Original title: The Solana Ecosystem Overview》
Original title:
Original Author: kelxyz, James Trautman
Original compilation: BlockTurbo
Lets talk about the elephant in the room from the beginning: SBF and FTX really played an integral role in promoting the growth of the Solana ecosystem in the early days.
They are gone now.
However, it is also true that many other builders have been and still are working on expanding the ecosystem.
This report aims to provide background information on the state of the individuals and teams still building the Solana ecosystem.
The report is divided into two parts: protocol layer analysis and application layer analysis.
Part 1 - Solana at the protocol level
technology initiatives
The topic of upgrading performance is the basis for Solanas recently completed short- and medium-term technology plans. Firedancer, Jito-Solana, and Multiple Leaders per Slot are some of the most anticipated initiatives in the developer community.
Network Health and the Developer Landscape
Despite Hetzners terms of service issues and FTXs debacle, Solanas network health and infrastructure are relatively stable. There was some pressure on the smaller and unprofitable validators prior to FTX, but most validators were still easily profitable. See below for more details on ownership, geography and data center distribution.
The developer ecosystem looks strong. It is important to note that the amount of data collected on this topic is too small to be fully relied upon.
protocol infrastructure
These projects build or extend components of the Solana infrastructure that are not directly tied to the protocol itself - developer tools, deployment tools, experiments with different virtual machines, DAO tools, etc.
The Road to the Future for Solana - Top Tech Initiatives
Solana doesnt have a clear roadmap, but a number of initiatives are already gaining developer attention. Examining these initiatives provides the background needed to understand where Solana is going at a technical level.
Firedancer (under test)
Firedancer is a standalone, C++ based validator client, spearheaded by Jump Crypto. Once live, it will make Solana the second chain (after Ethereum) to have multiple clients. Having multiple sets of code that can run a chain from scratch reduces the likelihood of a bug causing significant damage to the network. If there is a problem with one implementation, it is less likely that a completely independent second implementation will have the same error at the same time - ultimately benefiting the network.
Firedancer also has the potential to significantly improve performance (600k TPS has been demonstrated live). Expect Firedancer to be gradually deployed in 2023.
Jito-Solana (deployed)
Jito-Solana is Jito Labs improved validator client, optimized to boost MEV in a manner similar to Flashbots MEV-boost on Ethereum. Clients create more efficient markets for MEV by introducing specific markets for MEV-influenced blockspace. Working with Jito-Solana is the JitoSOL Liquid Staking Derivative, which will give validators running Jito-Solana the option (but not the obligation) to automatically distribute MEV profits to the JitoSOL pool on top of staking rewards.
QUIC (deployed on mainnet)
Solana replaced its old data transfer protocol, the User Datagram Protocol (UDP), with QUIC, a similar data transfer protocol that also allows for greater control over data flow. This allows validators to exercise more discretion when sending and receiving transaction data to and from slot leaders. In other words, validators will be able to more easily filter out spam transaction data that has broken the chain in the past.
Local Fee Markets (partially deployed)
Solana accounts have a hard cap computational limit - once reached, subsequent transactions cannot modify the accounts state within a given block. Local fee markets allow users to send priority fees to validators to express the urgency of modifying the state of a particular account after that account has reached its computational limit.
The result is less spam (since it can be outbid) and greater efficiency in the block space market (since users can now target and bid on specific account states rather than trying to overload blocks with bids).
Stake-weighted Quality of Service (QOS) (deployed)
Unlike validators who accept and transmit transactions indiscriminately regardless of origin, stake-weighting guarantees that a validator with, say, 0.1% stake is always entitled to transmit 0.1% of transaction packets to the leader. The previous indiscriminate approach made it easy for validators to be eliminated — that is, transmit fewer packets in total than their stake weight. This is bad - launching smaller validators directly leads to greater centralization.
Concurrent Merkle Trees / Account Compression (test)
Concurrent Merkle Trees are a new approach developed by Solana Labs to compress account data while maintaining the ability to modify the state of that data.
Account compression will significantly reduce costs and storage requirements. Before compression, storing data for 10 million assets would cost $1.14 million and take up 3.8 GB of space. With compression, storing the same 10 million assets costs only $250 and takes up only 828 KB of space. Metaplex plans to use this to exponentially reduce the cost of minting NFTs on the platform.
Solving Interesting Problems - Medium Term Plan
These are prominent initiatives originating from an earlier thread posted by Anatoly. Several other developers also highlighted these as the most important factors driving Solanas success.
Async block production
Asynchronous block production reduces the amount of work that slot leaders (validators competing to validate the latest blocks) have to do to package blocks. Initially, the leader has to do two loads (query stored on-chain data, such as transactions in the latest block) and two stores (instances that store on-chain data). When implemented, this work will be reduced to just one load.
