DeFi derivatives market grew by 210x in a single year. This exponential growth brought challenges, such as the low speed and high costs of the blockchain networks. For example, it takes about 10 cents to change just a single number on Ethereum. What’s more, today, Ethereum can only handle around 20-30 transactions per second. To compare, in 2020, Visa’s network processed 188 billion transactions or approximately 6000 transactions per second. This is where Solana comes in.
Imagine doing transactions on a blockchain almost as fast as your Visa card transactions. What would that mean for you? How would this help you increase revenues? Can you afford to miss the opportunity to be one of the first movers in this space?
Centralized finance has scaled up its transaction processing capacity using traditional methods like using more servers. However, till recently, there were no such methods available in the DeFi space.
The world’s fastest blockchain protocol. It launched its mainnet in March 2020, although its origins trace back to 2017. Its founders called it Solana after a small beach town in San Diego where they enjoyed surfing. Solana’s team boasts leading minds from Qualcomm, Intel, Netscape, and Google.
As Solana’s CEO, Anatoly Yakovenko, said in one of his interviews, “with this team, it’s not surprising that we can build this ridiculously fast blockchain.” His goal is to make DeFi accessible on a larger scale.
With this team, it’s not surprising that we can build this ridiculously fast blockchain.
Since its launch, the Solana network has raised $25M in funding from Foundation Capital, Multicoin Capital, and Distributed Global.
What makes Solana different?
At the base of this network lay eight core innovations that make Solana unique.
- Tower Byzantine Fault Tolerance
- Gulf Stream
Solana is one of the lowest-cost chains because it costs $10 for every one million transactions. For example, Ethereum transactions cost an average of $17-$20 each, with the lowest fees of $4.42 in June 2021. We can explain it partially by the efficient and scalable proof-of-stake mechanism that Solana uses.
While Proof-of-Work (POW) is an efficient algorithm, many have criticized it for its energy use and environmental impact. However, reaching a consensus about the time spent mining a block is as essential as reaching it over the existence of transactions.
Timestamping is crucial as it lets the network know that transactions occur in a particular sequence. Proof-of-History allows creating a historical record showing that an event happened at a specific time, just like Reddit AMA users were taking a picture with today’s newspaper.
Proof-of-History (PoH) lightens the load of the network nodes in processing blocks. Solana’s PoH offers a method of encoding time into the blockchain with unparalleled precision. Additional to PoH, the Tower Byzantine Fault Tolerance security protocol that Solana uses lets the participants stake tokens and vote on the validity of the PoH hash.
This algorithm is Solana’s key innovation that allows blazing-fast transactions. Proof-of-History is not a consensus mechanism, unlike proof-of-stake or proof-of-work. PoH is a cryptographic clock in Solana’s blockchain, allowing nodes to agree on the time and the order of events without communicating.
Each Solana node maintains its clock by encoding the passage of time in a simple SHA-256, sequential-hashing Verifiable Delay Function. It decreases node messaging overheads and other computation bulk. As a result, Solana reaches very high speeds without high energy use or impact on the environment.
Solana has transactional capacity comparable to the speed of the Internet. So it’s no surprise that Solana has already exceeded Ethereum’s block count because this network creates a block every 400 milliseconds with sub-second confirmations and transaction speed of 50K per second.
Proof-of-stake (PoS) was proposed in 2011 by a Bitcoin Forum user QuantumMechanic. PoS has no miners but has validators instead, and it doesn’t let people mine new blocks but instead mint or forge new ones.
To become a validator, a node must deposit a certain amount of coins into the network as a stake. Then, when the node is chosen to validate the next block, it receives the fees associated with the transaction inside this block as a reward. Getting rid of the miners and eliminating the processing power to secure blocks makes PoS much more scalable than the PoW.
Solana scales as a Layer 1 blockchain at the rate of Moore’s Law, meaning that processing speeds double every two years. It scales by using only CPU and GPU power and doesn’t need sharding or other complicated Layer 2 solutions. As a result, the Solana network is exceptionally stable and secure.
Solana uses PoS to establish who is allowed to be a block validator.
Validators on Solana
Solana is stable and secured thanks to its global network of almost 400 validators. There are no minimum stake requirements so that anyone can become a validator on Solana. A validator, unlike a miner, doesn’t have to purchase more and more equipment to increase processing power.
