New Anchor of Solana — DePin

TL; DR

Over the past year, we have observed the remarkable growth of both Solana and DePin. Rather than being an abrupt surge of geek technology, it is more of a gradual evolution and discovery of new application scenarios. Moreover, we have witnessed the synergistic power that arises from the combination of the Solana blockchain and DePin protocols.

In the first section, we provide an overview of Solana’s unique architecture, including the PoH clock, Tower BFT consensus algorithm, mempool-less transaction forwarding, turbine block propagation, and optimistic concurrency control. The article also highlights Solana’s evolving features such as the local fee market, Firedancer upgrades, and state compression for compressed NFTs.

In the context of DePin (Decentralized Physical Infrastructure), we explore its emergence, essence, and landscape. It discusses the pipeline of DePin, including hardware, hardware onboarding, network structure, token incentive, and the affiliate layer. Also, we emphasize the paradigm shift of DePin protocols leveraging existing blockchain ecosystems, with Solana being a preferred platform due to its high-speed blockchain and features. Several showcases of DePin protocols migrating to Solana, such as Helium, are also mentioned.

Past and Present of Solana

Recap of Unique Architecture

Solana became well-known for its exceptional performance among Layer 1 blockchains by making significant trade-offs and departing from many conventional blockchain designs. Moreover, Solana benefits from a distinctive advantage in the communication field thanks to the background of its co-founders. Consequently, Solana has successfully implemented multiple optimizations on its messaging layer.

PoH: The Starting Point

When discussing Solana, it is important to consider PoH, as the following features are all designed to coordinate with it.

Many people may think of PoH as a new consensus algorithm, but in reality, PoH is not a consensus mechanism. Instead, it acts as a clock that operates before consensus. The PoH clock allows the leader validator to bypass the need for a global consensus on the timestamp and sequence of transactions, thus enabling faster transaction execution.

Essentially, PoH is a specialized Verifiable Delay Function (VDF) that can handle high-frequency calculations. For those unfamiliar with VDF, it is a function that requires a specific number of sequential steps for evaluation, and the result can be efficiently verified. VDFs are commonly used to measure duration. In the case of PoH, its hash chain includes hashes of any data observed by the application, ensuring that the data existed before the subsequent hashes. An important aspect of VDFs is their ability to convert large inputs into fixed outputs.

In practice, the leader timestamps transactions, allowing validators to retrieve the public key of the designated leader. The leader then signs the timestamp, enabling validators to verify the signature and confirm that the signer is the owner of the designated leader’s public key. Users can then send transactions to the designated validator.

Each block includes cryptographic proof, which allows anyone to verify that a certain amount of time has elapsed since the last proof. All data hashed into the proof has undoubtedly occurred prior to the generation of the proof. There is no specific time requirement for when this block reaches each validator, as it may arrive in any order or even be replayed years later.

Tower BFT: Optimized Version of PBFT for PoH

Solana uses Tower BFT as its consensus algorithm, which is an optimized version of PBFT designed specifically for Proof of History. Similar to traditional PBFT, the active set of validators consists of all staked accounts with leader identities that have voted within a cluster-configured number of ticks. The leader schedule for each epoch is calculated based on the ledger state at the beginning of the previous epoch.

Tower BFT has a few notable differences compared to other PBFT algorithms. Thanks to the Proof of History clock, Tower BFT doesn’t require all validators to agree on a newly produced block before moving on to the next one. Instead, the next slot leader can directly build on top of the current slot leader. Another significant difference is that voting messages are treated as transactions in Solana. This design choice is what enables Solana to achieve nearly 90% of the TPS (transactions per second) observed on its network. The actual TPS is approximately 400, which is quite impressive when compared to other Layer 1 protocols.

Mempool-Less Transaction Forwarding

The unique design of Solana allows for efficient transaction processing through a pre-decided leader validator set and the separation of consensus and execution. Unlike other protocols, such as Ethereum, Solana does not rely on a mempool for transaction propagation. Instead, all transactions, whether initiated programmatically or by end-users, are promptly routed to leaders for inclusion in blocks.

