Thanks to the incredible speed Solana offers, and due to the timing of Solana’s market entry coinciding with “DeFi summer,” DeFi applications have always been a mainstay for this cryptocurrency. 178 DeFi projects are listed on the enterprise’s website as of September 2022.
DeFi is an integral part of any blockchain ecosystem because of the possible earnings generated. While Ethereum miners get paid handsomely via transaction fees, Solana’s business is more service-oriented. Cumulative DeFi revenue across all blockchains is set to surpass $3 billion soon, and Solana is well-positioned to grab its share of this emerging market.
Figure 1: Solana has more than 178 live DeFi projects
Source: @solanians at Twitter.com
Figure 2: Solana’s cumulative deFi revenue
Source: The Block Research, Ethereum ETL, The Graph
Total value locked (TVL) in DeFi on Solana
TVL is the total amount locked in a currency’s DeFi DApps. The best way to compare TVL is by denominating amounts in native tokens. SOL’s price has appreciated 20x since April 2021, and the dollar-denominated TVL would have increased by the same amount without additional SOL locked.
Figure 3: TVL locked in DeFi on Solana, denominated in SOL
Source: Defi Llama
A look at Defi Llama’s chart reveals healthy growth until mid-October, followed by a slump. 11 million SOL was locked at the beginning of April 2021 and 81 million SOL in October. $257.6 million of locked value grew to $14.8 billion during the same period.
Research by Messari found extraordinary growth of perpetual future trading on Solana. Notably, SOL perpetuals on Solana DeFi grew 60x compared to 13% for Bitcoin perpetuals, showing a tight focus of the ecosystem on itself.
Raydium and Marinade Finance are the two projects with the most value locked, while Mango Markets is the number one futures market. Serum, a DEX and a trading protocol developed by FTX exchange, is another important player.
But certainly DeFi is not the only driver of Solana adoption. Digital artists have also embraced the platform’s low fees and created some smash hits in the process. Therefore we will take a closer look at the role of NFTs in the Solana ecosystem!
Transactions per second are not the best metric to gauge users’ felt experience. Crypto influencer Packy McCormick stated that using Solana felt like “using the internet” in his analysis for Not Boring. But what does that mean?
The first slide in Solana’s seed round deck reads: “Solana is blockchain at NASDAQ speed.”
Solana block times are measured below 400 milliseconds, which demands considerable network speed and node processing capacity. As a result, Solana node requirements are steep. A prospective node needs a 12 core CPU, 128GB RAM (256GB for an RPC node) and a blazingly fast 500GB SSD.
Theoretical TPS
As a proof of concept, Solana’s testnet has demonstrated 400,000 TPS on a single machine without any networking, which is almost at Nasdaq speed, where the trading servers handle up to 500,000 TPS.
Out in the wild, Solana’s testnet has reached bursts of 59,400 TPS, making it “faster than Visa.” In lab environments, 50 nodes were able to conduct 111,609 TPS on their mainnet. Real-world speed in a distributed system with nodes spread across the globe is, of course, affected by available network speeds.
Solana’s white paper claims that the theoretical limit to its capacity is even higher than 400,000 TPS and will continue to increase as network speeds and node processing capacity rise and network latency shrinks.
Solana’s performance is achieved without sharding, which is the approach that Ethereum will implement in its next iteration. With sharding, a blockchain is split up into multiple pieces that work in parallel. Still, it introduces complex problems for DeFi when assets processed on different shards are composed.
Time to finality
Transactions are only deemed final after three to 12 validators have confirmed them, depending on the desired security level. The time it takes for these three to 12 confirmations is called the time to finality. Solana takes five seconds on average, with outliers at 12 seconds — a long time for internet standards.
Research by email client Superhuman revealed that users experience delays of more than 100 milliseconds as noticeable friction. Rival layer-one blockchain Avalanche boasts only 1.3–1.6 seconds to finality.
So it seems that Solana, despite its high speed, could never reach the point where it could build a decisive lead over its competition.
Low fees are one of the existential selling points for Solana. As with Ethereum, the actual fee is a function of supply and demand. When demand for block space rises, the price to include a given transaction in a block appreciates accordingly.
Solana features a much higher transaction capacity than Ethereum. We’ll cover just how much in the chapter on theoretical transactions per second.
A look at network explorer Solana Beach reveals transactions cost between 5,000 and 10,000 lamports. One lamport equals one-billionth SOL. In dollar terms, the average Solana transaction has cost $0.00025.
