About This Solana Overview
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
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.
Solana operates as a single global state machine and is open, interoperable and decentralized.
Source: Solana.com/docs
What makes Solana different to other Cryptocurrencies?
Solana is whats know as a layer-1 Blockchain, which means it can operate a Base layer for validating and securing transactions. Layer-1 can operate independantly without the support of any other blockchain
There are several Layer -1 Cryptocurrencies and they all have different designs and technology stacks.
The most widely known Cryptocurrency, Bitcoin is mainly used as a type of “digital gold” its mainly used as a digital store of value, Other layer-1 cryptocurrencies. Ethereum, the second largest crypto has to ability to process smart contracts and run decentralised apps.
Solana also has the ability to execute smart contracts and run decentralised apps. This means its more comparable to Ethereum than Bitocin, however there are some key differences, here are some of the main ones.
- Speed – 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.
- POH – Solana is built on a protocol called “proof of history” (PoH). This is different from Ethereum (proof of stake) and Bitcoin (proof of work)
- Design – PoH is a technique for keeping time between computers that do not trust one another—resulting in a fast network limited only by bandwidth.
- Cost – Solana’s cost per transaction are often below $0.01 which makes it ones of the cheapest blockchains available
These advantages makes Solana one of the fastest growing (user base) layer-1 blockchains, especially compared to Ethereum, its main competitor. However, 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
Solana History
The Solana whitepaper was published in 2017, and the project launched in June 2018
Solana raised over $359m, of this $25.5m was from a public sale, the other $334m came from several funding rounds from 2018 to 2021. Some of the leading investors in Solana were Andreessen Horowitz (a16z), Polychain Cpaital and Multicoin Capital.
The Solana whitepaper was written by Anatoly Yakovenko, who co-founded Solana with Raj Gokal. Anatoly, is the more prominent member of the project. He prevously worked at Dropbox and Qualcomm. Today, Anatoly is one of the most prominent members of the crypto community, his X account has over 411k followers. Based on our best research, we believe owns approximately 3.5m SOL.
Note: You will often see that people refer to two distinct companies when talking about Solana – Solana Labs and Solana Foundation. Solana Labs is the company that built Solana Labs build the Solana blockchain and is based in America. its a for-profit entity. Solana Foundation is based in Zug Switzerland its a non-profit entity that is focused on the ongoing development of Solana Labs, mainly though providing grants and research.
Solana Today
Solana Labs has 233 employees and Solana Foundation has 271 according to LinkedIn Data. Employees fro Solana Labs have a background in various Technology and Crypto organisations.
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.”
- Solana has attracted a strong following of users with its high transaction throughput and very low fees. while it has not “killed” Ethereum, it has found its place in the crypto ecosystem and has been one. ofthe best performing chains fo 2024.
- There are actually now other blockchains that have emerged known as “Solana Killers” who are more directly trying. to compete with Solana, the best known ones are SUI and Aptos.
“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
Solana’s design means its capable of handling a lot more transactions compared to Ethereum and the other level 2 blockchains that have been created to improve performance on Ethereum.
Solana has a significantly higher transaction throughput than Ethereum and the other L2 blockchains combines. This is both because of how Solana is designed but also because of the amount of interest it has generated in the last year.
The image below of Acg TPS shows Solana is capable of reaching 3000+ TPS while the other major blockchains dont reach 100.
Solana also benefits from having an very low transaction fee. This has actually be increasing recently due to the amount of activity on the Solana blockchain.
Ethereum has been actively working to lower their transaction costs, the recent Dencun upgrade on the Ethereum blockchain reduced the transaction fee significantly. Thanks to this upgrade, several L2 transaction fees are now in line with Solana.
This is also reduced the transaction fee on the main Ethereum network which has lowered the Ethereum transaction fees, albiet still much higher than Solana and the other L2s
Despite Ethereum becoming more competitive on transaction fees. Activity on Solana continues to increase.
Solana Unique Addresses has reached all time high in 2024, making Solana the most widely used blockchain
Solana is now getting almost double the usage of the other mainstream blockchains.
This growth of users has been driven by several factors, one of the main ones is speculators buying various meme coins that have recently launched on Solana.
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 more 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 and games
- 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 Transaction Fees
With the increase in usage of Solana. there has also been an increase in the fees generated by users making transactions on the blockchain.
October 2024 was one of the best months ever for Solana as it reached over 63m USD in Transaction fees
On October 28 2024, Solana generated more in transaction fees than Ethereum. However, it still lags behind Ethereum in total fees generated
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.
Solana is actively looking to help games developers build on the blockchain. The Solana Games kit is a collection of tools and services developed in the Solana ecosystem designed to help game developers build web3 games on Solana.
Several of these games also have their own governance coins that can be used for governance, in game purchases or other use cases. These are all tradable on the Solana blockchain.
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.
Solana Total Value Locked $USD
Source: DefiLlama
Share of TVL Across Major Chains
Source: DefiLlama
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.
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 and growing fast. 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.
The most popular hot wallet but far is phantom, they have almost 600k followers on X and are very active on the crypto community.
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.
Solana Liquid Staking Protocols TVL
Source: DefiLlama
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.
- As of late 2024, Solana has seen its popularity soar with interested in meme coins, NFT and even payments. The concensus is that users find Solana cheap and much easier to use than other crypto currencies which has seen several people onboard to crypto through Solana.
| # | Name | Price | Changes 24h | Market CAP | Volume | Supply |
|---|
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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