With this mempool-less approach, the lifecycle of a transaction in Solana is significantly shorter compared to traditional blockchains. This eliminates gossip time and inherently improves the overall efficiency of the process.

Turbine Block Propagation

Solana introduces turbine block propagation to enhance efficiency in node communications. Unlike traditional gossip networks, transactions are divided into batches, enabling a node to send transactions to multiple parties without generating multiple copies.

Solana validators organize transactions into smaller batches known as “entries.” In a network with 15 validators, if the fanout size is set to 3, the leader node initially broadcasts to a special root node located at the top of the turbine tree. The root node then shares the data with 3 nodes in the first layer. Nodes in this layer further transmit the data to a subset of nodes in the next layer. This process continues, with each node in a layer retransmitting to a unique subset of nodes in the next layer, until all nodes in the cluster have received all the data shreds.

This approach reduces communication costs and enhances the efficiency of block propagation in the Solana network.

Optimistic Concurrency Control

Optimistic concurrency control is a feature that is often talked about when discussing new Layer 1 blockchains. However, when we praise Solana for its impressive performance, this feature is usually only mentioned briefly.

In Solana’s execution layer, validators process transactions optimistically, which means there is very little delay between receiving the last entry and being able to vote. This is why there are often multiple failed transactions in a single block.

Enhancements in Progress

In addition to the innovative design implemented during the launch of Solana, Solana has also introduced many new features to meet market demands, which has contributed to its current success.

Localized Fee Market

Priority fees can lead to a “gas war,” but Solana’s blockspace is structured in a way that prevents individual “hotspots” of activity (such as NFT minting) from dominating blockspace. This helps minimize the impact of a single hotspot on fees by reserving room for other activities.

In Solana, gas is referred to as Cus (Compute units). Each block has a Cus limit of 48 million, and each account has a Cus limit of 12 million. Hotspot activities initially affect transactions involving the hotspot account, but regular transactions like transfers, staking, validator votes, and oracle updates are not affected. Once an account reaches its soft CU limit, the sender must pay additional fees.

In a pure global fee market, multiple activities collectively fill up blockspace, with no single activity coming close to reaching its account CU limit. In this scenario, no specific hotspot stands out, but a global fee market is established where a minimum level of priority is required to compete and get block inclusion.

Firedancer Upgrades

Currently, there are four different types of clients in the pipeline aimed at improving client diversity. However, the majority of Solana validators are using the Labs client, which poses a risk of network outages in case of a bug. Jito Labs has developed a MEV branch that enables searchers, such as arbitrage bots, to compensate validators for including their transactions. This configuration reduces spam and ensures that validators benefit from most MEV opportunities. Surprisingly, as of October 2023, more than 31% of Solana validators are utilizing the Jito Labs client.

The other two clients are still in progress. Sig is a Solana validator client implementation written in Zig and developed by Syndica. While Zig is not widely used, it hasn’t received much attention from the community.

Firedancer is a new independent validator client for the Solana blockchain, created by Jump. They have revised each validator component to improve scalability and have also introduced performance upgrades, which are expected to increase transactions per second (TPS) without the need for additional hardware. Some members of the community even speculate that Firedancer could be considered Solana 2.0. Currently, Firedancer is live on the testnet, and it is expected to launch on the mainnet early next year.

State Compression for Compressed NFTs

State compression is an important feature that has been introduced. It follows the philosophy of Rollup, where a Merkle Tree is created and the state is stored on the leaf node. Only the Merkle roots are stored on-chain. When updating the Merkle tree, we only need to update the root state and provide the proof, similar to zkRollup.

When we apply this technology to NFTs, it results in compressed NFTs, which can significantly reduce costs, especially when we need to mint millions of NFTs for a single project. As shown below, the cost to mint 1 million NFTs with State Compression is only 5.35 SOL, compared to 12000 SOL before the upgrades.

