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Solana has been propelled by three factors: technology, products, and partnerships, as well as the “SBF factor.” Could this help it compete with Ethereum?
The crypto world is teeming with “Ethereum killers,” or projects that promise to dethrone the undisputed leader in blockchain applications. Such boasts can mostly be dismissed as a publicity stunt to garner money and attention because, for the time being, there is little evidence that Ethereum’s empire is under serious threat. But, in recent months, one potential candidate has gained more traction than others: Solana.
Founded in March of 2020 by former Qualcomm executives, Solana opened its blockchain to the public early this year. Like others competing for Ethereum’s crown—including Polkadot, Dfinity, and Cardano—Solana claims to offer a faster and more efficient alternative.However, the project has stood out for its quick execution and ability to generate buzz, causing its SOL token to skyrocket and blue chip investors to rush in this summer with $314 million in funding.
It’s too early to tell whether Solana will maintain its momentum or become a serious competitor to Ethereum. However, three factors can be identified that have propelled its rapid rise: technology, products and partnerships, and an intangible quality known as the “SBF factor.” Here’s a closer look at all three of these factors to see if the crypto world should take Solana seriously.
Solana’s blockchain technology
The criticism levelled at Ethereum is that it is slow and expensive. While its versatility and pioneering use of smart contract technology have made it extremely popular, the Ethereum blockchain currently tops out at 15 transactions per second, and its “gas” fees skyrocket when the crypto action heats up.
All of the would-be Ethereum competitors promise a faster and less expensive experience. In Solana’s case, that translates to around 50,000 transactions per second and fees of pennies per transaction. The project also aims to address a long-standing issue, expressed in an axiom, that a blockchain can excel in only two of three areas: decentralisation, security, and scalability.
Founder Anatoly Yakovenko claims Solana’s breakthrough comes as a result of “8 key innovations.” While it’s unlikely all eight of these are significant (“8 key innovations” feels like a phrase ginned up by marketers), the company’s work around proof-of-stake and time stamping appear to be bona fide technological achievements.
A more technical breakdown is provided below, but the bottom line is that Solana appears to have discovered a way to speed up the consensus process that makes blockchain transactions reliable and immutable. Its process is based on something known as “proof of history,” which allows the nodes that validate transactions to work more quickly:
“Solana’s implementation of [what it calls Tower Consensus] enforces a global source of time across the blockchain through a second novel protocol known as Proof of History (PoH). This essentially provides a chronicle of previous events on the blockchain, ensuring that there’s a common record of what happened and when for permanent reference.
“Tower Consensus leverages this synchronized clock to reduce the processing power needed to verify transactions, since the timestamps of previous transactions no longer need to be computed. This helps Solana achieve a throughput that dwarfs most competitors (more on this later).”
In practise, this innovative system means that Solana has already added more transaction blocks to its blockchain than Ethereum, Bitcoin, Polkadot, Algorand, and Cosmos combined. Meanwhile, Solana’s promise of a fast and secure blockchain has resulted in a slew of applications for the fledgeling project.
Products and partners
A big reason for Ethereum’s success is the number of other applications that people have built on top of it.Games, financial services, media projects, and, of course, other blockchain projects that rely on Ethereum’s ERC-20 protocol to keep their own transaction records are among them.
Solana’s ecosystem is much smaller—as of June, it had approximately $1 billion in assets deposited as collateral, compared to $59 billion for Ethereum. However, in terms of developer tools and applications, the project is off to a promising start. So far, these include a protocol for constructing NFT stores—backers of Solana, like those of Ripple’s ledger, tout it as a less expensive and more environmentally friendly way to mint non-fungible tokens (unique digital artefacts that are gaining popularity in the sports and art world).
Solana has also discovered a possible niche in the field of decentralised finance, or DeFi. Specifically, the rapidly expanding trading platform FTX has built a decentralised derivatives exchange called Serum on top of Solana, and a Swiss firm called Digital Assets AG is using Solana to offer tokenized stocks.
Solana has made an impression in the short time it has been around by arranging collaborations with a number of prominent names in the crypto world. Kik, a messaging app, announced in April that it would be integrating with the project, as well as Circle and FTX, which plan to build out their stablecoin operations using Solana.
The SBF Factor
As previously stated, Solana is receiving support from FTX, the exchange founded by 29-year-old billionaire Sam Bankman-Fried, known in crypto circles as SBF.
SBF’s endorsements are significant because SBF is one of a handful of larger-than-life figures in an industry that worships them. SBF, like Vitalik Buterin with Ethereum or Changpeng Zhao (CZ) at Binance, possesses enormous social media charisma in addition to his crypto genius.
While SBF does not lead Solana’s technical direction (that is handled by the understated Yakovenko), his role as a patron and champion of the project is extremely valuable in terms of building buzz and confidence. SBF’s presence sprinkles pixie dust on Solana and provides it with a figurehead that other would-be Ethereum killers lack. (The leaders of Polkadot, Dfinity, and Cardano share SBF’s brilliance but lack his charisma.)
Of course, SBF’s blessing is no guarantee that Solana will succeed in the long run, but it does help to explain Solana’s meteoric rise in a short period of time.
The bottom line
Is Solana the true Ethereum assassin? No, primarily because the concept of an Ethereum killer is flawed in the first place. There is no reason to believe that Ethereum will be displaced anytime soon unless there is a major blunder or complete failure to implement its proof-of-stake ambitions—a step that should largely address complaints about its speed. The platform is simply too popular and entrenched for the crypto community to abandon it in large numbers.
But that doesn’t rule out the possibility of other blockchains giving Ethereum a run for its money in the long run. Solana is currently one of several relative midgets vying to take on the giant. But, in these early days, Solana may have risen to the top of the pack of potential rivals thanks to technical brilliance, astute alliances, and a charismatic champion.