Solana (SOL)
Date of Research: July 2024
Solana is one of the top competitors in the smart-contract based blockchain ecosystem with a market cap of over $82B as of Q2 2024. Overall, the Solana blockchain is a healthy, thriving ecosystem that is good to use for high-throughput projects such as NFTs or TradFi-backed stablecoin transactions, but the risk is the regular network outages. If they can go a full year with perfect uptime, they would be a stronger competitor to other major blockchains.
Fundamental Analysis
Website
Creation date: 1993-04-15
Whitepaper
Team
What are their names?
Anatoly Yakovenko and Raj Gokal
What other projects have they been involved in, if any? Founded Solana Labs in 2018, launched the Solana blockchain in 2020.
- Anatoly (LinkedIn) studied a BSC at Uni of Illinois 1999-2003. He worked as a software engineer at Dropbox, Mesosphere, Qualcomm, and Alescere.
- Raj (LinkedIn) studied economics at The Wharton School. He is an entrepreneur who initially started in digital health platforms and transitioned to Solana Labs.
Funding
They launched with private/pre-sales, an ICO, and various venture funding for a total of $359.55M raised as of 2024.
June 2021: over $314m from private token sale led by Andreessen Horowitz and Polychain Capital
Goals & Purpose
What is the goal of the project?
Simply put: mass adoption. They created a blockchain network built for smart contract use with the ultimate goal to create a highly scalable, fast, and secure blockchain that can support a wide range of decentralized applications (dApps) and services.
What problem is the project trying to solve?
Solana aims to address the limitations of other blockchains, like slow transaction speeds and high costs.
How do they plan to solve the problem?
They use Proof of Stake (PoS) to validate information and Proof of History (PoH) to make the validations faster.
Feasibility
Is this a new idea or has it been done before?
PoS is not new – Ethereum is the largest notable blockchain to use it. PoH was developed by the Solana Team.
PoH: Built “timestamps” into the blockchain itself through a verifiable delay function (VDF), which is basically a chain of hashes. Each new piece of data includes the hash of the previous state, making it impossible to alter or recreate the sequence. This method sets clear time boundaries for transactions, ensuring their order and timing within the network. Block producers generate these hashes in real time using a SHA256 function, which allows the network to accurately track when each event occurs.
Have they actually created the infrastructure/code/whatever is necessary for this idea, or is it still just an idea?
Yep. The blockchain has been functioning since 2020 (though it has had a few major outages that caused concerns about a lack of decentralization and reliability).
Do you think other people would buy in?
Yes. As of July 2024, Solana is the third largest blockchain by total value locked.
Audit & Security
Solana has been audited multiple times. Certik Skynet gives it a ~91% score, ranking it in the top 10th percentile. There were no significant vulnerabilities found in the audit reports. As a well-established open-source project, this is to be expected.
Sentimental Analysis
Social media: X, Youtube, Discord, Reddit
Social media creation date: All in 2018.
Is it active? Y
Are people talking about the project off its own pages? Y
Is what they’re saying good or bad? General sentiment is positive, but dragged down by concerns over the technical issues it has had and the lack of initial adoption of their crypto phone.
Are the people engaging with it paid to (promotors, influencers, sponsors etc)? A lot of influencers talk about projects on Solana, but it doesn’t seem that Solana pays influencers directly. They have a brand and press page for their assets and contacts.
Anatoly promoted a marketing scheme on X in early 2024 that promised an airdrop to Ethereum users who had spent more than 2 ETH in transaction fees and moved to Solana. This caused a large swarm of scams that showed how dangerous this kind of marketing is. It’s also been compared to a vampire attack, though it doesn’t exactly fit the description.
Where does this coin/token deserve to be on the list of top coins/tokens, if at all? Considering the large ecosystem and active community, it would be surprising if it drops out of the top 10.
What’s happened on Google trends about the coin/token/project? It has steadily increased over time, with the highest interest in Spain and China by far, and most of the activity around SOL price predictions and NFTs.
