Overview

Solana is the next generation Internet platform (Web 3.0), and its structure is a public transaction encryption network based on blockchain. Solana’s open source software network coordinated globally dispersed computers into a completely unified cloud platform owned and operated by users. Solana supports high-speed and low-cost transactions on a single-layer blockchain, thereby alleviating the need for additional scaling solutions that other networks usually require.

SOL is the native token of the Solana network and represents a part of the ownership in the ecosystem. At this stage, SOL tokens mainly have the following five functions:

  • Provide support for decentralized applications (dApps)
  • Payment
  • Pay network fees
  • Provide network security through staking
  • Promote network governance.

Figure 1: SOLANA blockchain related data, data as of November 29, 2021

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Solana’s blockchain solution

The Solana network aims to provide developers with a high-performance Web 3.0 cloud platform that provides scalability on the Layer 1 blockchain. This method aims to optimize speed, cost, and improve the degree of network decentralization, eliminating the complexity of the Ethereum Layer 2 solution. Specifically, these characteristics can be quantified as:

  • Speed: 400 milliseconds block time
  • Cost: 0.000005 SOL per transaction (approximately US$0.001).
  • Decentralization: 2,242 global nodes.

Utilizing a unique architecture method with eight core innovations and optimizing for different technical trade-offs, Solana finally reached the level of network high performance. However, these “trade-offs” have also brought some problems. For example, the degree of network decentralization is relatively low (compared to networks such as Ethereum), and the result is that the network is at risk of interruption, such as the DDoS attack that occurred on September 14, 2021 , Which once caused all the functions of the Solana network to be shut down for about 24 hours. Nevertheless, Solana is still attracting users who like this type of network design, and they are currently expanding the scale of the Web 3.0 blockchain cloud computing market by enabling the following features:

  • New users: Solana enables previously underserved, cost-sensitive users to access existing encrypted applications such as Decentralized Finance (DeFi), Non-Homogeneous Tokens (NFT) and other Web 3.0 DApps.
  • Increase usage: Solana enables users to more actively adopt Web 3.0 applications by reducing transaction costs and increasing transaction speed.
  • New applications: Solana can support more new applications and gradually move itself into the mainstream market.

Technology trends often appear in cycles. Solana’s impact on the Web 3.0 cloud computing market is similar to the previous computing platform innovations that have promoted overall Internet adoption: • From mainframe to PC: In the mainframe era, computers are bulky and expensive , Which limits their access to academic researchers from selected universities. The advent of personal computers (PCs) reduced costs and opened up access to a new wave of consumers, which changed the situation at that time. Solana’s lower fees have a similar impact today.

  • From local to cloud: In the age of local networks, any organization must own and manage its own server or rely on other computer infrastructure to access software, but with the advent of cloud computing, people no longer need processes involving local hosting , While greatly improving application agility. Solana has a similar impact by providing developers with a single platform that is powerful enough to run Web 3.0 DApps while eliminating the complexity of Layer 2 scaling solutions.
  • From desktop to mobile: In the desktop era, the dominant applications are basically designed for fixed computing platforms, so the range of applications that can be supported is also very limited. But now, our main life is carried out on mobile devices, and it also provides developers with a mobile computing platform, which has changed the situation of desktop applications in the past and made it possible to develop new applications based on mobile, such as Uber. Solana designed DApps by improving the scalability of the Web 3.0 cloud and providing developers with a new infrastructure medium, which has had a similar impact today.

For networks such as Solana and Ethereum, this is a huge and fast-growing opportunity for the Web 3.0 cloud computing market. Many Web 2.0 cloud providers-including AWS, Google Cloud, Microsoft Azure, Alibaba Cloud and Tencent Cloud-have succeeded by serving different customer needs. The Web 3.0 cloud market is following a similar path, with networks such as Ethereum and Solana Is becoming a major competitor in this field.