When we explore the specifications of the cNFT, we come across a trade-off between cost and composability. There are three key factors that determine the Merkle tree: maxDepth, maxBufferSize, and canopyDepth. maxDepth determines the tree’s capacity, which is roughly 2^{depth}. maxBufferSize determines the number of concurrent updates allowed in one block, typically ranging from 8 to 2048.

The most crucial factor, canopyDepth, determines the portion of the tree (number of proof nodes) that remains on-chain. Increasing the canopyDepth results in higher storage costs but provides greater composability. This is because we can reduce the number of proofs that clients must submit for verification, thereby lowering the transaction limit. Conversely, we can prioritize cost efficiency at the expense of composability.

Current Performance Status

Due to ongoing efforts and enhancements, previous downtime concerns have shown substantial improvement. Since February 25, 2023, there have been no reported service disruptions, and the system has maintained a flawless uptime of 100% thus far.

Furthermore, there has been a notable improvement in the success rate of transactions. In the initial stages of Solana, there were a considerable number of unsuccessful transactions, nearly 20~30%. However, over the past 2 months, the success rate of transactions has reached approximately 99%. Additionally, the average transactions per second (TPS) has increased from 3000 to 4000 in general.

In addition to network performance, the inflow of capital is often overlooked when discussing Solana. Currently, there are 1.5 billion stable coins circulating on the network, with USDT accounting for 907 million and USDC accounting for 599 million. Among the stable coins, USDT issued on Solana ranks third in terms of volume, following Tron and Ethereum. Despite having a circulating supply of only 599 million, Circle has authorized 5 billion USDC to the Solana network, which represents nearly 20% of the total USDC supply.

A Glance of DePin

Emergence and Essence

DePin or PoPW

DePin, short for Decentralized Physical Infrastructure, was initially proposed by Messari in late 2022. They have provided a clear definition and listed the landscape based on their perspective. DePin is divided into two main sectors: Digital Resource Network and Physical Resource Network. The Digital Resource Network encompasses storage, compute, and bandwidth, while the Physical Resource Network focuses on areas related to hardware such as wireless networks, geospatial networks, mobility networks, and energy networks.

Similarly, in early 2023, Multicoin Capital introduced a narrative called PoPW, which stands for Proof of Physical Work. According to their definition, protocols that align with this thesis incentivize individuals to perform verifiable work that contributes to the development of real-world infrastructure. In comparison to traditional methods of capital formation for constructing physical infrastructure, these permissionless and credibly-neutral protocols:

1. Enable quicker infrastructure development, often 10–100 times faster
2. Are more responsive to local market needs
3. Can be significantly more cost-effective

Essence of Incentive and Hardware

When we examine the details of DePin / PoPW, we discover that it is not a new area in cryptocurrency. After all, Bitcoin itself represents the original decentralized physical infrastructure. Therefore, there is no need to categorize the definition.

It is interesting to note that these ventures often encompass all aspects of hardware in their narrative. However, the core of DePin / PoPW, and what we should focus on, is the token economic design that replaces existing infrastructure.

The main goal of DePin / PoPW is to establish a more cost-effective global economic network. It aims to address the challenge of Web2 giants by using token incentives to motivate individuals to bootstrap networks and ultimately attract end users.

In the traditional ICT market, monopolies gain control by offering low prices or subsidies. Once they dominate the market and establish high barriers, they increase prices to maximize revenue. This follows a completely different logic. Through reasonable token incentives, we can build a highly efficient network from the outset and reduce the exorbitant prices set by current monopolies.

Landscape and Revolution of DePin

Physical Infrastructure Pipeline

The subject of DePin / PoPW is extensive and covers various areas such as PoW, AI, IoT, RWA, sharing economy, decentralized computing, and decentralized storage.

Instead of providing an exhaustive list of protocols and a comprehensive overview of DePin / PoPW, we will concentrate on the pipeline of DePin / PoPW and explore the potential opportunities it presents.