[image of Google Trends, with link]
Technical Analysis
Data: Live tracking of numbers can be found on CoinGecko.
Native network: Solana, it’s own.
Token usage (to pay fees or just an asset): Gas fees, governance, staking.
Consensus mechanism: Proof of Stake
Can it be purchased in Centralized Exchanges?: Almost all.
Active addresses: Over 1 million
Tokenomics
Is this coin/token on its own blockchain or a different blockchain? Its own.
Is the coin/token inflationary or deflationary? Inflationary, but with a predetermined disinflationary schedule. The decreasing inflation rate started at 8% and is reducing to 1.5% over time. It also burns 50% of transaction fees to create deflationary pressure, and stakers receive rewards that offset token dilution from inflation.
When was the initial token distribution? 24 March 2020
What was the form of the presale? Private sale.
Was there/will there be a lockup period? If yes, for how long? There are stake accounts which were created by an investment in SOL or a grant by the Solana Foundation. Each account has its own unlock date. A total of 12.6% of the total staked SOL is locked. The largest holders of locked stake will be released in 2025 and 2026 over a period of dates so as not to flood the market. There are no unlock dates listed past 2026.
Initial Coin Offering (ICO): Public auction sale on CoinList of 8 million SOL for a total raise of $1.76 million.
- Who received it? It was open for public sale [CoinCodex].
- How was the pool split? Investors 1.6%, Founders & Project 25%, Private Investors 35.4%, Premined Rewards & Airdrops 38%
What was the initial price of the coin/token? $0.22
What was the initial liquidity of the coin/token? 500,000,000 SOL
Is there a limit to how many coins/tokens will be produced? No.
What are the top wallets currently holding the coin/token? An overview of the distribution of nodes and locations can be found at SolanaCompass.com. A live update of accounts can be seen at Solscan.io.
Can the coin/token 10x, or has it already? It has, and many people believe it can again. Its performance in 2024 has been especially positive.
Where can you buy it (and where can’t you)? Most major exchanges.
Conclusion
Solana is a major player in the blockchain space with a developed ecosystem and thriving community. It doesn’t require Layer 2s for scalability because of how quickly the network should be able to perform, but there are some layer 2s that focus on interoperability to connect it to other chains through bridging, mostly. With an average gas fee of roughly 0.00014 SOL (two cents USD), the network is one of the cheapest.
The Nakamoto Coefficient, called the “Superminority” on Solana’s website, which is used to measure decentralization, describes how many node operators would be required to work together to control more than one third of the stake on the network, and thus essentially control the network; Solana’s superminority in July 2024 is 18, with an average of 1500 total validators. In comparison, Ethereum has over a million validators but could get a majority if the top two worked together. So, if client diversity is your preference, Solana has fewer options but a larger spread, but according to SolanaCompass, Solana’s coefficient has been decreasing since August 2023.
FTX, a major cryptocurrency exchange that collapsed in November 2022, was a significant supporter and investor in Solana. The collapse affected Solana’s reputation and market value due to this close association and the involvement of FTX in numerous Solana-based projects. Solana has shown signs of recovery, with ongoing development and growing ecosystem activity.
Solana continues to work on network improvements and expanding its community to fully regain confidence and stability. But the semi-regular outages have really made some people nervous about using the network for anything too substantial. Between March 2020 and July 2024, the network has seen roughly 15 major outages. While no blockchain is perfect, until people are confident the network won’t drop, mass adoption (their primary goal) is unlikely. Some people were concerned about the outages suggesting the network wasn’t very decentralized, which was true early on, but the more recent outages have been technical by nature and required software updates to be implemented by all validators before the network ran properly again, which is a problem any software-based tech could have.
In Q2 2024, Solana announced partnerships with PayPal and Stripe, two major payment platforms that will boost the network’s participation greatly, and has sent the price of the asset higher. A few TradFi companies have filed to have Solana ETFs too, which shows how much interest and confidence there is in the network.