Why Did Dying Solana Rise Again?

In 2022, as SBF and the FTX platform gained immense popularity, Solana also became a hot public blockchain in the cryptocurrency industry. However, the collapse of FTX almost brought down the entire Solana ecosystem.

The price of SOL plummeted from $236 to $13 within weeks. Investment institutions advised startups not to choose Solana and instead build on the Ethereum Virtual Machine (EVM). Subsequently, some prominent projects migrated from Solana to other chains. However, a year later, as shown in the graph below, Solana bounced back, surpassing its peers.

Price Growth Trend of Top Tokens from the End of 2022 to 2023

People love to hear comeback stories, and today this article explores the choices Solana made to successfully recover from the bear market trough in 2023, and the design differences that made it a leading public chain.

01 Client diversity

Solana’s founder Anatoly and team members have extensive backgrounds in the traditional mobile communication industry. They worked as programmers at Qualcomm for over a decade, witnessing firsthand the impact of Moore’s Law (doubling of hardware capacity every two years). Solana’s architecture differs from Bitcoin and Ethereum in that it does not restrict the hardware requirements for nodes.

Bitcoin and Ethereum are relatively mature networks with more client diversity. But why is client diversity so important? Think of it this way: in a decentralized network, you want all functionalities to be relatively decentralized. If over 66% of the network uses a single-node client and that node sends out erroneous updates or syncs blocks in the wrong order, it can impact the functionality of the blockchain. There may be consensus issues regarding which block gets approved first, and Ethereum and Bitcoin have both actively optimized client diversity in the past.

Consensus client and execution client (Source: https://clientdiversity.org/methodology/)

Solana experienced three major network outages and several performance degradations in 2022, as well as an outage in 2023. These outages were primarily caused by consensus issues. While low transaction fees are good for users, they also make it easier to conduct denial-of-service (DDoS) attacks by sending large amounts of transactions or conducting denial-of-service (DDoS) attacks.

When a block is proposed, validators receive the information packet (in the block), independently verify its correctness, and mutually confirm the correctness to reach consensus.However, consensus information is lost when validators lag in processing packets.

Firedancer has created a messaging framework that bypasses certain hubs and reduces network latency. Since Firedancer was built from scratch by a different team, it may not carry the same bugs as the Solana Labs client. Therefore, the same bug will not affect these clients at the same time. Ideally, a validator would run one primary and one secondary client, with the secondary client acting as a backup.

A chain with a strong DeFi ecosystem needs to guarantee 100% uptime, so Solana needs more powerful client infrastructure.The main causes of Solana network stalls are lack of congestion control and network processing delays. Several network upgrades have improved validator anomalies against transaction flooding, enabling better congestion control.

Solana admitted that client diversity is a work in progress. As with Ethereum and Bitcoin before, these things take time. One sign of improvement is the percentage of assets running through the Jito-Solana client. While the Jito Solana client does not help in achieving redundancy, it indicates that validators will run different clients when available.

As more clients like Firedancer and Sig come online, we should see less reliance on Solana Labs clients in the future. The optimal ratio for individual clients is around 33%. Therefore, there is still work to be done.

Percentage of staking run through Jito-Solana client over time

02 Cost model

A healthy fee market is a key factor in a thriving blockchain, as chains like Bitcoin and Ethereum have shown. In 2024, Bitcoin’s block reward will be halved from 6.25 BTC to 3.125 BTC per block. If we assume that Bitcoin producers require the same incentives, then to maintain existing incentive levels, the price would have to double, or fee revenue would have to make up for the loss of the reward halving. Thanks to Inscription, the increased fees give hope to block producers and the Bitcoin security budget.

Inscription casting costs account for approximately 20%.

Through EIP1559, Ethereum has changed its monetary policy by adding a burning mechanism to ensure that ETH inflation remains under control. Monetary systems and dynamic fees play an important role in stabilizing the chain and adjusting incentives for stakeholders, with other chains also aspiring to achieve the same status.

