Why is Solana ecosystem so prosperous? Analysis from a technology and data perspective
By Jason Jiang, OKG Research
After the Dencun upgrade was completed, except for the sharp reduction in Layer 2 gas fees, the Ethereum ecosystem did not attract much attention. On the contrary, Solana once again became the focus of a short-lived meme boom. Although the Meme popularity of Solana ecology has faded this week, with its unique technical advantages and active community ecology, Solana has become a well-deserved “star” in today’s public blockchain circuit.
1. Will the relative advantage continue to expand? But the target is not Ethereum
Unlike most other Layer 1 blockchains, Solana’s goal does not seem to be to surpass Ethereum. The initial vision of Solana founder Anatoly Yakovenko was to make Solana “the Nasdaq of the blockchain industry” — to achieve Nasdaq-like trading scale and response speed on the blockchain to bring fast and inclusive onchain financial services to more users. Therefore, from the outset, Solana emphasized transaction speed and performance, which is also one of the most noteworthy features of Solana today.
Solana’s whitepaper claims a theoretical throughput of 710,000 transactions per second. However, at the time of writing this article, Solana’s TPS has been relatively stable at around 2,000–3,000 in the past 6 hours, which is nearly 300 times lower than the theoretical data. If we consider that Solana’s TPS calculation also includes “voting transactions” for consensus information (which currently accounts for about 2/3 of Solana TPS and is usually not included in TPS on other public blockchains), the actual TPS for “non-voting transactions” involving Dapp smart contract interactions may be only around 600–900. This is a significant gap from expectations, but compared to Ethereum and its L2, Solana still has a clear advantage, especially in handling parallel transactions.
Of course, TPS is not an “excellent indicator.” High TPS can be “disguised”: suppose a blockchain produces one block per hour, but each block contains 1 billion transactions, then theoretically, it would have 277,000 TPS. Such TPS performance may seem impressive, but who can accept a transaction taking 30–60 minutes to complete? TPS is important, but it often overlooks the impact of block time on user experience: for users, there is a huge difference between 0.4 seconds (Solana’s average block time) and 12 seconds (Ethereum’s average block time). Any delay over 1 second in user experience may be deemed intolerable, especially in today’s transaction-oriented crypto world, where every millisecond can be crucial. Therefore, Solana can provide not only powerful transaction capabilities but also an efficient trading experience that meets user demands.
Besides speed, low cost is equally important. Compared to Ethereum’s high fees, Solana’s fees are very cheap, usually requiring only 0.000005 SOL (a fixed value, approximately $0.001 at the current price) for a single transfer. There is an order of magnitude difference between this fee and the fees charged by Ethereum Layer2s after the completion of the Dencun upgrade. This difference may not be apparent in low-frequency high-value transaction scenarios, but when there is a demand for high-frequency transactions, the cost difference between $0.001 and $0.01 will be significant.
Moreover, only when the interaction costs between users and products are sharply reduced can technology adoption accelerate. History has repeatedly proved this “rule”: in the early 2000s, cheap Nokia phones replaced fixed telephone connections; cheaper smartphones replaced Nokia phones, rapidly ushering human society into the mobile digital age. The prerequisite for the accelerated penetration of these technologies is that they become efficient and cheap enough during their development. The above advantages of Solana have already shown enormous potential in many areas. Whether it is the rapid growth of concepts such as DeFi, Meme, NFT, GameFi, or the landing of the DePIN project, which truly integrates blockchain technology into various scenarios of the real world, economic and social activities in Solana are becoming diversified. In the long run, due to the “unusual” technology roadmap and architecture, Solana may also establish irreplaceable advantages.
Firstly, Solana relies heavily on hardware to cope with the challenges brought by protocol progress at the software layer, thereby ensuring that its speed and scale will increase with hardware progress. In the current context where Moore’s Law is gradually failing and AI technology is continuously driving the breakthrough of GPU/parallel processing capabilities, the computer hardware industry is surpassing software protocols and becoming a new hotspot. Solana is expected to hitch a ride on the development of hardware, further widening the performance gap with other Layer1 public blockchains that rely on software protocol progress.
