Solana: Bringing Blockchain to the People

Hey everyone,

Ever since it launched in March 2020, Solana has experienced quite the roller coaster ride, losing popularity with the crypto cool kids as fast as it gained it.

Let's set the scene.

Solana's the young buck blockchain in the neighbourhood - bright-eyed, bushy-tailed, and ready to conquer the world.

They’re the new kid at school who just moved in from another city —a bit different, a bit mysterious, but undeniably cool.

They have all these big ideas about scalability, speed, and low fees that make the other blockchains look outdated.

And just like that, Solana becomes the talk of the town. Everyone wants to get to know them, date them, work with them, or at least catch a glimpse of their tech.

The hype is real, and Solana is at the centre of it all. It's attracting high-profile partners like bees to honey - VCs are clamouring to get their hands on them, fledgling DeFi and NFT projects are flooding its network, and its native SOL token is soaring.

It's like they just got voted prom king, and it's not even spring yet.

But, it turns out that the trends at Solana's new school move at a thousand miles an hour, and if you can't keep your promises, you're left in the dust.

And so, in the heat of September 2021, Solana, the “Speedy Gonzalez” of blockchains, trips and falls. A significant network outage leaves it lying face-down on the track for over 17 hours while the race continues. As a result, some spectators start questioning if this kid is all it's hyped up to be.

Is it ready for the blockchain big leagues, or is it just another 9 to 5 bank branch which closes on weekends?

Couple that with a devastating crash in markets in 2022 that caused SOL to tank by 96%, and you have a fall from grace that’s more devastating than Icarus.

So the question we face today is not whether Solana can reclaim its popularity, but how it plans to do so.

Solana: Bringing Blockchain to the People

There's been a quiet buzz growing around Solana this year as we enter what many believe will be the last leg of this bear market.

The price of SOL has more than doubled in 2023, and the Solana Foundation is humming with exciting developments - a dazzling new community office space in the heart of New York City and a Web3 smartphone are two highlights. All while still nursing a black eye and a bruised ego, thanks to SBF.

But before we get to Solana's exciting future and assess whether it really can bring blockchain to the people, let's dig into its past - its attributes, victories and failures.

The Brains Behind Solana

At the heart of Solana is its charismatic founder, Anatoly Yakovenko.

Anatoly's a force to be reckoned with – a former Qualcomm engineer and a Dropbox heavyweight; he's no stranger to the tech world.

Although, his true genius lies in his vision for Solana.

With the belief that blockchain technology should be as accessible and ubiquitous as the internet, he's been pivotal in guiding Solana through the peaks and troughs. His technical prowess and unwavering commitment to the project have led Solana to innovations that aim to turn it into a network that's:

Solana 101

Solana attempts to stand apart in the crowded blockchain space by positioning itself as a high-performance blockchain that leverages a unique consensus algorithm – Proof of History (PoH), which is a decentralised clock that helps to secure the network and improve its overall efficiency – designed to support thousands of transactions per second (TPS).

Proof of History

Anatoly's unique contribution to blockchain technology is his invention of the PoH consensus mechanism. His innovation allows for greater scalability and speed than other blockchains, addressing one of the critical challenges in the “Blockchain Trilemma.”

PoH is akin to creating a cryptographic timestamp, proving that a specific event has occurred at a particular moment without needing external proof. This allows Solana to process transactions more quickly and efficiently, increasing its scalability.

If that blew over your head, think of it like a magic clock inside your computer.

The magic clock keeps track of the order and time of everything that happens on the computer, giving it superhuman memory.

PoH does this exact thing, but for all the transactions that occur on the blockchain.

And the best part? No one can cheat or change what the clock remembers.

You can see how this translates to payments in the digital world: When people send money to each other over a decentralised network, it's super important to know who sent what money to whom and when. This way, no one can lie or cheat about what money they sent or received.

PoH, therefore, keeps track of everything, remembering the order and time of all the transactions. And it can do this really fast, so even if thousands of people are trading simultaneously, nothing gets missed.