Validators earn transaction fees. However, they lose part of their stake if they approve fraudulent transactions. It’s an excellent financial motivator, and it holds as long as the stake is higher than the transaction fees.
What can you build on Solana?
Blockchain technology is only as good as the network it serves. So Solana’s efficiency, speed, scalability, and cost-effectiveness attract sophisticated users. In one year, many forward-thinking teams built over 400 DeFi, Exchange, Infrastructure, and NFT-based projects on Solana.
Here are a few exciting projects that will help you understand Solana’s potential.
In August 2021, Serum has reached over $6B in trading volume. This project’s founder is Forbes 30 under 30 CEO of FTX Sam Bankman-Fried. Serum is a high-speed decentralized derivatives exchange with trustless cross-chain trading. It’s the biggest project on Solana, and it uses this network’s powerful feature to offer a sub-second settlement with minimal transaction fees.
FTX team chose Solana instead of Ethereum because of its speed, so the potential of building DeFi on Serum is enormous.
Serum is probably one of the most potent DApps in the crypto ecosystem. It is a decentralized exchange that anyone in the world can open an account on almost instantly. Serum is an open-source project that everyone can contribute to building.
Why use Serum?
It’s effortless to use, super low cost, and very fast. You won’t spend a fortune on gas fees and won’t wait for hours for transactions to settle on Ethereum.
Raydium provides a solution that allows for real-time high-frequency trading in cryptocurrency markets at a network level. Solana’s proof-of-history supports a high throughput network while providing an auditable record.
Raydium is an automated market maker (AMM) that leverages the central order book of the Serum exchange decks. This project removes the challenges of interacting directly with existing exchanges. Raydium allows you to benefit from participating in multiple exchanges simultaneously while maintaining lighting-fast speeds. It makes finding diverse offerings at the best prices easy. Raydium also enables new features that improve your trading experience. Thanks to Solana’s blockchain, it has meager transaction costs.
This innovative project allows you to trade like on a full-blown centralized exchange with all the graphics and trading views. In the meantime, it’s decentralized and also enables swaps. It’s pretty crucial because Solana’s minimal fees (less than a few cents) make swaps very convenient. Compare it to $10-$40 swap fees on Ethereum.
For any exchange to function, it needs initial liquidity. With decentralized exchanges, users provide liquidity for a reward. It is then registered in smart contracts, guaranteeing that the exchange will return your liquidity on request.
The main advantage of Raydium and the primary source of earnings is providing liquidity on so-called “farms” and fusion pools.
Fusion pools allow you to earn yields in various assets for providing liquidity. For example, in the fusion pool consisting of two RAY and MAPS assets, you can double your earnings in RAY and MAPS with a different annual interest for each. This feature is unique to Raydium and is called dual yield. You can use the RAY token for working with farms and fusion pools.
Bonfida brings together Serum, Solana, and the user into one consistent interface. It means you’re saving yourself time and effort by not having to switch between different tools every time you need comprehensive data.
This project is the flagship Serum GUI that brings first-of-its-kind Solana data analytics. Some of the largest market users and makers in the DeFi space use Bonfida’s API. It has seen a 25% growth of requests weekly and features a seamless graphical user interface to trade on Serum. Bonfida’s inception volume is 359.68 million, and their daily volume is 5.71 million.
Bonfida’s community is quite large, with over 2K users on telegram and Discord.
You can secure your SPL tokens with Bonfida wallet, convert your SPL token with their swap feature and use it to trade on Bonfida decentralized exchange. Creating a wallet on Bonfida is effortless and quick.
In Bonfida’s exchange analytics, you can view their custom-built exchange monitoring tools, including volume and latency monitors for all major exchanges. Their leaderboards offer clear and unbiased data at a glance so that you stay informed on where the exchanges rank.
Bonfida’s curated market insights data gives an overview of specific market aspects at any given time. Data is taken from a wide variety of exchanges across various categories and displayed for simple interpretation. It’s incredibly straightforward and user-friendly.
Bonfida also allows you to swap with a simple hit of a swap button.
Traditional financial and trading structures have always kept people apart, moving them in circles and locking them out.