Solana initially did not have priority fees, with the fee for each transaction fixed at 5000 Lamports (in the Solana blockchain, Lamports are the smallest unit, similar to wei in Ethereum or satoshis in Bitcoin). Solflare was the first wallet to implement priority fees on Solana in January 2023. Fees are crucial for the following reasons:

1) Resist spam attacks
2) Validator rewards
3) Improvements to the economic stability of the protocol. As expenses increase, inflation can be reduced.

Similar to Ethereum’s EIP1559, Solana burns 50% of the fees, while the remaining 50% goes to the validators. This standard was set in 2021 and has not changed since.

Basic fees are burned, while priority fees go to validators. (Source: Umbra Research)

On Ethereum, transactions wait in the mempool before entering a block, and validators select the transactions with the highest fees to include in blocks. The global mempool is created by validators propagating their respective mempools to each other. This is where Maximum Extractable Value (MEV) is generated.

Because the mempool is visible to both validators and MEV seekers, seekers can identify transactions where they can profit by performing frontrunning and backrunning. Seekers are typically bots looking for MEV opportunities. For example, if someone buys token A worth one million dollars, a seeker can buy token A before that transaction completes and immediately sell it.

Unlike Ethereum, Solana is multithreaded and can execute transactions in parallel. When signed transactions reach the leader, the leader verifies them and randomly assigns them to threads. They are sorted by priority fees (i.e., transactions with the highest fees are prioritized) only when assigned to different threads locally by the leader.

Differences in Transaction Processes between Ethereum and Solana

Solana originally did not have priority fees. However, now, wallets like Solflare allow users to pay priority fees. Priority fees have created a local or isolated fee market within Solana. Unlike Ethereum, Solana transactions must specify which part of the state they wish to read from and write to.

Solana validators know which state transactions involve before computation, whereas Ethereum validators only know this after computation begins. Solana transactions require specified information that helps Solana determine which part of the state is becoming hot. The total number of computation units (CUs) used by any hot spot is restricted to 25% (one of the four cores used for Solana’s multithreaded execution). This is done to prevent excessive updates to an account within a single block.

A hotspot is a specific smart contract or account that experiences a sudden surge in traffic. On the EVM network, heavy demand from a single application (such as Crypto Kitties) could cause transaction fees to rise across the entire network. On Solana, individual smart contracts/applications (such as Tensor or Jupiter) are limited to using 25% of the CUs per block.

In other words, transactions using any particular contract cannot occupy more than 25% of a block, which is 12 million CUs. Any transactions exceeding this limit must wait for the next block. Therefore, if the usage of an individual application suddenly increases, the entire network will not begin paying higher fees. Only transactions interacting with that application will see an increase in fees. This is what a localized fee market looks like.

With different applications, even if a gas war occurs, it will not affect other applications

What happens if there are 4 or more hotspots?In this case, Solana looks like Ethereum. Gas wars may occur between competing hotspots, and transactions with the highest fees will be able to enter. Local fee markets appear to be a nifty solution to the general problem of skyrocketing fees.

How does it work in practice? There are still some issues with Solana’s fee market design:

First of all, the basic fees incurred by transactions are currently the same, whether it is a token transfer, exchange or flash loan.This is obviously not reasonable enough. Transactions should incur fees based on the compute resources (CU) consumed, although this is already under consideration. CU represents block space, so paying a higher fee should get you more space.

Secondly, since there is no memory pool, validators only arrange transactions based on fees after they are allocated to different threads. Therefore, higher fee transactions do not always succeed. This may lead to the next problem.

Thirdly, Solana does not have a memory pool like Ethereum. Hence, higher priority fees do not guarantee that transactions will be included in a block. Therefore, searchers (those looking for MEV) extract MEV by bombarding the network with multiple transactions and hoping validators choose one of them. On Solana, due to lower transaction costs, this practice is relatively easy.

03 Community atmosphere

Steve Ballmer once said, “The key to ‘.net’ success is developers!.” This is the only metric that makes sense when building a new ecosystem. A strong network of developers build applications, which in turn develop use cases, and ultimately translate into real users. Whether it’s mobile, desktop, cloud services or blockchain, developers are the path to relevance.

