Downtime
Despite its impressive performance and potential, Solana has also faced some major challenges and downtime in recent years. Most notable are:
September 2021 - the network went offline for 17 hours due to a surge of over 400,000 transactions per second that overwhelmed the validators and caused them to crash.
April 2022 - the Mainnet Beta cluster had frozen, preventing the network from creating new blocks and reaching consensus. It was discovered that a flood of 6 million tps was flooding the network causing a 7 hour outage.
September 2022 - a misconfigured node caused a 6 hour outage, freezing the protocol’s entire operation.
February 2023 - Several services on the network running custom block-forwarding software inadvertently transmitted several orders of magnitude larger than a normal block, causing a full day of downtime.
Overall, Solana has suffered at least 12 major and 3 minor outages since inception.
These incidents have raised some concerns about the reliability and scalability of Solana, especially as it faces increasing competition and demand from other blockchain platforms and applications.
Some critics have also previously questioned the level of centralization and governance of Solana, as most of the validators were run by a small number of entities that have close ties to the core team and investors for quite some time. A recent update from the Solana Foundation however identified that Solana now has a Nakamoto Coefficient of 31 - which reports the amount of nodes that would have to collude to censor the network; the larger the number, the more decentralized the blockchain is. To contrast, Ethereum has a coefficient of 2; Avalanche at 25, and Polygon scores at a 4.
Who is Building on Solana?
Despite the plaguing stability issues, Solana still has a very active development community with many developers choosing to build exclusively on the Solana network. Solana’s low fees and fast transaction speeds make it attractive for decentralized perpetual trading as well as perhaps its strongest narrative being NFTs.
Some of the biggest projects building on Solana are:
Solend
With over $43M in TVL, Solend is an algorithmic, decentralized protocol for lending and borrowing on Solana.
Orca
The automated market maker (AMM) of choice and the first DEX available in the Solana ecosystem. With $40M TVL, Orca has also generated over $1.5m from protocol fees donated to the Orca Climate Fund.
Raydium
Over $38m TV and a total trading volume to date of over $53B, Raydium offers a swap interface similar to popular dApp Uniswap as well as farming and staking pools for yield generation.
Solana Floor
The central hub for all things Solana NFT’s, Solana Floor lists the top and most popular NFT collections as well as tracking price history and trending projects.
Game Developers
Solana’s transaction fees and thoroughput make it an attractive blockchain for web3 game developers. Additionally, Solana Ventures was a $100m fund created, in part, for game developers to create in the Solana ecosystem. You can view all Solana native games on ChainPlay with the most notable being STEPN, Star Atlas, and Aurory.
How to Get Started with Solana?
If you are interested in using or developing on Solana, you can follow the links below for more information:
Developers can see the Quick Start guide via the Solana Docs. Also, Questbook has some additional resources for Solana developers.
End-Users interested in exploring the Solana ecosystem can explore the help guides available on the Solflare website. Solflare was created by the Solana team and supports native staking, DeFi interaction, and NFT portfolios.
Additional Solana Resources
Here are some official resources to dig in and learn more about Solana as well as follow updates on future progress:
That’s all for now! We hope you enjoyed this deep dive and look forward to continued coverage of other protocols and projects in the future. As always, if you have any suggestions for future editions of ‘The Cortex Connection’, please visit our Discord channel to let us know!