Solana is a next-generation blockchain that has achieved greater scalability and speed than blockchains like Ethereum, while maintaining decentralization and censorship resistance.
They’ve accomplished this by using an inherently more efficient, time-based mechanism, called Proof of History (PoH). Their consensus protocol takes advantage of this global clock, and as a result, Solana can process transactions without having to inefficiently replicate information across nodes, or even worse, solve meaningless puzzles like in Proof of Work systems.
The Solana blockchain can achieve a capacity of around 65,000 transactions per second, with transactions costing only a small fraction of a cent. You can see their real-time stats here. This has important implications for projects that rely on speed and efficiency, such as crypto exchanges.
The rapid growth of the Solana ecosystem has made SOL, its native token, one of the top 10 cryptocurrencies by market cap (there are over 12,000 cryptocurrencies).
How Does Solana Compare to Ethereum?
Both Solana and Ethereum are blockchain-based smart contract platforms that enable developers to build decentralized applications (dApps) with a focus on security, scalability, and interoperability.
Ethereum was the first platform to offer a decentralized Turing-complete virtual machine called the EVM (Ethereum Virtual Machine). The EVM allows users to run smart contracts on the Ethereum network. Smart contracts are decentralized protocols that facilitate, verify, or enforce the negotiation of a contract without intermediaries.
While Ethereum was the first attempt at a smart contract ecosystem, it’s no longer the most efficient, and its gas fees and wait times can be problematic for DeFi applications. Both Solana and Ethereum are used for a wide range of applications, including crypto exchanges, stablecoins, supply chain finance, remittance services, identity management, and more. That said, Solana’s ecosystem is focused on applications that require fast and cheap transaction confirmations.
Top 8 Solana Ecosystem Projects and Why They Exist
The Solana ecosystem is home to over 400 projects, many of which are extremely innovative and offer something unique. But why are they doing so well? And how can you get involved? Here’s your guide to the top 8 Solana ecosystem projects and why they exist.
Saber
Saber is an automated market maker for trading stablecoin pairs on Solana. The liquidity for this stablecoin exchange is provided by crypto holders, who deposit crypto in the Saber liquidity pool in exchange for passive yield.
Saber implements the same stableswap algorithm as Ethereum stablecoin exchanges like Curve, but Saber benefits from the speed and efficiency of Solana. Saber is Solana’s golden goose. The more crypto is deposited into the liquidity pool, the more people will trade stablecoins on the platform due to its liquidity advantages. It’s ranked as the #1 Solana token by Total Value Locked (TVL), with no signs of slowing down.
Sunny
Sunny is a composable DeFi yield aggregator that enables users to create yield aggregations from multiple sources. Sunny bills itself as the Solana-based alternative to the likes of Yearn Finance.
Composability means the ability to use this aggregator for other DeFi projects, such as using the Sunny token for collateral or to repay loans.
Raydium
Raydium is an on-chain order book AMM that provides users with more control over their funds, while also reducing trading costs. Users have access to the order flow and liquidity of the entire Serum ecosystem. Raydium is both an AMM and liquidity provider for the Serum DEX (which we’ll look at later).
Orca
Orca is a decentralized exchange (DEX) that is designed for people, not programs. Orca is a new kind of DEX that aims to make trading as easy and intuitive as possible.
Trading on DEXs has traditionally been difficult and unintuitive for non-technical users, not to mention encumbered by high gas fees. Besides being built on Solana, Orca aims to solve these problems with a fair price indicator and easy access to your token balances (without having to open a browser extension).
Serum
Solana’s Serum is a trust-less DEX supporting full limit orderbooks and fast order placement, cancellation, and fund management. Their main differentiator is that they’re running on an on-chain central limit order book (CLOB).
SolFarm
Solana’s SolFarm is a yield aggregator that aims to maximize user profitability. Users simply deposit funds into a vault, which does auto-compounding to generate optimal yield. Yield farming refers to the practice of not only providing liquidity to receive yield, but doing so in a calculated and strategic manner to generate the most yield possible for users. The community is still growing as users continue to explore the various strategies that can be employed.
Parrot Protocol
Parrot is a protocol for borrowing and lending liquidity. They aim to make value locked in LP tokens accessible, by collateralizing liquidity and lending networks with these LP tokens. Parrot’s first product is the Solana-based PAI stablecoin, which enables yield farming on ETH Layer 1, as well as participation in new yield farms on Solana.
Parrot’s roadmap includes crypto lending with LP collaterals, margin trading using PAI, and more.
Marinade Finance
Marinade is a protocol for staking tokens on Solana. Unlike traditional staking, there’s no lockup period, which means that you can retrieve your staked SOL tokens at any time.
Rewards are also compounded, and you have the opportunity to earn serious DeFi yields.
The Hot New Solana Project: Hydraswap
HydraSwap is a decentralized exchange built on Solana, that aims to provide users with a CEX-level trading experience. Hydraswap is a high-performance DEX that comes with a powerful Automated Market Maker. Hydraswap aims to provide a fast, reliable, and inexpensive trading ecosystem for DeFi traders and Liquidity providers (LPs).
Hydra’s automated market maker (HMM) is aimed at enhancing the returns of LPs while improving their impermanent loss profile. HMM introduces smart pricing using a compensation parameter and oracle prices. This can enhance LP returns by 4x as compared to simple constant product market makers. Moreover, HMM combines this smart pricing with concentrated liquidity creating one of the most powerful venues for LPs.
By addressing the needs of LPs, Hydraswap will create a liquid and robust trading environment for DeFi.
Takeaways
Solana has seen tremendous growth in the last year, with once achieving a total value locked of over $15.25 billion in 2021. Around half of that TVL is split between Saber and Raydium, but there are hundreds of projects in the Solana ecosystem.
The DeFi industry is experiencing unprecedented growth. In fact, it’s reported that the DeFi market has grown 88-fold in just the last year. This rapid expansion has created opportunities for new entrants into the space, and Solana aims to capitalize on this trend by enabling developers to create a suite of next-generation products and services.
There are many different types of projects within the Solana ecosystem — from stablecoins to lending protocols — which means there’s plenty of room for innovation across multiple use cases. Together, projects like these are aiming to, once-and-for-all, bring decentralized applications to the masses, which requires providing the seamless, instant experiences that we’re all used to.
To join this emerging ecosystem, check out some of the top tokens and projects like HydraSwap, which are taking advantage of Solana’s key benefits, including scalability, speed, and interoperability.
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