Solana (SOL) Blockchain Review: A Detailed Overview of the Solana Blockchain

About This Study

This Solana blockchain review is a study is a detailed analysis of Solana, a layer-1 cryptocurrency.
This study does not endorse or criticize the project but summarises the key points impacting Solana’s long-term success.
All the information is from the listed sources and true at the time of writing; however, these may be subject to change.
The reader is encouraged to do their own research (DYOR) on Solana before making any investment decision.
The author of this document does have Solana in their portfolio. However, this study is written from an unbiased perspective.
This study is for informational purposes and should not be considered financial advice.

Who is this study for

People who have beginner to intermediate knowledge of blockchain technology.
Individuals interested in Solana are looking to research the project in detail.
Anyone interested in understanding the Solana project

Solana Blockchain Review

Part 1: The Solana Project

What is Solana

Solana is a blockchain built for mass adoption. It’s a high-performance network that is utilized for a range of use cases, including finance, NFTs, payments, and gaming. –

Source: Solana.com/docs

What makes Solana different?

Solana is built on a protocol called “proof of history” (PoH). This is different from Ethereum (proof of stake) and Bitcoin (proof of work)

PoH is a technique for keeping time between computers that do not trust one another—resulting in a fast network limited only by bandwidth.
This technology makes Solana one of the fastest layer-1 blockchains, especially compared to Ethereum, its main competitor.
Solana’s advantage is its speed, with tests showing it is capable of 3.9k transactions per second (TPS) compared to Ethereum with 15 TPS.
Critics of Solana will argue that the Ethereum protocol is more decentralized and secure than Solana.

Source: https://solana.com/docs/intro/history https://www.datawallet.com/crypto/solana-vs-ethereum

Who is building Solana

Anatoly Yakovenko

Co-founder of Solana with Greg Fitzgerald & Stephen Akridge

Previous work experience includes Dropbox and Qualcomm.

Anatoly has been leading Solana since its inception in 2018

A leader in the crypto community with 306k+ followers on X.

We believe he owns 3.5M SOL (worth over $300m)*

Solana Today

Solana has 239 employees (+25% from 2 years ago)

Employees have a background in large Tech or competing crypto organisations.

When did Solana Launch?

The Solana whitepaper was published in 2017, and the project launched in June 2018

https://cryptorank.io/ico/solana?page=1 https://solana.com/docs/intro/history

What is Solana trying to achieve?

Solana wants to become the blockchain for mass adoption by offering high transaction throughput at a low cost.
Its closest competitor, Ethereum, while secure, is criticized for high gas fees and low transactions per second. For this reason, Solana is branded in the media as an “Ethereum killer.”

“The goal is to ensure that not only can it be accessible to everyone, but that it can also be scalable enough to support real-world demand. For Solana, that means providing the fastest, low-fee, censorship-resistant blockchain to enable high-growth applications to democratize the world’s financial system.” – https://solana.com/news/why-solana-

The Solana Network

Average performance data from January 2024 highlights the performance advantages of Solana over Ethereum and Arbitrum, one of the largest Layer-2 blockchains

Performance KPIs vs other major blockchains

Summary: The Solana Project

Solana wants to become the blockchain for mass adoption by offering high transaction throughput at a low cost.
Its closest competitor, Ethereum, while secure, is criticized for high gas fees and low transactions per second.
Solanas’s high speed low cost can unlock new crypto use cases, such as payments.
Solana has also gained traction in NFTs and gaming, use cases that need speed and low cost. Meanwhile, Ethereum continues to lead in DeFi, where security is more of a priority.
Unlike other projects prioritizing decentralization, Solana has focused more on speed and cost, even at the expense of decentralization.

Part 2: Usage of Solana

Solana Transactions History

Non-vote Transaction history from 2022 shows consistent (mildly increasing) usage over time with a spike in Jan 2024 in line, with the price of SOL increasing with other cryptocurrencies

Note: Voting transactions are submitted by validators for network consensus. Non-voting transactions are the transfer of SOL between different Solana accounts or smart contracts

Solana Active Addresses

As with Transactions, Active addresses have also increased. This increase in addresses has coincided with a resurgence in the price of SOL. The current number of Solana active wallets is even exceeding that of the 2021 bull run.

Solana Revenue

Since Jan 2024, Solana has been averaging $1.5m weekly in protocol revenue. The increased on-chain activity and resurgent crypto market have driven this. This shows Solana’s potential to generate revenue despite its low fees.

Solana Revenue – Source Token Terminal

Solana Use Cases

As a mainstream, established layer-1 blockchain, Solana has several use cases. These are the most prominent ones listed here, but this is not an exhaustive list.

Gaming on Solana

Solana claims its low transaction costs (a fraction of a cent) and high throughput make it the perfect platform for gaming developers. They also offer funding for gaming developers with Solana Ventures.

NFTs on Solana

Solana has significant cost advantages and has recently overtaken Ethereum in number of NFT traders. Ethereum remains dominant in value, but Solana is showing signs of challenging their dominance.

Note: in Feb 2024 the cost of buying an NFT on Solana was $0.0062 Compared to $55.39 on Ehtereum.