Practical application

The Solana cloud economy has grown rapidly in the past year, driving the total value of the ecosystem to more than 110 billion U.S. dollars. At present, the entire ecosystem is mainly composed of the Solana Network (SOL) and assets issued on the network. The SOL community has jurisdiction over the ecosystem . These include assets such as digital services (smart contract DApp), digital dollars (USD-backed stablecoins) or digital goods and artworks (NFT) issued on the Solana network. The following is an overview of the value distribution between these categories:

  • Solana Network (SOL) occupies most of the value of the digital economy with a market value of $73 billion, and currently accounts for approximately 65% ​​of the value of the entire ecosystem.
  • Digital services (DApps) on the Solana network account for about one-third of the value of the entire ecosystem, and the specific data is about 35 billion US dollars, accounting for about 30%.
  • The value of digital dollars (stable coins) circulating in the Solana economy is about 4 billion U.S. dollars, accounting for about 3% of the economic value of the entire ecosystem.
  • The value of Solana-based digital goods and arts (NFT) is approximately US$1 billion, which accounts for approximately 1% of the total economic value of the entire ecosystem.

Figure 2: SOLANA cryptocurrency economic market value distribution

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Solana has successfully established a large and rapidly growing user community. The number of monthly active users (MAU) of the most popular Solana wallet Phantom has increased from 200,000 in August 2021 to 1.2 million in October 2021. If you compare Phantom with the most popular Ethereum wallet Metamask, Solana User growth is roughly the same as Ethereum in October 2020.

Figure 3: Comparison of monthly active users of SOLANA PHANTOM and ETHEREUM METAMASK wallets

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Since the launch of the network, developers’ interest in Solana has risen sharply in the past year. The attention of open source developers is a key indicator of the development of the Web 3.0 cloud network, because it is these BUIDLers that create the application ecosystem that will eventually attract users to the Solana network. To this end, Solana has been actively promoting hackathons and attracting more and more developers to register and submit projects to further promote the development of the DApp ecosystem.

Figure 4: Solana Hackathon registration status (left) and project submission status (right)

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Solana is a smart contract platform or general encryption cloud platform for the development of DApps. The Solana community has established a large ecosystem of more than 500 DApps within a short period of time after the network was launched. The areas of Solana DApp design mainly include DeFi, Web 3.0 and NFT, including:

  • DeFi: Use cases include open order book exchanges, automated market makers, lending platforms, asset management software, and payments.
  • Web 3.0: Use cases include Solana domain name services, data privacy web browsers, and off-chain data oracles.
  • NFT: Use cases include casting platforms, markets, games, music streaming, social media, and distributed autonomous organizations (DAO).

Figure 5: SOLANA chain decentralized application (DAPP) ecosystem

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

In the past year, the total locked-up volume (TVL) of the Solana DeFi protocol has increased, and it now accounts for about 6% of the total locked-up volume (TVL) of all encrypted projects. This achievement is mainly attributed to the increasing user’s interest in Solana Interest, increasing applications, strong SOL network performance, and increase in the issuance of digital dollars on the Solana chain (the total market value of stablecoins on the Solana network has reached approximately US$4 billion).

Figure 6: The total lock-up volume on the SOLANA chain and the change trend of SOLANA lock-up volume in the total lock-up volume of cryptocurrencies

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Finance is not the only growth area in Solana’s digital economy-in terms of consumption, Solana’s on-chain performance is equally good. In recent months, there has also been an increase in non-homogeneous tokens (NFTs) on the Solana chain that represent the ownership of digital properties (such as artworks, consumer goods, or other assets). The total market value of Solana blockchain-based NFTs has risen to over US$1 billion, Solana NFT’s monthly sales have increased to approximately US$250 million, and the number of independent buyers has increased approximately 4 times in the past three months to approximately 60,000 people.

Figure 7: SOLANA NFT secondary sales volume and number of independent buyers

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

As users, applications, and usage continue to grow, Solana’s network revenue has increased in the past year. By November 2021, Solana users have paid approximately US$4.5 billion for transactions such as sending payments, running smart contract programs, issuing new assets, and voting on network consensus, which is a 100-fold increase from the beginning of the year.

The Solana protocol reduces the supply of SOL by eliminating 50% of the total transaction fees, and the remaining 50% will be paid to the network’s computing infrastructure providers (validators), and staking of SOL tokens can be rewarded.

Since fee income reduces the supply, and the fees paid to pledgers will stimulate more people to hold tokens, the basic value model of SOL has been effectively supported under this token economy, and the digital token SOL has become a unit. A productive capital asset.