Imagine a protocol that makes borrowing, lending, and trading accessible for all.
Oxygen offers tools to all participants to mobilize capital globally through decentralized access to pools of liquidity and credit and makes trading accessible for all. You can make the most of your money, borrow from peers, earn, trade directly out of pools. “Oxygen is 100% decentralized, 100% non-custodial, and 100% on-chain.“
Powered by Serum’s on-chain ecosystem, this prime brokerage protocol has a seven-figure TVL though the functionality is still developing. Once it can integrate with more parts of the Serum’s ecosystem, it can become a vital element of the applications stack on Solana.
Oxygen’s transactions are purely peer-to-peer, and it can support 100s of millions of users with its cheap, scalable, and permissionless protocol with no involvement from an operator. Oxygen doesn’t follow a pre-set market model and uses market-based pricing instead. It also allows you to use your entire portfolio as collateral to let you borrow other assets. As a result, you get a lower margin call and reduced liquidation risks.
Project Phantom Wallet
It’s not just the technology that gets in the way of using blockchain-based applications. Accessing these apps can be tricky because they are notoriously difficult to set up and use, especially for non-techies.
Phantom unlocks a secure and straightforward way to store and manage your Solana tokens (SOL). It works in your browser, so you can access it anywhere with an internet connection without downloading any additional software. Just open up a new account in seconds, and start sending & receiving tokens immediately. Phantom provides a convenient way for you to interact with decentralized applications built on top of Solana.
With Phantom, you can:
1. Send funds quickly and securely between wallets.
2. Receive payments in seconds without the sender having to sign up or create accounts.
3. Stake your Solana coins by locking them up while earning interest. Solana staking is in a couple of clicks.
4. Swap out your ERC20 tokens for others instantly without going to another exchange.
5. Get NFT support, which is not something you see in browser-based extensions. What’s more, you can also view your NFTs. No other browser wallets provide this feature. You can also send your NFTs to another address instantly using Solana without using any third-party interface.
6. Get in-built DEX, Web3, and ledger support.
And much more…
Kudelski security independently audited Phantom Wallet, which makes it pretty unique. Other wallets don’t tend to have independent audits because they want to avoid giving out their source code to the competition.
This wallet makes it easy for anyone anywhere in the world to access DApps on the Solana blockchain, with support for Ethereum and other networks coming soon.
Phantom has recently secured $9M from multiple VC firms, so they have a lot of capital to build new features. This wallet has all the potential to become your go-to Metamask alternative very soon.
Project Step Finance
Another member of the Solana ecosystem, Step Finance, is an aggregator, an all-in-one tool that yield farmers love. It enables you to do everything you need on Solana Ecosystem on one platform – from DeFi, DEX’s leveraged assets to NFTs, and more.
George Harrap, the CEO of Step Finance, has been in crypto for over a decade and was one of the early Bitcoin miners when he was a student. In 2014, he got into DeFi and tried building several projects back then. George tried Ethereum, but it was too expensive. He also tried the Sidechains, but there was no liquidity at the time. Then this blockchain enthusiast found Solana and the world’s largest market maker Alameda that provided liquidity for this network. This is how Step Finance started.
Main features of Step Finance:
- Step Finance is the first project on Solana to feature a swap aggregator with a balancer that selects the best price. Therefore, whatever you transact on Solana, Step will always be the best place to go.
- Transaction history for reporting that gets all the data from the chain. This feature is unique to Step Finance and doesn’t exist anywhere on Solana.
- The broadest coverage of NFTs on Solana with prices.
Project Cope on Solana
As Cope’s Whitepaper states, “COPE is a project that has two phases. Phase 1 of COPE involves seeking to ascertain and evaluate trader weaknesses and failings retrospectively based on trader calls made about crypto markets and provide reporting on this for self-analysis.”
This project designs a reporting engine and an automated investment product that users can grant permission to trade on based on the COPE index.
What makes Cope unique is that no other coin evaluates trader strengths and weaknesses based on their calls. The leaderboard they are creating will also be exclusive to this project. Because of the airdrops, Cope is also a very lucrative product. Airdrops offer traders literally “free” money.