Actual transactions per second (TPS)
Between 2,000 and 3,000 TPS are conducted on the Solana network at the time of this report. This number dwarves Ethereum’s 35 TPS by almost two orders of magnitude.
Figure: Solana transaction breakdown
Source: Solana Beach
On Solana, 80%–90% of all transactions are used for voting and synchronization, so this number is misleading on its own. Other blockchain projects have ridiculed Solana for its inflated numbers in the past.
Avalanche CEO Sirer weighs in on Solana’s transaction numbers. Source: Twitter
Before comparing apples to apples, voting has to be factored out of transaction counts since Ethereum nodes don’t vote. Assuming the upper bound of 90% votes, Solana would still process 200–300 TPS or 10x Ethereum at a fraction of the cost.
Solana has a unique consensus mechanism called TowerBFT and proof-of-history (PoH). Co-founder Anatoly Yakovenko, with a background in distributed systems design, thought hard about blockchain scalability problems in 2017 after Bitcoin transactions took days when demand surged.
According to an interview with Acquired, he discovered that most consensus issues vanish when the systems involved agree on a common timeline. Take the dreaded double-spend issue, for instance. In a synchronized system, you can assume that the first transaction is valid and the second is thus fraudulent.
Solana implements a surprisingly straightforward method of synchronizing nodes. It uses a sequential hash that runs over itself continuously, creating a rhythm that all nodes follow.
Proof-of-history uses recursive calculations where the previous output is used as the next input. Only with the output of the current function “X” will a validator be able to calculate the output of the next function “Y.” All validators need to solve the same function “X” and then be able to derive the output for the next function “Y” around the same time. Like this, Solana creates synchronization across its network.
Figure: The proof-of-history flow of control
Source: Binance Research
Besides PoH, Solana uses its version of the practical Byzantine fault tolerance (PBFT) consensus mechanism called Tower. PBFT is an industry standard.
Programming language
Solana uses Rust, a recent, functional programming language for programs that run on top of its blockchain and base layer.
Rust has seen a remarkable rise in popularity for blockchain applications thanks to its performance advantages. From a purely technical point of view, it seems like a clear winner compared to Ethereum’s Solidity.
However, the lack of tooling, libraries and knowledgeable developers means that many wheels need reinventing to get DApps off the ground. The advent of the Anchor framework has ameliorated that somewhat by reducing the amount of work necessary just to get started by 80%.
This next article will look at the question if Solana is able to scale. What is the network’s transaction speed in theory and practice? And what are the advantages and disadvantages of the design choices involved?
Cryptocurrency trading is no rocket science – oh, wait a second, it is. It is a consuming full-time job where you tie yourself up in knots on a daily basis. So when the newness defining the niche wears out, you start asking Google questions like the best crypto trading app or the best crypto portfolio tracker in an attempt to automate as many processes as possible.
And this is the moment when you discover for yourself the Good Crypto – a multi-exchange crypto trading app that is also a crypto portfolio tracker which could serve as a bridge, connecting you with the 35+ exchanges and multiple wallets.
GoodCrypto allows you to place a plenty of advanced custom orders, such as Trailing Stop Loss or Stop Loss + Take Profit combo, could send you push-notifications on order execution, significant price changes, deposits, transfers, daily portfolio summary, and offers trade automation.
Good Crypto: the best portfolio tracker & cryptocurrency trading app
You can use the classic Web App version, or open a Good Crypto app on your iOS or Android device.
The GoodCrypto app offers you real-time market data, analytics through the automated portfolio tracker, the TA trend signals and all of this you get as an advanced trading terminal supporting 35+ leading crypto exchanges.
Connecting all your crypto exchanges and blockchain wallets out to Good Crypto is easy: just add your API keys and enjoy an overview of your portfolio that is updated in real-time, set up alerts or head straight to crypto trading with the most advanced mobile terminal on the market!
Here you can enjoy the full functionality of TradingView charts on the palm of your hand with all the drawing tools you are used to and over 40 technical indicators. Using a GoodCrypto app, now the pending orders do not freeze your balance until triggered, that is giving you an exceptional flexibility in creating lots of your trading setups.
Switch to Algo tab and enjoy seamless trade automation: from Infinity Trailing algo, to Grid or DCA, and custom order groups.
It’s a good opportunity to make some more significant things, while your GoodCrypto Bot is trading in profit without manual intervention.
How to pursue crypto trading strategies with Good Crypto?