Therefore, I’m curious about how many developers there are in the Solana ecosystem. However, it is important to note that much of the Solana ecosystem was initially hit hard due to the collapse of FTX.

Packy sarcastically mentioned in an article in 2022 that SBF is one of the figures that makes Solana an interesting ecosystem. When FTX collapsed, the ecosystem lost one of its biggest supporters. New tokens are no longer on the market, venture investors are no longer investing, and development talent may have flocked to other places to find resources.

Solana’s monthly active developers in 2023

According to recent Solana data, approximately 3,000 developers have been developing on Solana in the past year. This number considers developers who contribute to public repositories and does not include those developing in private repositories on GitHub. Considering the recent surge in SOL prices, more developers may turn to the ecosystem. As users flock to Solana (due to rising prices), this number will likely increase significantly.

Comparison of the increase and decrease in the number of developers in each mainstream public chain in January and October in the past three years

(Source: https://www.developerreport.com/)

If we compare this number to Electric Capital’s developer report, which states that there were over 19,000 developers in the blockchain ecosystem in October 2023, developers on Solana represent approximately 15% of the entire ecosystem .

Compared to the traditional Web2 ecosystem, Solana provides developers with lower costs and faster transactions, and provides users with a better experience. As the suite of consumer starter tools grows around Solana, more and more developers will build on it.

To establish a sustainable ecosystem, it is crucial to ensure that developers can benefit from it. Solana provides resources for developers who are serious about building on its platform through foundations, community hackathons, and platforms like Superteam Earn. The team raised nearly $600 million from ecosystem hackathons. Additionally, through airdrops targeting developers, Solana has unleashed a wave of new talent who can build without the pressure of fundraising.

In 2022, Bonk allocated 5% of its airdrop to developers. Another 20% was allocated to existing NFT projects within the ecosystem, and 10% went to artists and collectors. This 35% is now worth $450 million. Developers holding onto this token may have realized around $500,000 in gains during Bonk’s December surge, equivalent to a pre-seed round of financing.

Search for Saga Phone trends on Google Trends

The recent shift in sentiment toward Solana can be quantified by sales of the Saga phone. Although the phone was named the “worst phone of 2023,” as the Bonk’s price increased, users who bought the phone found that it paid for itself. Owners of the phone are eligible for Bonk’s Airdrop, turning the phone into a free crypto-native phone. Since the number of phones is limited, similar to the Bored Ape NFT or other collectibles, traders are beginning to realize the arbitrage opportunities and the value of future Airdrops, so they rush to buy the phones. Demand was at its peak, with unopened Saga phones selling for more than $5,000 on Solana.

This situation is indicative of the changing sentiment surrounding the Solana ecosystem, with Bonk being an example of a meme asset, and similar variants also being WIF. However, Meme assets alone may not help the ecosystem grow. In fact, consumer demand for using products on Solana, such as earning points and potential Airdrops, is the main factor that changes sentiment. Two recent examples are Pyth and Jito.

Pyth Network provides an oracle service and increases Solana’s liquidity by Airdrop Token to users. Jito airdrops a portion of the supply to users who stake SOL in Jito’s validator client and use LST for DeFi activities. These Airdrop activities are more beneficial to small users and bring them substantial value gains.

Allocation of Total JTO Across Tiers

Interestingly, the Jito airdrop scheme adopts a tiered model, whereby the number of JTO tokens received decreases gradually from Tier 1 to Tier 10, following a diminishing trend. This implies that users in lower tiers receive higher value per token.

Jupiter, a DEX on Solana, had disclosed its airdrop plan before Jito. While it was known that Jito would launch a token, the scale of the airdrop was underestimated, potentially leading to underutilization of the airdrop.

Now, all eyes are on Solana, with everyone attempting to participate in the next JTO airdrop. Projects like Tensor, Kamino, Marginfi, Zeta, Meteora, Parcl, among others, have announced their token plans and are converting these points into their respective tokens. Some view these token plans as a bad idea, while others argue that they can serve as loyalty points and a more transparent token distribution method, unlocking behaviors that increase product value.