At the foundation of the physical infrastructure lies the hardware. When embarking on a DePin / PoPW project, the initial decision revolves around whether to utilize existing general-purpose hardware or opt for a custom-made solution. General-purpose hardware offers accessibility and coverage, which is particularly advantageous for establishing the computing and storage network during the initial stages. However, using general hardware requires additional efforts to ensure compatibility. On the other hand, tailor-made hardware involves creating specialized components to meet specific requirements, such as custom dash cams for mapping purposes. This opens up significant possibilities for hardware manufacturers, as most DePin projects focus on software and often seek assistance from third-party suppliers specializing in personalized hardware solutions.

The second layer focuses on hardware onboarding. Users have two options: they can seek professional help from the Depin support team or use a self-deploy toolkit. The support team offers expertise and guidance throughout the onboarding process, ensuring that users have the necessary knowledge to effectively set up and integrate the hardware. On the other hand, the self-deploy toolkit provides users with the resources and documentation needed to independently set up and onboard the hardware. As the project progresses, we may also see third-party service providers in this area.

The third layer of the pipeline is the network structure, which includes the consensus layer, communication layer, and other components necessary for coordinating the service providers specific to a single project. There are two main approaches here: either building a dedicated network for the entire protocol or reusing existing Layer 1 or Layer 2 networks and only constructing the remaining components.

The top layer is the token incentive layer, which is the most important and easily accessible part for general users and investors. Ensuring that the interests of general users align with the network and miners is crucial to managing the selling pressure from miners.

Throughout the pipeline, the affiliate layer serves as a frontend aggregator for both service providers and general users. For service providers, the aggregator consolidates different components and functionalities into a single platform, making user interactions simpler and streamlining workflow. It can also bring together service providers into a cluster, similar to a mining pool, to gain a more powerful position in the network. For general users, the frontend aggregator brings together various services and data sources, allowing them to check the status, as seen in DefiLlama.

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The Paradigm Shift

In the past, protocols typically used to create their own networks, similar to traditional public chains. However, many protocols now prefer to use an existing ecosystem instead of building their own chain. This is because the Layer 1 pattern has already been established, and DePin / PoPW is following this trend.

We can clearly see this shift in approach with the leading protocol in DePin / PoPW, Helium.

Previously, DePin / PoPW was considered as a complete platform that covered all the layers above. This meant that the protocol had to handle the entire process. While hardware could be outsourced to third parties, building the network from scratch was a significant barrier, not to mention ongoing maintenance.

Therefore, it makes sense for most DePin / PoPW protocols to move the blockchain network aspect to a mature platform. The common consensus, execution, and settlement layers can be reused in existing Layer 1 or Layer 2 solutions. Some DePin / PoPW protocols will still maintain a hardware network for communication, especially those that require quick response times and high bandwidth.

Other DePin / PoPW protocols that don’t heavily rely on hardware communication may choose alternative approaches like zkRollup. In this case, the physical work of the hardware is completely off-chain, while the on-chain part handles the rest of the DePin / PoPW network and verifies the proof of physical work.

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Two-Way Efforts Create the Future

Migration of Leading Protocols to Solana

As previously mentioned, the trend for DePin / PoPW protocols is to select an ecosystem that can make use of existing blockchain infrastructure. Out of the various platforms available, only a few are capable of meeting the requirements of DePin / PoPW. These protocols necessitate real-time responsiveness and lower transaction fees. Solana, with its high-speed blockchain and features such as a 0.5s block time and direct processing of the validator, is an excellent fit for DePin / PoPW. Furthermore, Solana’s cNFTs provide a more cost-effective means of granting certificates to nodes of DePin / PoPW, which is a common practice.

In this section, we will showcase several examples from Solana to illustrate the collaborative efforts involved in this migration.

Helium: Decentralized Wireless Network

Helium is a well-known decentralized LoRaWAN network that powers individual hotspots and also offers 5G service in certain American cities. Previously, Helium maintained a general L1 platform, but it struggled to gain killer apps and user adoption, despite being the largest DePin/PoPW network at the time.

The lesson learned from Helium is that maintaining a general smart contract platform is not necessary and can be a waste of resources for DePin/PoPW networks.