Connected Stop Loss and Take Profit Orders
You can connect Take Profit and Stop Loss to any order you send just in one click. Both Take Profit and Stop Loss will activate when your base order gets filled, and once one of them executes – the other will be canceled automatically. Your balances do not get locked in the process.
Choose a Trailing Take Profit instead of an ordinary one – unleashing the full power of Trailing Stop orders. This will give you an opportunity not to limit your potential upside if the price continues to move in your direction, instantly making your trading setups much more powerful and tilting the Risk/Reward ratio in your favor.
Specify a trigger timeout for your Stop Loss order to protect yourself against erroneous market moves caused by large orders or liquidations. If the price only briefly falls under your Stop Loss – it won’t trigger.
With GoodCrypto App you can set Trailing Stop orders even on exchanges where the original interface does not provide it.
Alerts
Alerts are a crucial weapon in every trader’s arsenal. The GoodCrypto App got you covered here as well, providing a wide array of alerts: from unlimited custom price alerts to order execution, sudden market movements, market and portfolio summaries, new exchange listings, and even DeFi gems monitoring.
MACD triple strategy in GoodCrypto
Inside the GoodCrypto platform there are many useful tools for analyzing the market, but we will take a look at one of the most popular MACD trading strategy and its variety – MACD Triple.
The MACD Triple strategy is a trading system based on the moving average convergence divergence (MACD). It uses multiple time frames, including one hour, four hours, and fifteen minutes, to determine buying and selling signals. The strategy also includes short-selling opportunities. It is useful for reversal signals during sweeping advances, since it compares closing prices to the range. MACD signals are often used to determine trend momentum and strength.
As one of the most common strategies that one also uses a stop-loss rule, or maybe a GoodCrypto trailing take profit to earn the maximum of the price movement. It uses a profit target of 1:3 or more, depending on the entry price. The traders close their open positions if the MACD crosses back the baseline in the opposite direction of your trade, a sign known as a reverse trading signal. And equally can be used in another market direction. Using this strategy, you can take advantage of both the short and long sides of the trend.
Practicing the MACD strategy, traders can determine the direction of limit / pending orders opening, which as we mentioned above, you can place as many as you want using the GoodCrypto app. This will help them enter the market in the right direction at the right time for a profitable trade. If the MACD crosses the moving average in the same direction as the price chart, it indicates that the trend has been “exhausted.”
But as it was noted, it is better to use several arguments to enter a trade with your strategy, or additionally use the technical analysis signals module inside the application.
Summing Up
If you’re looking for a great tool to trade cryptocurrency and manage your crypto portfolio, you might find some peace after signing up for the Good Crypto App, which provides you with advanced trading functionality, great portfolio tracking, and a suite of market research and analytics tools.
So install Good Crypto on iOS or Android and continue your crypto journey with ease!
SOL holders enjoy a variety of options for putting their tokens to work. Non-custodial staking is available in the Exodus wallet or with the native Solana-CLI command-line tool. Staking rewards are around 6%–6.5% APY at the time of writing.
Custodial staking is possible on Binance Earn, Kraken and FTX and, typically, offers fewer earnings. Binance Earn offered 6.5% APY this November 2021.
Then there’s lending on platforms such as Solend or Tulip Finance. Even staked SOL can be lent on Tulip, albeit for a meager 1.79% yearly yield, while Solend offers 3.87% for supplied SOL.
Lending becomes more exciting when providing stablecoins. Solend offers 24% on USD Coin (USDC), and Tulip grants 15% APY on USDC-USDT pairs via Raydium.
Solana initial coin distribution breakdown
The degree to which Solana is decentralized was the subject of heated controversy on Crypto Twitter this autumn. The pièce de résistance is the number of tokens held by the team and by VC backers. Solana has an initial token supply of 500 million SOL with a yearly inflation rate of 1.5%.
Binance Research found out that the team holds 12.79%, and VCs bought 29.15% of all tokens during the seed and funding sale, a total of 41.94%.
Figure: Solana initial token supply distribution
Source: Binance Research
The pie chart doesn’t include the $314.15-million token sale that Polychain Capital and a16z completed in June 2021, and the exact amount of tokens involved was not published. The exchange price for SOL was $30–$40 in the months ahead, though it’s probably fair to assume that a steep discount was applied, given the scale of the purchase. Presupposing a $20 token price, 15.7 million SOL or 3.14% of the initial supply would have changed hands.