In addition, Solana’s insistence on a monolithic architecture may also bring a different experience. This choice seems undoubtedly to be a reverse bet against the mainstream development approach of public blockchains. Including Ethereum, most public blockchains regard monolithic architecture as a long-term obstacle to scalability and attempt to solve the problems brought by monolithic architecture through modular expansion, Layer2 expansion, and various forms of sharding exploration. However, considering that as blockchain applications become more and more complex and intertwined with each other, the development complexity built on modular/layered/sharded systems may increase exponentially, and the difficulty for users to interact between different systems will also rapidly increase. In contrast, the coordination complexity of monolithic architecture is lower, the aggregation delay is lower, and the attack surface is relatively smaller. Solana may bring a more ultimate user experience with its monolithic architecture.
Of course, these are not certain. The only certainty is that Solana is rising rapidly and becoming the “traffic carrier” of the current Web3 world.
2. Solana, the “superstar” of today’s Web3 world
From a transaction perspective, Solana’s daily trading volume has maintained strong momentum over the past month. Unlike the drastic fluctuations in ETH trading volume, Solana’s token trading volume has surged by over 775.91% in a single month, breaking the $10 billion mark over the weekend, driven by the Meme frenzy. Although there is still a certain gap between ETH and Sol in terms of token trading volume, the distance between the two is clearly narrowing.
Compared to trading volume, the token turnover rate (referring to the frequency of token turnover buying and selling within a certain period) better reflects changes in market liquidity. Over the past year, Sol’s token turnover rate has consistently been higher than ETH’s, with a trend of further widening the gap in recent times. A high turnover rate does not necessarily represent high token value (it only proves trading value), but a low turnover rate definitely indicates a lack of liquidity.
From the perspective of active users, the number of daily active users on the Solana network has continued to grow rapidly since March, surpassing the milestones of 1 million and 2 million on March 16th and 17th, respectively, setting a record for the highest number of single-day active users in the history of the crypto world. This data may exaggerate the number of users because many people control multiple addresses and are difficult to distinguish. However, with a monthly growth rate of 379.8% and an annual growth rate of 1816.6%, the growth momentum of Solana’s active user base is still pleasantly surprising.
More importantly, whether in Web2 or Web3, the number of developers is one of the most valuable metrics. As Steve Ballmer once said, “The key to success for .net is developers, developers, developers.” In 2023, approximately 2,000 developers (including full-time and part-time developers) participated in the construction of the Solana ecosystem, ranking approximately 7th among all ecosystems in the crypto world. This ranking was higher before 2023, but due to the FTX incident and Sol’s sluggish performance, many developers left. However, considering the recent recovery of the Solana ecosystem, more developers may reconsider and enter the ecosystem.
Conclusion
Although Solana’s performance is impressive today, and there is even a trend to surpass Ethereum in some indicators, as mentioned at the beginning, Solana’s goal has never been to defeat Ethereum. Perhaps helping Web3 technology penetrate traditional Web2 markets with high throughput, low latency, and low-cost transaction performance is more in line with Solana’s original vision.
Moreover, even with strong competition from newcomers, the basic pattern of Ethereum’s leadership has not changed. In the rounds of competition in the past, the public blockchain ecosystem has already shifted from exclusive competition to cooperation as the main theme. Looking at the current landscape of public blockchains, apart from Ethereum, other public blockchains either absorb application value overflow based on Ethereum, focus on vertical ecosystems to attract mainstream participants, or attract Ethereum users and traffic transfers with innovative technological advantages.
Whichever path is chosen, it harbors tremendous development opportunities. Because in the future, we may enter a highly cross-chain integrated Web3 world, where the value barriers between blockchains will gradually disappear. Even Solana and Ethereum may completely realize the free circulation of value in certain scenarios, benefiting both blockchains.
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