Solana's (SOL) blockchain stands out for its inherent speed and cost-effectiveness compared to other well-established blockchains. As a decentralized protocol, Solana incorporates an innovative Proof-of-History (PoH) timing mechanism, that is implemented before, and facilitates its Proof-of-Stake (PoS) protocol structure.
What makes Solana special?
High throughput: Solana can handle over 65,000 transactions per second (tps), making it one of the fastest blockchains in existence.
While this capacity figure comes from testing rather than real-world use, even if Solana performs at 50% of its testnet speed at scale, it would be a groundbreaking achievement in the blockchain space. A transaction speed of 65,000 transactions per second is approximately 10,000 times faster than Bitcoin, 4,000 times faster than Ethereum, thirty-five times faster than Ripple, and even about 2.5 times faster than Visa. Currently, Solana processes approximately 23 million transactions per day which is significantly higher than other chains.
Low transaction fees: Solana's fees are considerably lower compared to other major cryptocurrencies, making it an attractive option for developers and users alike.
The average transaction fee paid by Solana's users in the last epoch as of 24th Jan 2024 was 0.000073669 SOL. Many transactions would have paid the minimum fee of 0.000005 SOL, but some would have paid more to guarantee priority processing of their transactions. At the current market price, 0.000005 is equivalent to 0.004 USD.
Scalability: Solana is designed to scale with Moore's Law, ensuring that it will continue to improve its performance as technology advances.
Decentralization: Solana maintains a high degree of decentralization, fostering a more secure and resilient network.
The recent Solana Foundation's Validator Health Report highlights that the Solana network remains one of the largest proof-of-stake networks. The report cites metrics such as total global node count, node distribution, and geographic and data centre diversity.
Given Solana’s high speed and low fees, it makes an ideal chain for a DeFi app. Let's dive deeper into its DeFi ecosystem. According to Defilama, the Total Value Locked (TVL) for Solana grew by 600%, from $250 million in January 2023 to $1.272 billion in January 2024. Despite the growth, it is still far from its 2021 peak of $10 billion. With a TVL of $1.272 billion now, Solana ranks 4th compared to other chains.
The Jito airdrop precipitated a surge in user engagement within Solana's decentralized finance (DeFi) ecosystem, as enthusiasts sought to capitalize on the prospect of acquiring a share of the airdrop. Concurrently, Marginfi, a decentralized lending protocol operating on the Solana blockchain, witnessed a substantial growth in Total Value Locked (TVL), expanding by a notable fifteenfold quarter over quarter. This underscores the increasing traction and interest in Solana's DeFi landscape, showcasing a robust influx of participants and capital into decentralized lending platforms.
We are also starting to see DEX volume on Solana catching up to Ethereum. With major catalysts like Firedancer a new validator client for the network aimed at increasing speed slated to launch in the first half of 2024, will we see TVL levels back to their former high?
How about competition?
Dubbed as ‘Solana’ killer, Sui is a layer 1 blockchain that prioritizes instant transaction certainty and faster smart contract deployment. Its unique feature is the native programming language Move, based on Rust, which simplifies smart contract development in the DeFi industry.
Validators in SUI function like miners but enable parallel processing of transactions, boosting throughput and scalability. This parallel approach makes SUI versatile for applications like gaming and retail payments. The blockchain scales horizontally, adapting to application demands, and resulting in low transaction costs.
Sui is currently the #2 non-EVM chain by Total Value Locked (TVL), only 8 months since Mainnet launch! During a surge in inscription-driven activity, Sui encountered two days of exceptionally high transactions, surpassing 10 million transaction blocks processed each day, with a peak of over 13.8 million transaction blocks processed on December 22, 2023. In fact, despite the heightened demand, the average gas price decreased, highlighting the network's stability and the efficiency of Sui’s gas pricing mechanism. Demonstrating remarkable resilience, Sui achieved a peak TPS of 6,000, underscoring its impressive network throughput capabilities.
With such similarities to Solana in terms of high throughput and low gas price, it is interesting to see how each chain will play out, especially in the Defi space.
We, from Blockchain at NTU, thank you for being part of this enlightening journey and extend a warm welcome to the enthralling universe of blockchain!
NOTE: Articles written by Blockchain at NTU ARE NOT FINANCIAL ADVICE!
Written By:
Perion Lim
Researcher of Blockchain at NTU Club AY23/24
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