In early 2023, the Helium community voted to migrate their blockchain onto Solana by minting nearly one million hotspots as NFTs using state compression. This migration allowed Helium to focus on the wireless network itself.

The successful migration without any issues proved that building a DePIN business on top of Solana is feasible. Helium’s move to Solana also sparked growth across the entire DePIN movement.

Hivemapper: Decentralized Mapping

The Hivemapper network was launched in November 2022, utilizing the Solana blockchain to create a community-powered, incentive-driven online map.

Moreover, Hivemapper utilizes state compression technology on Solana to significantly reduce fees and ensure the rewards cycle is maintained. Maps are tools that closely resemble real life and are accessible to everyone, enabling us to imagine a future where mapping is seamlessly integrated into various aspects of our lives.

For any service to reach a broad audience, it needs to be cost-effective and user-friendly. Hivemapper and Solana serve as excellent examples in this regard.

Render Network: Decentralized GPU Rendering

The Render Network is the leading high-performance distributed GPU rendering network that facilitates a marketplace for computing resources between GPU Providers and GPU Requestors.

Following the footsteps of Helium, Render Network has decided to move to Solana after a community vote. This migration to Solana is an important milestone for Render Network as it unlocks new capabilities such as real-time streaming and dynamic NFTs, in addition to state compression.

It is worth noting that Render Network previously operated on Ethereum. The decision to migrate holds great significance for DePin protocols. While Ethereum is known for its decentralization and strong consensus, DePin protocols have often faced trade-offs between cost and decentralization. However, Solana now has the second-highest number of validators, surpassing Ethereum and other mainstream Layer 1 networks in terms of Nakamoto Coefficient. Therefore, building on Solana is an obvious choice for most DePin Protocols.

GainForest: Empowering Reforestation Efforts

GainForest is a platform that enables donors to make verifiable and trackable donations, ensuring direct support to local individuals responsible for preserving forests.

For farmers and other community members engaged in the protection and restoration of endangered rainforest areas, GainForest offers timely and fair compensation for their physical efforts in planting and caring for trees.

In return, donors receive Solana-powered “NFTrees” tokens, representing their investment in the environment. These NFTree holders also enjoy digital rewards, such as wildlife camera videos showcasing the thriving animal life in the areas they have helped safeguard.

Composability and Moat of the Thriving Ecosystem

While we have only mentioned a few typical DePin/PoPW protocols above, we can see the diversity and growth of the DePin track on Solana.

The leading protocol, Helium, launched on Solana earlier this year, and its impact has been immediate. More and more DePin/PoPW protocols are choosing Solana as their base layer. Almost all subdivisions of DePin/PoPW protocols have successfully integrated with Solana, proving the concept for these protocols that initially had doubts.

Furthermore, the ability for DePin/PoPW protocols to work together has a significant impact on the ecosystem. This cluster of protocols acts as another building block for DeFi on Solana, potentially bringing a DePin Summer. The existing user base and flow provide a fertile ground for emerging protocols to easily build on top of or collaborate with existing protocols. This creates a new positive cycle, attracting more and more protocols to the Solana ecosystem.

As we mentioned in the paradigm shift, migrating traditional blockchain networks to a more mature platform is an inevitable trend, and Solana is currently the top choice. At this stage, Solana has established a strong position in the DePin/PoPW track, making it difficult for other public chains to gain market share.

Every smart contract platform has its own foundation of support. Ethereum has DeFi, Arbitrum has GMX, and now DePin is becoming the new anchor for Solana. We anticipate that it will drive Solana in the next wave of growth.

Appendix

1. https://solscan.io/
2. https://docs.solana.com/
3. https://github.com/Syndica/sig
4. https://compressed.app/?ref=solana.ghost.io
5. https://multicoin.capital/2022/04/05/proof-of-physical-work/
6. https://multicoin.capital/2023/09/21/exploring-the-design-space-of-deping-networks/
7. https://explorer.helium.com/
8. https://hivemapper.com/explorer
9. https://maps.gainforest.app/
10. https://medium.com/render-token/fall-2023-render-network-metrics-bf08243a59ed

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