CRYPTO MOVERS AND PRICES
Smart contract platforms Ethereum, Solana (SOL), and Polkadot (DOT) were rallying this morning. ETH is trading at its highest point since mid-May.
Crypto Story of the Day
Solana (SOL), which started the year with a USD 74.67 million valuation, reached an all-time high market cap of USD 36.2 billion this morning. The network’s approach to blockchain scaling is unique among peers, but is unproven in practice.
The Solana network was developed by San Francisco-based Solana Labs. It’s mainnet launched in 2020 after the firm conducted a 2019 USD 20 million raise led by Multicoin Capital. Solana Labs also raised USD 314 million in June via a round led by Andreessen Horowitz and Polychain Capital. The raise involved the purchase of the network’s SOL tokens.
Following the 2019 raise, Managing Partner of Multicoin Capital Kyle Samani described Solana as “the closest thing to the ‘world computer’ blockchain developers conceptualized in the early days of crypto...While many developers have proposed sharding solutions for scaling existing layer 1 solutions, all of those solutions introduce a tremendous amount of complexity and create new user experience problems.”
Unlike other smart contract platforms such as Ethereum, Polkadot, and Cardano, Solana aims to achieve scaling on its main layer. While Ethereum, for example, has looked to off-chain solutions such as ZK-Rollups or the Polygon Network, Solana utilizes technology that its creators claim allows it to scale its main chain.
The network relies on “proof-of-history” on top of proof-of-stake to facilitate what it claims is a 65,000 per-second throughput capacity. This capacity, however, is largely theoretical and untested.
For example, in 2019 ahead of the network’s mainnet launch, Solana Labs revealed that an “internal scalability test” had achieved a “[m]aximum transactions per second peak” of 47,000. However, this metric hasn’t been achieved in practice; Solana’s website showed a “current [transaction per second]” of 1,763 yesterday (by comparison, Ethereum currently processes about 20 transactions per second).
Solana’s focus on layer 1 scaling is advantageous, according to the firm, as it “ensures composability between ecosystem projects by maintaining a single global state as the network scales.” Developers will “[n]ever deal with fragmented Layer 2 systems or sharded chains.”
Solana has seen growth in its ecosystem over the past year. For example, last summer FTX launched Serum, a decentralized exchange built on Solana. According to Solanaproject.com, a site for tracking data on the network, Serum currently holds U.S. 459 million in locked assets.
According to the site, overall Solana DeFi currently holds USD 3.25 billion in deployed capital. DeFi protocols Radium and Saber hold USD 1.06 billion and 764.90 million, respectively. Solana also hosts USDt 290 million and 1.19 billion UDSC. The network also hosts a number of NFT applications, however, the extent of this activity is difficult to quantify at the moment.
Solana has adopted a novel approach to scaling as opposed to its peers. According to the data presented by Solana, this approach has achieved significant throughput capacities, though the upper bounds of the network’s transaction speeds remain untested in practice. Having said that, historically, crypto investors have been receptive to new approaches to blockchain scaling.