Staking validators have to pay transaction fees on voting and syncing transactions but earn staking rewards as well as block rewards. Running a viable validator requires a stake that produces rewards in excess of transaction costs. In September 2021, the minimum stake required had surpassed $1 million — a significant barrier to entry for new validators.
Despite that, almost 1,200 validators are operational at the time of this writing. The top 19 validators control 33% of all SOL staked and could theoretically halt the network if they colluded.
Solana’s implementation is fundamentally different from Ethereum’s. On the latter, programs can hold state; on the former, they cannot. A program’s state is the data it uses.
For example, one piece of data could be an incremental counter that assigns a number to NFTs as they are minted. This incremental counter would be stored in a program’s state on Ethereum, which Solana cannot do.
Instead, Solana uses accountsto store and access data. Accounts can also store multiple addresses to send and receive tokens. Like Ethereum with its ERC-20 standard, Solana also supports tokens built atop it.
Unlike Ethereum, every token needs an address of its own, which is then part of an account. It is a bit similar to Bitcoin’s HD wallets in practice, but with a different implementation and functionality.
To make a long story short, we will look at active accounts instead of unique addresses. Though this number is difficult to pinpoint accurately, research from CoinDesk and Solana Beach arrives at a substantiated estimate of 1.2 million active accounts.
Solana protocol revenue and price-to-sales ratio
One of Solana’s most vital selling points is its low transaction fees. Currently, a transaction costs $0.00025. Transactions on Solana are a bargain compared to Ethereum, where a Uniswap trade frequently costs over $100. Conversely, these low fees lead to lower protocol revenues.
Source: Token Terminal (Y-axis has a log scale.)
The Graph reports earnings of just $3.2 million for Solana, while Ethereum miners gained $1.5 billion in the 30 days leading up to Nov. 16, 2021.
Looking at the price-to-sales ratio, Solana lands on a multiple of 30,909x earnings, while storage protocol Filecoin has a multiple of “only” 514x.
Solana is in a difficult position from a price-to-sales perspective. On the one hand, it needs low fees to remain attractive for traders and financial applications. On the other hand, SOL’s price is hard to justify at this point.
Driven by DeFi activity and NFT sales, Solana rose to prominence the fall of 2021. Constantly pushing the envelope, its team now wants to onboard “one billion users” in the following years.
Named after a famous beach near San Diego, California, Solana is the brainchild of former Dropbox engineer Anatoly Yakovenko. Development started in 2017, and in April 2018, he and his co-founder, Greg Fitzgerald, secured their first backing from Abstract Ventures and 500 Startups. Solana had its big break in 2020 when Sam Bankman-Fried backed the project. He successfully deployed FTX’s decentralized exchange protocol, Serum, on Solana. In 2021, Polychain Capital and a16z injected $314 million into the blockchain venture with a private token sale.
Solana’s beta mainnet saw the light of day in March 2020 and quickly attracted developer attention. According to recent research, it is on a path to overtake Ethereum when comparing developer activity in the form of GitHub commits, pull requests and forks.
This chapter will focus on metrics that reflect the real-world usage of Solana. Looking at the meteoric price growth is a good indicator of investor confidence. To gain a deeper understanding, we’ll look at unique addresses, lending and staking rates, and protocol revenue plus the price-to-sales ratio.
As a marker of centralization risk, we’ll finally look into how many tokens are held by the team and VC backers.
Solana Summer: SOL price rose more than sixfold in autumn 2021
Source: Messari
Solana’s (SOL) price was on an absolute tear starting in August 2021, called “Solana Summer.” The token’s value rose from $35.15 to a high of $258.65 between Aug. 1 and Nov. 6, 2021. A boom in NFT sales, perpetual futures volume and a tight-knit community propelled Solana’s market capitalization to more than $73 billion and made the token No. 4 on the CoinMarketCap list of coins sorted by market cap at times.
Seen from a November 2021 perspective, Solana is up more than 130x from a year ago and outperformed all other top 100 tokens except Axie Infinity (AXS), Kadena (KDA) and Fantom (FTM).
Insider Insight with Bernhard Koch, Founder and CEO Cryptix
As a venture builder in the fintech sector, we build bridges between innovation and effective everyday usability. Thus, it is a given that we closely follow the developments in the DeFi space and the increased use of DAOs. What we recognize, however, is that DAOs intentionally lack substance when it comes to financial regulation:
DAOs are unregulated and legally unaccountable – not the right approach we deem suitable to serve the masses. The widely used “dot-org-constructions” based on non-profit-foundations are mainly used to avoid taxes.