For example, Marginfi allocates one point per day to staked users, but four points per day to borrowing users. This system makes sense as the protocol requires borrowers. However, detecting Sybil activity has become challenging, yet projects like Marginfi and Zeta have a method of detection; for instance, if a wallet matches money laundering transaction patterns on Zeta, its points will be set to zero.

These examples have attracted a large number of users to join the ecosystem. In our view, ecosystem development consists of two mutually balancing forces. On one hand, you need to build culture and passion, which meme assets, points, and airdrops address. On the other hand, you need to design excellent products to pique curiosity and retain users. Therefore, while various aspects of Solana can be further explored, more attention should be paid to the products developed by developers over the past year.

04 Ecosystem

Solana’s on-chain ecological landscape (incomplete version)

The development of Internet products is always accompanied by improvements in bandwidth. In Web3 as well, Solana marks a moment when its high throughput and low transaction costs make it possible to build consumer-grade applications. Just like we saw in the Web2 era where the platform shouldered the server costs. On Solana, compressed NFTs allow developers to send a million NFTs for a few hundred dollars.

Currently, much of what’s on Solana is an extension of the broader cryptocurrency landscape, viewed as “X, cheaper and faster.” But building entirely new applications requires competing with users’ inherent behaviors, which requires a lot of resources that most startups aren’t willing to challenge.

However, what excites me about Solana is that it has the potential to change the current landscape of the Internet. I’ll go into more detail about how it’s done at the end of the article, but for now, let’s take a look at Solana’s current situation.

1) Trading platform

Considering Solana’s relationship with FTX, the early ecosystem was mainly focused on DeFi. Mercurial started as a stable asset exchange platform on Solana, similar to Curve on Ethereum. Following the collapse of FTX, hackers stole over $400 million worth of tokens from FTX, approximately $800,000 of which was Mercurial’s governance token MER. This resulted in the developer parting ways with Alameda Research. As part of the resumption of development, Mercurial was abandoned and two new protocols were born: Jupiter and Meteora, respectively a revenue aggregator and a DEX aggregator.

Solana’s low fees make it easier for users to trade at a higher frequency, which can be easily seen in the numbers.Three charts illustrate the differences in transactions on Ethereum and Solana. Ethereum shows superior metrics in terms of transaction volume and value locked (TVL).

It’s important to note that Ethereum has a five-year head start and a healthy DeFi ecosystem with multiple underlying tokens worth billions of dollars. Therefore, the following indicators are somewhat flawed. When looking at charts, conclusions should be drawn by looking at all three charts rather than a single chart.

Comparison of Weekly Ethereum and Solana Transaction Volumes

Comparison of Ethereum and Solana TVL

However, the difference in TVL between the two chains is much greater than transaction volume. At some point, the TVL figure becomes less relevant. The higher the ratio of transaction volume to TVL, the better the capital efficiency. Recently, Solana has outperformed Ethereum in this aspect.

Ratio of Ethereum and Solana Transaction Volumes to TVL

One of the reasons for the recent increase in transaction volume is users looking to get Airdrops. Jupiter announced the Airdrop program, in which 50% of tokens are reserved for the community, divided into four different phases, the first of which may launch in early 2024.

While Airdrop may be what drives Solana activity, it must be understood that certain designs are not possible on Ethereum. For example, order book design is not possible on the Ethereum base layer. Protocols such as dYdX and Aevo have forked onto their own chains.

Solana’s combination of speed and low fees means market makers can conduct high-frequency trading on the chain without having to resort to CEX or wait for superior performance second-layer solutions.

Many CEXs today barely touch the chain. Sometimes, when chain integration is difficult, they just add a token and disable deposits or withdrawals of that token. But CEX also has its advantages. Market makers (MM) still choose CEX as the main activity platform, not only because of the handling fee, but also because of the performance guarantee.

As they say, liquidity breeds liquidity. Traders flock to the platforms with the most market makers because they make it relatively easy to enter and exit large positions.