DeFi on Solana

DeFi on Solana dropped in the bear market of 2022/23 but is showing signs of recovery. However, it remains the 5th largest chain for DeFi behind Ethereum and several Layer 2s. Solana is underperforming in DeFi relative to its market cap compared to other cryptos.

Payments on Solana

Solana Labs launched Solana Pay in 2022 as a payment service similar to Visa or PayPal.

Solana Pay is an open, free-to-use payment network; it offers instant transactions and near-zero gas fees.
Users can settle transactions in USDC (a Solana stablecoin)
Solana Pay is integrated with Shopify, making it available to millions of businesses. Shopify accounts for 10% of total U.S. e-commerce.
This product enables Solana to compete with payment companies such as Visa or Mastercard.

Source:https://techcrunch.com/ ,finance.yahoo.com/news/solana-almost-2-700-past-113000123.html , https://solanapay.com/

Developer Activity

In 2023, Solana had 2.5k-3k monthly active developers building on Solana. Developer retention also increased from 30% to 50%. This means more developers are building on Solana, and higher retention means each developer is making more contributions.

Solana vs Other Protocols

Based on the DeFi performance numbers, users are going to Ethereum Layer-2s rather than Solana to avoid ETH’s high transaction costs. This is another sign that Solana is underperforming in the DeFi sector relative to its potential and other Cryptocurrencies.

Summary: Usage of Solana

Solana is often dubbed an “Ethereum Killer” due to its lower costs and faster transaction fees. However, it still lags behind Ethereum in several usage metrics.
Solana has a niche; it has established strong positions in Gaming and NFTs, and its payment partnerships could see it enter a new trillion-dollar market.
Regarding DeFi, it lags behind Ethereum and other Layer 2s and may never become a leader in this space.
Solana’s developer activity is trending positively and shows people are still building on the platform.
Solana’s technology makes it an attractive platform for developers, and it should continue to be a leading crypto, although likely behind Ethereum.

Part 3: Buying and Holding Solana

Buying Solana.

Solana is currently the fifth-largest crypto by market capitalization. It is almost universally available on all major centralized cryptocurrency exchanges.

Storing Solana

As Solana is a major blockchain, several cold storage wallets support Solana and other blockchains. For example, Trezor supported Bitcoin and Ethereum and recently announced it now supports Solana.

Staking Solana

As of February, over 19m SOL tokens were staked (almost USD 2b). Marinade has long been the leading protocol. However, Jito has seen TVL grow past $400 following the launch of its Jito token in November 2023.

Tokenomics

SOL had an initial supply of 500m launched at $0.20 in 2020. It has an unlimited supply and is expected to reach 700m tokens by 2030.

Solana’s proposed inflation schedule with an initial inflation rate of 8% and will decrease by 15% every year until it achieves a long-term inflation rate of 1.5% (expected 2030).
All inflationary tokens will be distributed to stake accounts and validators.
Solana’s current inflation rate as of Feb 2024 is around 5%
There are currently 441m tradable SOL tokens in circulation with a market cap of $45b. The fully diluted market cap is $58.2b

Security

The Solana network is validated by thousands of nodes that operate independently to ensure data remains secure and censorship-resistant.

Validator nodes process transactions and participate in consensus to improve the network’s security. At the time of writing, there are 1,624 validator nodes online.
Validators are incentivized to participate by getting a share of transaction fees and other protocol-based rewards.
Solana also has a bug bounty program that rewards people who can identify network vulnerabilities.
Depending on the severity of the vulnerability. Submitters can earn anything from 25k SOL to 20 SOL.

Source: https://solana.com/validators#is-there-a-bug-bounty-program,

https://github.com/solana-labs/solana/blob/master/SECURITY.md#bounty

Network Outages

Solana has been somewhat infamous for outages. However, this has improved recently, and before the outage on 6th Feb 2024, Solana was on its longest streak without recording an outage.

Planned Upgrades

Unlike other cryptocurrencies, Solana does not have a “roadmap” section on their website. Their last update was in December 2022, which highlights two major upgrades.

Part 4: Solana Price History

Solana Price History

Solana launched to the public at $0.95 and peaked at $250 at the end of 2021 (most recent crypto bull run). Its current activity suggests it’s on the verge of another price rally. However, this also depends on the broader crypto market.

Market Capitalization

At Solana’s last ATH, its market cap was $72B. More SOL tokens are in circulation today, so its market cap would need to be $110b to achieve another ATH.
For this to happen, there would need to be a strong bull market, or Solana would need to develop new use cases and/or take activity away from Ethereum and its Layer 2s to achieve this.

Part 5: Interest in Solana

Online Community Following

Comparing followers of Solana with other projects of similar market caps

Solana Blockchain Review: SWOT Analysis

Solana Blockchain Review: Summary

Despite being labeled as an “Ethereum Killer,” nobody expects Solana to challenge Ethereum’s dominance in the market.
This is particularly obvious in DeFi, where Solanas TVL is significantly behind ETH and several layer 2s. There are few signs to suggest this will change.
This is not to say that Solana can not become a major cryptocurrency in its own right; its speed and low cost make it a better choice for several use cases.
Solana has the potential to be a leader in payments, NFTs, and even games, use cases where speed and low fees are fundamental.
With Solana’s current adoption and market capitalization levels, Solana is expected to remain a significant blockchain alongside Bitcoin and Ethereum for the foreseeable future.

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