Figure 8: Monthly income on the SOLANA chain, and monthly income trends

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Since Solana has adopted a supply deflation mechanism, the total supply of SOL will not be determined in the future. Although the total supply of SOL will vary based on network revenue, the speed of issuance of new tokens has been written into the Solana protocol.

The Solana mainnet beta was launched in March 2021, when the supply of SOL was 500 million. During February 2021, the SOL supply inflation rate was adjusted from 0.1% to the initial inflation rate of 8%. After that, the initial inflation rate of 8% was reduced according to the annualized dis-inflation rate of 15% until it reached 1.5. % Long-term inflation rate. As of November 2021, the circulation of Solana network tokens is approximately 509 billion SOL, and the total inflation rate is estimated to be approximately 7.3%.

Figure 9: SOL token supply release schedule

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

A brief history of Solana

The founder of Solana is Anatoly Yakovenko, who first conceived the key elements of the project and its technical approach at the end of 2017. The internal testnet and official white paper of the Solana network were released in early 2018, and the Beta version of the Solana software protocol mainnet was launched in March 2020.

Between 2018 and early 2020, Solana Labs, the development company behind Solana, conducted a series of financing transactions.

Figure 10: SOLANA financing history

In-Depth Research Report: Interpretation of Solana in Grayscale Panorama

Competitive advantages

Solana has the following competitive advantages:

  • Team: Solana has a strong core technical team composed of former employees from Qualcomm, Google, Dropbox and Apple.
  • Technology: Solana has a novel technology blockchain solution that provides high scalability and low transaction costs, making it different from other networks.
  • Community: Solana has a strong and active community of users, developers, industry partners and investors.
  • Ecosystem: Solana has established a large and fast-growing DApp ecosystem, with new use cases constantly emerging.

potential risks

  • At the network level, Solana also faces some potential risks. At the same time, there will be some pressure from competitors in the encryption industry and external factors, including:
  • Competitive network: Solana faces competition from other blockchains with smart contract functions, such as Ethereum, Binance Smart Chain, Internet Computer Protocol, Avalanche, etc.
  • Economy and valuation: Compared with other blockchains such as Ethereum, Solana’s network fee income is relatively low. Unless fees increase due to new applications, increased usage, or increased fees, it may not be possible to support a cash flow-based valuation model.
  • Degree of centralization: If one day, one or a group of entities control most of the supply of SOL tokens, the Solana network may become over-centralized. In addition, if you want to participate in the Solana network, users may need more professional equipment to improve support, which means that the network cannot attract a large number of users, and then may not be able to achieve a high degree of decentralization.
  • Regulatory uncertainty: Solana may face scrutiny by various regulatory agencies. So far, regulatory agencies have generally only identified Bitcoin and Ethereum as assets that are not securities.
  • Cybersecurity: Solana uses a variety of new technologies and methods to have pros and cons. First, the Solana consensus mechanism uses a new blockchain technology that is not widely used, and may not operate as expected; second, the cryptographic technology at the bottom of the network may have flaws, including flaws that affect Solana network functions or make the network vulnerable to attacks. Finally, Solana’s economic incentives may not work as expected, which may lead to network insecurity or poor performance.

Summarize

There is no doubt that encrypted network platforms such as Solana can provide support for next-generation networks and cloud waves. Web 3.0 DApp can provide users with many innovative benefits and also generate strong consumer demand.

However, the performance of many head blockchain cloud computing platforms is not good, transaction processing is slow and costly, and some require complex expansion solutions to provide support. These issues limit the large-scale adoption of the encryption economy. Solana uses a unique technical approach, optimizing trade-offs to prioritize high scalability, making on-chain transactions faster and cheaper than many other networks. Solana has gained a large and fast-growing active user base, developer community, and DApp ecosystem, and it has also been driving the rapid growth of the network.

The annual revenue of the Web 2.0 cloud computing market has reached 350 billion U.S. dollars, and the market value is as high as 4.6 trillion U.S. dollars. Solana has positioned itself as a challenger in the traditional market and has begun to grab the market share of Web 2.0.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/73978-2/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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