2) Borrowing and income aggregator

The on-chain borrowing market allows market participants to obtain asset returns. Additionally, they allow investors to convert from one asset to another without creating a taxable event. Marginfi is the highest-valued lending protocol on Solana, with more than $350 million in deposits and $80 million in borrowings locked.

Before FTX collapsed, Solend was the main lending protocol on Solana. In November 2021, its total locked value was almost close to $1 billion. In November 2022, when FTX went bankrupt, Solana ecosystem Token prices plummeted, causing positions in the DeFi protocol to be liquidated. Solend’s total locked value dropped from over $350 million to approximately $25 million in just one week.

As of December 26, 2023, the total locked value was just over $200 million, which has not yet returned to pre-FTX collapse levels. The drop in Solend’s locked value creates an opportunity for a new protocol to attract funding. Considering that Solend already has a token, it is not enough to attract and retain users through interest rates alone.

Marginfi seized this opportunity and announced the launch of “Points”, which means that in addition to receiving interest, depositors and borrowers will also receive an Airdrop at a later point in time. Marginfi launched points in the first week of July 2023. Since October 15, Marginfi’s total locked value has grown from approximately US$30 million to approximately US$485 million in just two months, an increase of more than 10 times.

Total Value Locked (TVL) of Borrowing Protocols on Solana

Kamino, the second-largest borrowing platform on Solana, has demonstrated rapid growth through its incentive mechanisms. The protocol announced the upcoming launch of its token on December 3, with the total locked value increasing eightfold in three weeks to approximately $245 million.

3) Liquidity Staking

Staking is a core component of proof-of-stake (POS) chains, enabling stakeholders to earn rewards from protocol inflation and fees while safeguarding the chain’s security. Liquidity staking is essential infrastructure as chains should set low barriers to staking and not deter users due to high fees.

Liquidity staking allows investors to stake any amount without requiring deep technical understanding or running node software. While Solana validators must stake SOL from the outset, and Ethereum only recently transitioned to proof of stake, the liquidity staking industry on Ethereum leads the way. Over 383 million SOL is staked, accounting for approximately 90% of the circulating supply.

Remarkably, 362 million SOL, or approximately 95%, is native staking, meaning it is locked and not utilized in any staking derivatives. This implies that users staking with native SOL miss out on the opportunity to use liquidity tokens in DeFi. By staking SOL through protocols like Marinade or Jito, you receive mSOL or JitoSOL as a reward, which can be used in DeFi applications. As staking derivatives evolve, one can expect users to gradually opt for derivatives over bearing opportunity costs.

Staking of SOL (Liquidity and Passivity)

The liquid staking market only has about 20 million SOL. Currently, 24% of circulating ETH is staked, but approximately 68% (31% LST and 37% platform) are staked through liquid staking platforms and CEX. If 31% of SOL is also staked through different LSTs, Solana’s LST market can be estimated at approximately 115 million SOL or approximately $11 billion.

Marinade is the first Solana liquidity staking protocol born out of finishing third in the 2021 Solana Hackathon. The protocol was launched on mainnet in August 2021. The solution, similar to Lido, is simple and practical. When users stake SOL through Marinade’s staking pool, users will receive Marinade SOL or mSOL, which can be used in Solana’s DeFi applications.

mSOL accumulates the rewards earned by the Marinade staking pool and adjusts relative to SOL every epoch (~2 days). When users stake using the liquid staking option, they must pay a fee to the pool. Liquidity staking exposes users to the smart contract risks of the staking protocol.

Marinade also offers its users the option to stake SOL locally. When they do this, the user does not get mSOL in return. When users exercise this option, they use native Solana functionality and Marinade simply acts as the interface. Users are the only ones who can withdraw their SOL at any time.

Users essentially create a Solana staking account and delegate the responsibility of managing the staking to Marinade. Staking accounts will receive staking rewards at the end of each period. Marinade does not charge users any fees, and they are not exposed to Marinade’s smart contract risks.