The main benefit of this is that it reduces redundancy. By delegating tasks among validators more efficiently, the time to generate a block could be reduced by a few milliseconds. When youre racing against the speed of light, milliseconds matter.
light client
Light clients sample shards (small transaction units) of nodes instead of downloading the full blockchain state. They rely on the assumption that the set of nodes they sample is honest. If the honesty assumption holds, light clients allow validators to contribute to network security by ensuring that honest nodes are not overshadowed by a dishonest majority.
Multiple leaders per socket
Typically, one validator does the work of validating each slot or block. Validators lucky enough to occupy that position will be honored as position leaders for approximately 400 milliseconds. Multiple leaders is a design change that increases the bandwidth of block production so multiple validators can occupy leader positions.
Each leader proposes its own transaction stream (actually a list of transaction trees), and the final order becomes the combination of these streams. This will increase competition and efficiency in the MEV market, as multiple leaders compete to include MEV-related transactions in final blocks.
formal verification
Formal verification utilizes Rust-based code verifiers such as Kani and Prusti to verify programs in the Solana program library and other important, widely used libraries such as those in Anchor.
The ultimate goal is to improve the security of Solana programs. A code verifier can automatically check for any problems or errors in a given program. Using them strictly - especially on core contracts - should improve the security of those contracts.
Other smart contract languages
Solana is rolling out support for the smart contract language Move. The language is designed to be platform-agnostic, and once fully implemented, it may attract developers to use Solanas LLVM-compatible smart contract language library.
About Solana Mobile
Solana Mobiles short-term roadmap includes three initiatives:
The Saga Development Kit is scheduled to start shipping in mid-December 2022;
Solana mobile dapp store application will be available in January 2023;
The Saga phone will be available to the public in early 2023.
After that, the mobile team will likely continue to iterate on the functionality and design of the Saga phone and mobile software development kit (SDK). Today, Mobile remains an outlier, more of a moonshot than a sure thing. But the size of the opportunity should not be underestimated.
A full history of implemented proposals and a list of accepted but not fully implemented proposals provide additional context and insight. Also, check out the Network Upgrades page for the latest proposal implementation.
Internet health
As of December 8th, the Solana network had a total of 2,306 validators with a total stake of approximately 370 million SOL. Validators are located in over 35 geographic locations and over 138 unique data centers around the world. Overall, Solanas Satoshi Coefficient (defined) is higher than the industry average of 28.
The Solana Foundation released a network health report in August 2022 that goes beyond the Satoshi coefficient to assess different aspects of decentralization. The report takes into account metrics such as geographic diversity, data center ownership, and entity control over validators to ensure a more comprehensive network health. While the Satoshi coefficient and growing validator set are beneficial, they are not sufficient guarantees against centralization risks.
While spread across more than 35 geographic locations, ~42% of Solana validators and ~38% of total stakes are based in the US and Germany. Other locations account for less than 30% of total stakes, but are made up of more than 25 different countries.
Geographic centralization is typical of layer 1 networks and a problem that Solana aims to solve. Too many validators in the same location can jeopardize the health of the network for reasons such as geopolitical risks, regulations, and natural disasters.
Data center centralization is another area of concern regarding decentralization. Using a private data center like AWS to run a validator could give the data center owner disproportionate power over the network. As of December 15th, Solanas total equity had been allocated without any single data center within the hosting 33.3% range. The “Other” category, which accounts for more than 30% of total stakes, includes over 125 unique data centers.
However, at the end of September, the Solana network brought together validators and stakers in Germany and the United States together with German web hosting company Hetzner Online. Hetzner hosts over 40% of the networks validators and over 20% of stakes. This relationship resulted in a network highly concentrated in Germany, with a particular focus on one data center.
In early November, Hetzner removed all Solana-related activity on its servers and stated that its policy prohibits the use of its servers for encryption-related activities. Fortunately, the concentration is not enough to disrupt the network. Still, the incident demonstrates the potential risks of a network that is too concentrated in a single geographic location and data center.
As a result, the Solana network is now more decentralized. Hundreds of validators and millions of stake migrated from Germany and Hetzner to other countries like France and Finland, as well as hosting providers like OVH SAS.
When evaluating the top 28 validators that make up the Nakamoto coefficient, the situation is slightly different compared to the apparent concentration of Hetzner migration in Germany, Hetzner, and even post-OVH SAS.
Check out the number of validators controlling over 33% of network staking, over half of which are hosted by Amazon and Terraswitch. Furthermore, one-third of them were staked in the United States. While these are not enough to collude against the network, it is critical to assess the composition of the top validators stake. In this case, the network could be at risk if this set of interests shifts to a more concentrated geographic region like the US or to a handful of data centers like Amazon or Teraswitch.