In June 2021, Cope launched games and granted beta-access to the most loyal Solana community members. If a user beats the game, it withdraws $COPE for him. In August 2021, this project succeeded in growing into a series of protocols, allowing everyone to Stake, Play, and Contribute to earn more COPE.
Project Orca on Solana
We can compare Orca to a simplified and more user-friendly version of Uniswap. It’s an automated market maker, where users trade against a liquidity pool. This project is launching one of the first widely-used Solana yield farming smart contracts developed by an independent, bootstrapped team. Orca has extremely low fees, user-friendly UX, and lightning-fast speed.
Two co-founders launched Orca in February 2021, so it is still in its early stages. Grace Kwan, aka Ori, one of the co-founders, got an M.S. in Computer Science at Stanford and worked as an interaction designer at IDEO in Tokyo and as a software engineer at Coursera.
Project Mango Markets on Solana
It’s an open-source, DAO-governed project, making it an ideal leverage trading and lending platform in the DeFi setting. If you like leverage trading in DeFi – Mango Markets is for you.
Mango Markets allows you to trade using multiple assets, explore low-interest lending opportunities and receive rewards for providing liquidity to traders on the Mango Markets. It’s actually the first lending platform launched on Solana. Moreover, SPL lending is way better than ETH staking/lending.
When it comes to spot trading, Mango Markets looks and feels similar to Serum.
Project Star Atlas
Star Atlas is one of the most ambitious video games the world has ever seen. They are building an AAA space-themed video game metaverse on the Solana blockchain. In Star Atlas, you will find deep space exploration, competing fractions, political domination, decentralized autonomous corporations, territorial conquest, DeFi NFTs, and much more. All of this exciting stuff is paired with some of the coolest-looking SciFi art you’ve ever seen.
Star Atlas allows players to engage in a strategy game and earn rewards. What makes it different are the quality standards, which are way higher than other blockchain games today. The devs are building this metaverse with Unreal Engine 5, which delivers a cinematic quality game experience that feels very similar to physical reality.
DeFi within Star Atlas
Star Atlas CEO Michael Wagner and the developer team are building an equivalent of a stock exchange within the metaverse at various space stations. On orbital space stations, users can construct trading decks and trading platforms and allow others to come there and execute specific activities. Players can also monetize the creation of various virtual assets, such as social centers, bars, restaurants, fueling stations, etc.
Star Atlas offers more than an unparalleled gaming experience. It allows players to earn revenue in Atlas cryptographic assets (the game’s native currency) from the value exchange when other players visit their assets. Users can compound the earnings gained through gameplay. You can also buy ships, land, and other assets directly from the game. Their Discord has 25K+ members, and if you are looking for teammates or want to form a clan – this is your go-to place.
Project Synthetify on Solana
This project is a decentralized protocol for synthetic assets built on Solana. Synthetify allows users to create synthetic assets out of thin air based on their collateral. Thanks to Solana’s speed and costs, this platform has a much more enjoyable user experience than ETH-based exchanges. So in the case of liquidation events, the network bandwidth is much more efficient than on ETH.
Synthetify is currently adding more features, like debt pool control, that will enable the platform to give much more robust capital allocation and allow users to keep lower collateral ratios. For example, on ETH, the average collateral ratio is 400-500. Synthetify is aiming at just above 200.
Additionally, if you want to swap cross pairs, for example, FTT to MBB and vice versa, you will be able to do it on Synthetify in one trade without going to the USD or any other assets. The fee and the price will be the same.
It is clear that the future of cryptocurrency will focus on multi-chain. There will be a lot of blockchains with various purposes. Backed by great minds and companies, DeFi is poised to become the most advanced version of itself with even greater possibilities.
With its innovative approach and breakthrough technology, Solana is paving the way to the future for decentralized networks. It overcomes the inefficiencies of current blockchain protocols. This robust network can process more transactions per second than any other blockchain network in existence and does it cheaper and more efficiently. PoH, PoS, and other core innovations allow Solana to scale its network parameters almost infinitely. It is one of those chains where DeFi will continue to grow and scale.
There needs to be “the front page of Solana,” a place where you can manage your portfolio and see your positions across multiple contracts. This is where those numerous projects, including the ones we mentioned in this post, play a vital role. Maybe now it’s the time to start building your blockchain app on Solana.