The crypto world is awash in “Ethereum killers”—projects that promise to disrupt the undisputed leader in blockchain applications. Such boasts can mostly be written off as a stunt to grab money and attention since, for now, there’s little evidence that Ethereum‘s empire faces any serious threat. But in recent months, one would-be contender has gotten 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. But the project has stood out for its rapid execution and ability to create buzz, which has led its SOL token to soar and blue chip investors to rush in this summer with $314 million in funding.
It’s too soon to say whether Solana will maintain this momentum or if it can become a serious rival to Ethereum. But it is possible to identify three factors that have propelled its rapid rise: technology, products and partnerships, and an intangible quality we can call the “SBF factor.” Here’s a closer look at all three of these factors in order to assess if it’s time for the crypto world to take Solana seriously.
Solana’s blockchain technology
The knock on Ethereum is that it’s slow and expensive. While its versatility and pioneering adoption of smart contract technology has made it wildly popular, the Ethereum blockchain currently tops out at 15 transactions per second and its “gas” fees soar to absurd levels when the crypto action heats up.
All of the would-be Ethereum killers promise a faster and cheaper experience. In Solana’s case that translates to around 50,000 transactions per second, and fees that add up to only pennies per transaction. The project also aspires to address a long-time problem, expressed in an axiom, that a blockchain can only excel in two of three attributes: decentralization, 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 follows below, but the upshot is that Solana seems to have figured out a way to accelerate the consensus process that makes blockchain transactions reliable and immutable. Its process relies on something called “proof of history,” which allows the nodes that validate transactions to carry out their work at a faster clip. Here’s the more detailed breakdown from an earlier Decrypt overview:
“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 practice, this novel system means that Solana has already added more blocks of transactions to its blockchain than those of Ethereum, Bitcoin, Polkadot, Algorand, and Cosmos combined. Meanwhile, Solana’s promise of a fast and secure blockchain has already resulted in a variety of applications for the upstart 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. These include games, financial services, media projects and, of course, other blockchain projects that rely on Ethereum’s ERC-20 protocol to maintain their own transaction records.
Solana’s eco-system is far smaller—as of June, it had around $1 billion in assets deposited as collateral compared to $59 billion for Ethereum. But the project is off to a promising start in terms of developer tools and applications. So far, these include a protocol for building NFT stores—Solana’s backers, like those for Ripple‘s ledger, tout it as a cheaper and more environmentally conscious way to mint the non-fungible tokens (unique digital artifacts that are gaining popularity in the sports and art world).
Solana has also found a potential niche in the realm of decentralized finance or DeFi. Specifically, the fast-growing trading platform FTX has launched a decentralized derivatives exchange called Serum atop Solana, while a Swiss outfit called Digital Assets AG is using Solana to offer tokenized stocks.
In the short time it’s been around, Solana has also made an impression by arranging tie-ups with a number of prominent names in the crypto world. Those include the messaging app Kik, which announced in April it would being integrating with the project, as well as Circle and FTX, which together plan to build out their stablecoin operations using Solana.
The SBF Factor
As noted above, Solana is enjoying support on a number of fronts from FTX, the exchange launched by 29-year-old billionaire Sam Bankman-Fried—known in crypto circles as SBF.
The endorsements from SBF, who is also an investor in Solana, is significant because SBF is one of a handful of larger-than-life figures in an industry that worships them. Like Vitalik Buterin with Ethereum or Changpeng Zhao (CZ) at Binance, SBF has immense social media charisma to go with his crypto genius.
While SBF doesn’t lead the technical direction of Solana—a role that falls to the understated Yakovenko—his role as patron and champion of the project is immensely valuable in building buzz and confidence. SBF’s presence serves to sprinkle a dash of pixie dust on Solana, and gives it a figurehead that other would-be Ethereum killers lack. (The leaders of Polkadot, Dfinity, and Cardano share SBF’s brilliance but do not exude a similar charisma).
The blessing of SBF is no guarantee that Solana will succeed in the long term, of course, but it does help explain Solana’s remarkable rise in a short period of time.
The bottom line
Is Solana the true Ethereum killer? No, largely because the notion of an Ethereum killer is misguided to begin with. In the absence of a terrible misstep or a complete failure to implement its proof-of-stake ambitions—a step that should largely fix complaints about its speed—there is no reason to think anyone is going to displace Ethereum anytime soon. The platform is simply too popular and too entrenched to imagine the crypto world abandoning it in large numbers.
But that doesn’t mean there isn’t room for other blockchains to give Ethereum a serious run for its money in the long term. As it stands, Solana is one of several relative midgets aspiring to challenge the giant. But in these early days, Solana may have moved to the front of the pack of would-be rivals, thanks to technical excellence, shrewd partnerships and a charismatic champion.
Created by Saidler & Co. and Decrypt.