The Solana Ecosystem

February 2021

The Solana ecosystem is growing rapidly. From network validators to wallet providers and applications, there is excitement surrounding the Solana smart contract platform. While blockchain networks rely on technical consensus to function, the value of a network depends on social consensus. Solana has attracted a collection of service providers and software engineers to support the platform and build on top of it. This month, we are going to look deeper into this nascent ecosystem. We will explore who is integrating with Solana, why they are doing so and what this means for the network going forward.

 

We have previously written about the philosophy and technical architecture underpinning Solana. As a brief summary, Solana was conceived in 2017 with the aim of becoming the fastest possible decentralized network. It would do this by enabling network throughput to match the performance of a single node. Anatoly Yakovenko, the founder of Solana and ex-head of compression at Dropbox, assembled a team of highly experienced engineers from places like Qualcomm, Intel and CERN (the particle physics laboratory). Together they have created an elegant solution that draws on the team’s experience in hardware and distributed systems. We discussed the history and design of Solana in our interview with Anatoly in November2020.

 

Three years of engineering went into building the Solana platform. But a platform with no users or applications is worthless. The first external group that Solana started to engage with was the validator community. Validators are responsible for validating transactions that run on proof-of-stake blockchains.They also power the network. In proof-of-work, these entities are known as miners, and it is essential to have a strong set of validators behind a network in order to keep it running and secure. From the very beginning, leading validators showed interest in Solana because of its novel design and excellent engineering team. One of the leading validators expressed to us privately that the reason that they are working on Solana is because it is more interesting than the raft of Ethereum clones that exist; its design is unique, exciting and it is worth being involved in the ecosystem.

 

Many of Solana’s validators came from the Cosmos community (the most sophisticated and established validator set) and today all of the most prominent validators -CertusOne, ChorusOne, FigmentNetworks, Staking Facilities - are validating the Solana chain. A recent count shows that there are over 500 active Solana validators distributed around the world, that have confirmed over 8 billion transactions on-chain.

With validators onboard, the network could operate.The next step was to get onboarding infrastructure to allow users to interact with the network. This means integrating with wallets and exchanges. Before the launch of the network, Solana started working closely with Coinbase Custody to offer a custody solution to early investors.This is important both for existing investors to hold their SOL, as well as for new investors thinking of investing. Knowing that there is professional custody available factors into investment decisions. More recently, we have seen a wave of other crypto wallets adopt Solana, including popular providers like Ledger and Exodus, resulting in 5 million unique Solana wallets existing. At the same time as onboarding wallets, the team was in contact with all of the major exchanges that would ultimately go on to list SOL as a trading pair. This is essential for building liquidity and getting tokens into the hands of users.

 

Having this infrastructure in place makes Solana fertile ground for developers to come in and start building applications. There are now over 120 projects in the Solana ecosystem that range from decentralised finance (DeFi) apps to music and identity protocols. Given the network’s incredibly high throughput, Solana is well positioned to host DeFi apps and we have seen some high profile stablecoins integrate already, including Terra, USDC and USDT.With these stablecoins now natively deployed on the network, it becomes even more attractive for developers to build on the high-speed Solana network, as they can use tokens like Terra directly in their applications.

 

The most prominent application now running on Solana is the Serum DEX, a project founded by FTX, a leading cryptocurrency derivatives exchange. We wrote about Serum in September 2020 and hold a Serum position our digital asset funds. Serum is a completely decentralized and permissionless exchange that brings unprecedented speed and low transaction costs to decentralized finance. The exchange boasts sub-second trade confirmations and fees as low as USD0.00001 per trade, making it superior to both other DEXs and most centralized exchanges. Serum has passed USD877m in trading volume since its inception in August 2020, with volumes growing month on month.

 

While having high profile projects like Serum running on Solana is important, it is also crucial to foster a grassroots developer community. To do this, the Solana Foundation hosted its first hackathon in Q4 2020 and attracted over 1,000 developers to participate in the event. Project submissions spanned DeFi, Web3, NFT gaming, and core infrastructure, with the event highlighting the speed and sophistication of the Solana smart contract platform. Following on from this successful event, a second hackathon was announced in collaboration with Project Serum. This event is specifically targeting DeFi developers and is being supported by some leading DeFi platforms including Aave, Chainlink, SushiSwap, and Circle. The event started yesterday, and with USD400kin prizes we can expect to see some exciting projects coming out of it.

 

Solana has been growing its ecosystem piece by piece. It started by integrating with core infrastructure providers such as validators, custodians and exchanges.Today it is focused on encouraging application developers to test out and buildtheir new DeFi apps on the platform. Ethereum is the leading smart contractplat form globally, with a market cap of around USD200bn. Solana has a market cap of just 1% of this. At CMCC Global, we do not believe that a single blockchain will defeat all others. Rather, we believe in a multi-chain future with a number of leading platforms becoming worth trillions of USD. Solana is well placed to become one of these leading platforms. We are excited to continue supporting the Solana ecosystem as it grows in size, stature and value.

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