At Cryptix, we have chosen to go the extra mile with a long-term regulated approach. While the main character of a DAO meets our requirements for decentralization and community engagement, it lacks the legal safety and conformity for the masses. Consequently, we have tried to think out of the box, and have successfully created a superior solution: We call it DGO – decentrally governed organization.
Unlike a DAO, a DGO makes use of a legal body: The Societas Cooperativa Europaea (SCE). While an SCE is not a new concept, we’ve discovered that very few are aware of this cooperative form, despite its great number of benefits:
Legal clarity and compliance by using a real legal entity.
Responsibility and commitment as the SCE is legally liable.
DGOs can have a for-profit motive, thereby creating more sustainable and engaging incentive structures for its members, which are ultimately more supportive and loyal to a project.
An SCE can change residence within EU countries with low hurdles to operate from a jurisdiction where the environment favors innovative approaches of such DGO and its members.
Voting on governance and strategic decisions can be made accessible and incentivized in a user-friendly mobile app, with absolute transparency and no manipulation due to real on-chain voting. While members, due to its simplicity, won’t even notice they’ve just voted on-chain.
These benefits come with a more complex, time-intensive, pioneering and expensive path. Nevertheless, we are committed to going down this path and thereby creating a never-before-seen and promising concept, born from the connection between SCE and blockchain technology. In our opinion, this is the next logical step towards enabling a non-crypto community to experience the benefits of decentralized finance, and include them in a powerful, transparent and direct way of decision-making in important projects.
Cryptix is already employing the described DGO model and legal construction within one of its projects, a layer-1-blockchain with its own native cryptocurrency, products and complementary services in layer-2. These Layer 2 services will be run by a DGO and involve their users at the enterprise level in a very simple and highly transparent way as never before.
We are excited about this journey and are already receiving stunning feedback for this concept. We will keep a close eye on user participation and learnings to grow and adapt together for the benefit of the community, its members and our society.
Summary
Ethereum helped crypto to get to where it is today. Without NFTs, without DeFi, and without the ability to launch tokens in less than 30 minutes, many projects simply would not exist, and the world would be poorer for it.
Ethereum is here to stay. Massive network effects, a large pool of development talent, and a mature tech stack mean it is easier and more sensible to launch on Ethereum than any other blockchain.
The onus is now on Ethereum’s developers to manage a timely upgrade to a more scalable and renewable future without compromising security and uptime — a genuinely colossal feat. The last upgrades to the mainnet have gone off without a hitch and have inspired well-earned confidence in the skills and thoroughness of the contributors.
2022 will be a make-or-break year for Ethereum. Its open, self-reflective culture and the surprisingly far-sighted thought leadership of Vitalik Buterin inspire confidence that it will be its best year yet.
The No. 1 DApp on Ethereum is the NFT marketplace OpenSea. OpenSea outpaced its competition in 2020 and is now the go-to place to trade and collect NFTs.
With more than $10 billion in total sales, it is a true juggernaut, solely responsible for 135,000 ETH (~$450 million) in burned transaction fees since the London upgrade in August 2021.
No. 2 is the DEX poster child Uniswap, which brought Bancor’s Automated Market Maker model to the mainstream and is the go-to for coin swaps. Following these two monsters are SushiSwap, an erstwhile Uniswap clone that now lives on more blockchain platforms than any other DEX, and OlympusDAO and Curve Finance, two DeFi powerhouses.
NFT sales volume and transaction volume
Ethereum NFT sales amounted to $2.2 billion in September and $1.7 billion in October 2021, according to research by Messari, more than eight times the volume of the next competitor, Solana. Most of that volume comes from big-ticket sales such as CryptoPunks or BoredApes, where a single deal can be worth millions.
However, looking at just the dollar-denominated volume doesn’t paint a complete picture. Ethereum saw 132,879 unique buyers in October, compared to 68,235 on Solana. The average amount a collector spent on Ethereum was $12,878 in October 2021.
While Solana’s dollar-denominated value was only an eighth of Ethereum’s, its activity was half. Ethereum certainly faces strong competition in the NFT market, and sky-high fees hurt its position because they price out new entrants.
Figure: Daily NFT sales on Ethereum
Source: NonFungible.com
Top projects like CryptoPunks and BoredApes at record prices, and traditional companies like Adidas and Nike have launched NFT collections. So it is safe to assume that this technology is not yet exhausted, even if NFT transaction volume has dropped sharply, from 1.08 million sales in October to 360,000 in December 2021.