Having payments that are trustworthy and quick are essential for a system that loads of people transact on in a decentralised manner.

Achieving that with its PoH mechanism makes Solana a heavyweight contender in the payments race for scalability. Imagine the Visa network, known for handling 24,000 transactions per second, suddenly having a rival. That's Solana.

Transactions Per Second

Solana set out to be a payments network that's faster than lightning. However, when the rubber hit the road, the reality of their capabilities fluctuated drastically.

Solana laid out its capabilities for handling over 700,000 TPS in its whitepaper.

That's 30 times Visa.

The problem with this is that it's entirely theoretical. In the real world, Solana is handling over 4,000 TPS and has allegedly reached 65,000 TPS during testing.

Even then, there are caveats for Solana's real-world figures. They don't just count standard payments but also include vote transactions submitted by validators, which don't represent actual user transactions. When these validator transactions get stripped out, Solana's actual figures come to around 400 TPS.

This is a far cry from where we started. But still, Solana is easily among the most performant blockchains, even when accounting for its over-inflated TPS.

Comparing blockchains is like comparing apples and oranges, but we'll do it for the TPS argument. The Ethereum mainnet handles an average of 10 TPS, while Bitcoin, the granddaddy of them all, processes around 5 TPS.

As far as Layer 1's go, comparing Ethereum and Bitcoin to Solana is like pitting a horse-drawn carriage in a race with a Ferrari.

The Roadblocks

Despite Solana standing head and shoulders above other Layer 1’s in terms of its TPS capabilities, its path has had several roadblocks.

Solana’s suffered at least seven network outages since its launch, with five coming in 2022 alone. One of the most prolonged outages lasted up to 17 hours in September 2021 after the network was overwhelmed by bot activity clamouring for an Initial DEX Offering.

Instances like these have earned Solana its meme status as a traditional bank only open during business hours. And rightly so; when a network claims it can handle 700,000 transactions and falters at 400,000, there'll always be backlash.

Unfortunately for Solana, speed isn't the only metric you're judged by in Cryptoworld.

Solana has faced countless centralisation concerns, with VCs holding a significant portion of SOL tokens. Early backers, like Multicoin Capital and a16z, received large allocations, raising the potential risk of concentrated decision-making power.

Furthermore, PoH requires expensive, specialised hardware, restricting the validator role to a select few.

That earned another badge of shame for Solana - being anointed the VC chain at the height of the last bull run.

The Road Ahead

As bleak as that picture looks, Solana's still alive and kicking.

Over the past week, there have been some promising data points for the network:

• Solana hit nearly 1 million daily active addresses, adding over 600,000 in two days tied to the GREED memecoin,

• $1.1 million worth of NFT sales were sold on Solana in 24 hours (more than any other network), and

• Solana saw a steady uptick in DEX trading volumes.

Although these figures may not all be indicative of organic growth, Solana has a lot going for it in the long run.

It boasts an average cost per transaction of $0.00025, making it possible to conduct large amounts of commerce on its network.

Because of this, it's unsurprising that its ecosystem is a bustling cityscape of dApps, with DeFi, gaming, and NFT platforms dotting the landscape.

And it's not just small-time players. Big names like Google, Meta, Chainlink and Brave have pitched their tents in Solana City.

And all that aside, Solana's biggest moonshot comes in the most unsuspecting form for a blockchain project.

Web3 on mobile?

Solana releasing its Android-powered mobile phone, Saga, harkens back to Anatoly's vision – to make blockchain as ubiquitous and user-friendly as the internet.

On a much smaller scale, it mirrors what Steve Jobs did for computing when he announced the iPhone on stage 16 years ago.

Even if you don't remember it, I'm sure most of you are familiar with the iconic image of Jobs holding up the original iPhone. It would change everything.

One thing is for sure, the launch of the Saga is far from having the impact that the iPhone's launch had. At the time of Saga’s pre-sale launch last month, it was reported that Solana had received under 500 orders for their Web3 phone.