Total TVL of liquidity staked on Solanas

Marinade and Jito are the two major liquidity staking protocol providers on Solana. Marinade’s TVL is approximately 7.1 million SOL, and its market share is approximately 41%. Jito’s TVL is approximately 6.4 million SOL, and its market share is approximately 38%. Similar to Marinade’s mSOL, Jito provides JitoSOL to users as a voucher for locking SOL in their staking contract. In addition to validator earnings, Jito also delivers MEV rewards to JitoSOL holders. \
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Convenient as they may be for users, there are also some drawbacks to liquidity staking tokens. One of them is the potential liquidity problem. For example, mSOL experienced a decoupling from its peg on December 12th. When a trader sold a large amount of mSOL, the price dropped from 1.16 to 1.02. This could be quite detrimental to a token that is supposed to be “pegged”. Although arbitrageurs ensured that the price returned to the pegged level, this event highlighted the necessity of improving liquidity for liquidity staking tokens.

Currently, there are over 10 liquidity staking tokens on Solana. As more liquidity staking tokens are launched, the issue of low liquidity may become more severe. To address this problem, Sanctum has proposed a solution. Sanctum Infinity is a multi-liquidity staking token pool that allows for exchange between all liquidity staking tokens in the pool. This can be seen as an aggregation layer for Solana liquidity staking tokens. The solution is expected to launch in the first quarter of 2024.

4) NFT Ecosystem

The NFT ecosystem on Solana has seen rapid growth over the past year. Initially, there was a lack of showcaseable content, and some flagship projects like DeGods and yOOts chose to migrate to other chains. Although Magic Eden has always been the leading NFT marketplace on Solana, it has hedged through multi-chain integration. Leading NFT collections are crucial for the community, so this gap must be filled.

New collections like Claynosaurz and Mad Lads have filled this gap and established strong communities in both. The commonality between these projects is that they are means to achieve goals rather than endpoints.

Mad Lads is a collection created by former FTX engineers, aiming to replace FTX with another platform called Backpack. The exchange platform aims to fill the void left by FTX while being more compliant, transparent, and following the spirit of DeFi. Mad Lads has developed a Solana wallet that utilizes executable NFTs or xNFTs, blurring the boundaries between applications and NFTs.

Unlike traditional NFTs stored on servers, xNFTs can execute code. xNFTs allow users to interact with applications such as Jito Staking, Birdeye, Orca, and Marginfi within the Backpack wallet.

Magic Eden was initially the dominant NFT marketplace on Solana. It expanded its support to Ethereum in August 2022 and eventually added other chains such as Polygon and Bitcoin (Inscriptions). As Magic Eden expanded its support to other chains, Tensor remained focused on Solana and offered additional features such as TradingView integration and market-making orders. In addition to these features, Tensor also launched token activities similar to Blur, where traders would receive Tensor’s governance token as a reward.

Weekly trading volume of the NFT market on Solana

5) Infrastructure

I have been using Solana for over two years and have experienced the infrastructure changes firsthand. Solana stopped producing blocks more than ten times in 2022, but only once in 2023. This kind of failure, while undesirable, is common for new chains trying cutting-edge technology. Even L2s like Arbitrum can experience these failures when traffic surges.

Various factors contribute to improving the infrastructure, from the operation of fee markets and client diversity to RPC nodes. Companies like Helius Labs and Triton are helping app developers with:

• RPC nodes and webhooks to interact with the Solana network. Outsourcing this responsibility allows developers to focus more on solving core problems.

• Enhanced API to help developers save time in obtaining required data, such as transaction history, NFT data, Token metadata, etc.

Another infrastructure change is state compression, Solana uses Merkle trees and only stores part of the data, greatly reducing storage costs. NFTs are one of the original applications of state compression. Helius Labs and Triton provide the necessary RPC node infrastructure and indexing services, while wallets such as Phantom and Solflare provide user-friendly interfaces.