In stark contrast, Apple sold 300,000 iPhones on its first weekend, and by Day 74 after launch, they’d sold 1 million of them.

It’s certainly not getting that level of viral attention, but the crucial question we have to confront is this:

Isn't a Web3 native mobile device precisely what this space needs for mass adoption?

Anatoly said it himself.

It's no wonder then that Solana decided to leapfrog the crowd and jump headfirst into the smartphone market.

Why this is a big deal

This isn't just about smartphones and blockchain.

It's about the potential of Web3 and the transformative shift in how we engage with digital experiences that the Saga unlocks. It's the potential “iPhoning” of the blockchain, if you will.

Take a minute and reflect on when Jobs unveiled the iPhone. That shiny gadget didn't just change the mobile industry; it was a harbinger of the seismic shift in computing. Suddenly, your computer wasn't just sitting on your desk at home or work. It was in your pocket. It was with you in the taxi, at the grocery store, on your date, and even in the bathroom.

This is similar to what the Saga phone attempts to do to Web3.

It puts it in your pocket.

Saga makes it effortless for users to engage with the decentralised internet, via the Solana dApp Store, directly from their phone. It's akin to having a miniature portal to the universe of DeFi and NFTs, ready to explore at your whim.

This direct engagement with Web3 isn't just a novelty but a vital step forward. You've only got to have two minutes of experience in the space to know how painful the wallet user experience is, let alone transacting through them on your desktop.

Saga is a radical departure from the clunky, big-screen browsing that has been the norm for Web3. The mobile phone's Seed Vault allows users to self-custody their digital assets securely, connecting all the dApps available on the Solana dApp store.

It's too soon to tell if this is the beginning of the “Jobsian” era for Solana's founder Anatoly Yakovenko. Yet, the parallels are evident:

• He’s launched a new product aiming to change how users interact with a particular technology,

• he’s laser-focused on seamless and straightforward user experience, and

• he’s shown an unrelenting willingness to innovate.

Saga is giving us a glimpse of what the future of Web3 might look like in the not-too-distant future.

Yet, innovation can be tricky. If we've learned anything, nailing the perfect formula for revolutionary products isn't a walk in the park. It requires meticulous attention to detail, a profound understanding of user needs, and a fair bit of luck.

Saga is an audacious project, and its success might pave the way for a whole new era of Web3 on mobile, just like the iPhone revolutionised computing.

One thing's for sure; Solana has thrown down the gauntlet.

Cryptoworld is watching. The Web3 landscape is changing, even if nobody's talking about it. You can bet your last Bitcoin on it.

SOL's Investment Thesis

As compelling as Solana's moonshot bet on the Saga is, this doesn't change our short-term investment thesis on their token.

SOL and other altcoins will continue bleeding against Bitcoin and Ethereum, going into the 2024 Bitcoin halving. So the best bet is to get your hands on BTC & ETH for the next year to protect your purchasing power.

As we can see above, the charts indicate that altcoins are clearly in a downtrend, having lost the shaded bull market support band.

And, as we highlighted earlier, an investment in SOL is not without its risks. From network stability to centralisation concerns, investors must keep their eyes open.

However, aside from fixable problems, with its solid technological foundation, impressive scalability, and expanding ecosystem, Solana offers a compelling long-term investment case.

As Chris Burniske, a prominent SOL investor, says - Solana has shown extreme resilience in the past year.

And, while most blockchain projects promise to “bring blockchain to the people” in some way, shape or form, the Saga smartphone is one of the best and most straightforward opportunities to keep that promise.

If Solana achieves a goal of that magnitude, it will undoubtedly be the most highly-valued blockchain network globally.

Even if it doesn't work out, it's a testament to the spirit of innovation that drives Cryptoworld forward.

After all, it's often the moonshots, the audacious dreams that don't always pan out, that redefine the landscape. So whether or not the Saga turns out to be the iPhone moment for blockchain, it's a leap worth celebrating.

Thanks for reading. Share this post with a friend if you found it insightful.

— Luca