The cost to mint 1 million NFTs on Solana is about $247, compared to about $98,000 on Polygon and about $65,000,000 on Ethereum. DRiP is an NFT platform that sends 3 million NFTs to different users every week instead of showing them ads. Using state compression technology, DRiP can achieve the same effect for about $250.

Several projects are improving Solana’s connectivity with other chains and mixing the best components of Solana and other chains. Eclipse uses Solana’s virtual machine SVM for computation and Ethereum as its settlement layer. In contrast, Neon is building an EVM on Solana that can do parallel processing. Nitro is building Cosmos L2.

5) DePIN

DePIN stands for Decentralized Physical Infrastructure Network, and the idea of ​​leveraging decentralized infrastructure and incentivizing it by inserting tokens has been around for a long time. DePIN blurs the lines between consumer and business devices. Helium and Hivemapper are some examples of DePIN on Solana.

Helium’s initial mission is to create a decentralized wireless infrastructure to support IoT devices. Helium’s devices act as hotspots, and about 50 hotspots are enough to provide internet connectivity to a city. Anyone can host a Helium hotspot.

Helium Mobile’s daily additions of prepaid users

Helium has its own blockchain with over one million hotspots before migrating to Solana in April 2023. To support growth and further expansion, Helium outsources tasks such as infrastructure support to Solana to save costs and achieve better scalability.

Hivemapper is another example of a DePIN application built on Solana. It helps map the world by installing driving recorders and motivating participants with HONEY Token. To date, Hivemapper has mapped 100 million kilometers worth of roads, 6.6 million of which are unique.

Source: Hivemapper

Hivemapper leverages the power provided by web3 infrastructure by inspiring ordinary people to install dash cams and start mapping. This model allows services like Uber and Zomato to use Hivemapper in the same way as Google Maps in the future, while requiring fewer permissions.

05 Summary

When the cost of interacting with a product drops dramatically, the adoption of technology accelerates. We’ve experienced this firsthand; in the early 2000s, cheap Nokia phones replaced landline connections, and people gradually shifted to mobile phones. Moore’s Law and the development of Android enabled people worldwide to access the internet via mobile devices. In my view, the features offered by Solana are very suitable for attracting the masses.

You can ignore the rest of this article; just try receiving $1 in the Solana Phantom wallet, and you’ll understand what I mean. I still remember the first time I experienced it; the speed and experience were closest to what I saw when using PayPal in the early 2010s. Solana’s unit economics enable developers to pay for on-chain user interactions without leaving gaping holes in their balance sheets. Solana’s unit economics make it possible to build consumer-scale applications that go beyond today’s crypto-native user base.

This doesn’t mean that products like MarginFi or Jupiter are irrelevant. They are critical infrastructure; however, to attract the first wave of users, their needs must be met, and replacing existing financial infrastructure is a daunting but worthwhile goal. However, as I look forward to the next decade, unless we establish our Facebook and Substack of this era, we will struggle to gain relevance beyond a dwindling subset of speculators.

Blockchain is financial infrastructure. In its current form, we focus excessively on user transactions rather than value exchange on the backend. What forms of value exchange can Solana’s blockchain achieve (users are unaware)? These answers are not answered in this article.

As with most price increases, being unable to focus on the main issues (Building) and instead focusing too much on price can lead to the network losing its long-term advantages. Therefore, Solana must slow down its pace of competition with EVM peers and turn to consumers. It needs a new batch of venture capital firms willing to invest in consumer crypto applications alongside founders who have built in Web2. This approach of seeking other directions in a market fiercely competing for a share of 10 million active on-chain users may lead Solana down a completely different path.

In a competitive market, Solana finds itself in a relatively strong position. Whether this will translate into meaningful moats and sustained momentum remains unclear. But for now, a few things are apparent: the SVM approach has advantages in developing networks, developers are building cool things in the ecosystem, and the community cares about everything.

These things didn’t happen overnight. Solana has gone through trials and come back. However, please note that this does not mean its trajectory does not need to be observed.

Disclaimer：

1. This article is reprinted from [白话区块链]. All copyrights belong to the original author [SAURABH, JOEL JOHN, AND SIDDHARTH]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
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