Ultimately, the decentralization and health of the Solana network remains intact and in a better position after validators and stake migrated from Hetzner to dozens of other geographies and data centers.
Developer profile
There are two main points:
A large number of developers are deploying on other chains, especially Ethereum. But the majority (66%) of developers surveyed are sticking with Solana.
Some 72% of developers reported that their teams were not affected by FTX at all. About 20% invest their personal or project funds in FTX.
While surveys like this are not rigorous enough to publish in Science, they do provide some much-needed data to better understand the broader reality of the situation.
Moving on to some other stats, the number of Github developer repos and the number of daily standalones have both increased about 2.5x year-over-year, despite a -95% drop in SOL price over the same period. Note that daily unique programs have been stagnant since May 2022, hovering between 1,000 and 1,150 per day during that time.
Alchemy released a Web3 developer report that reflects a similar growth story to the one above. According to the report, so far this year, Solanas active development team has grown by more than 10 times, and API consumption has increased by more than 5 times.
There is no better place to see what these new teams are building than to watch the hackathon events and the Solana Hack House. The 2023 lineup has already been announced and includes locations in Mumbai, Austin, Istanbul, New York and more. The hackathon has been a huge success for Solana so far.
protocol infrastructure
These are some of the top projects building or extending Solana infrastructure components that are not directly tied to the protocol itself - think developer tools, onboarding tools, experiments with different virtual machines, DAO tools, etc.
Exploring MEVs: Jito Labs
As mentioned above, Jito Labs created validator software to efficiently transfer MEV between validators, searchers, and stakers. The development of similar software (Flashbots) on Ethereum reduces network congestion and improves staker yields, especially during times of high network usage. The Jito client should have a similar effect on Solana.
Developer tools: Coral, Helius, GenesysGo, Clockwork
Coral is the company behind two development tools infrastructures:
Anchor Lang: Anchor is the preferred framework for writing programs (smart contracts) on Solana. Anchor simplifies the program building process by handling more baseline tasks, allowing developers to focus mainly on business logic. Seahorse Lang is a community-led project built on top of Anchor to enable programmers to build smart contracts in Python. Other development projects allow Solana programs to be created using another popular coding language, Typescript.
xNFT: xNFT is a standard for executable NFT, which enables users to have the right to execute code. Backpack is an application for xNFTs to create a new type of wallet where the application runs natively through an interface, rather than interacting with the application through a browser view.
Helius provides RPC node management specifically for Solana, webhooks that allow developers to trigger actions in response to on-chain events, and a set of APIs for decoding on-chain data that are more accessible than standard block explorers. During two months of mainnet operation, Helius gained more than 1,200 users.
GenesysGo also provides RPC services as well as storage and computing services. According to Step Data Insights, as of October 2022, GenesysGos Shadow Drive storage solution has stored 3.5 TB of data.
Clockwork is another developer tools infrastructure dedicated to transaction scheduling and smart contract automation. Since launching at Solana Breakpoint in early November, they have rapidly scaled to 60,000 automated orders per week.
Experiment with virtual machines: Neon, Eclipse, and Nitro
Several projects are experimenting with importing and exporting different virtual machines from Solana. Neon Labs will launch a smart contract program porting the Ethereum Virtual Machine (EVM) to Solana. This will allow EVM developers to deploy to Solana with little change to their original code. Look for them to deploy to mainnet in January 2023.
Eclipse and Nitro export Solana virtual machines (SVMs) to Celestia and Cosmos, respectively. These projects seek to leverage the speed of SVMs and the modularity of chains like Celestia and Cosmos to achieve the best of both worlds. Projects on Solana will be able to deploy code to Eclipse or Nitro as easily as Ethereum projects deployed on other EVM chains like Avalanche or Polygon.
DAO tools, wallets and fiat gateways
Realms and Squads are leading DAO governance and multi-signature solutions respectively. Finally, Phantom still dominates the wallet space - it is one of the teams looking to leverage its early success into multi-chain scaling on Ethereum and Polygon.
The aforementioned Coral backpack standard is also aimed at expanding the market and gaining market share. Solflare, Glow, Spot, Ultimate, and Cashmere are a few of the many other wallet competitors. A dialect is a protocol that strives to provide a messaging infrastructure for all of the above.
When it comes to payments, all eyes are on two teams in this ecosystem: Solana Pay and Stripe. Solana Pay recently made waves with its partnerships with STEPN and Asics, but the game here is really about point-of-sale level integration.
Stripes fiat-to-crypto portal showcases 16 projects, 11 of which are based on Solana. One of the projects mentioned is Ottr Finance - a Solana-based alternative to Venmo. Tiplink is another protocol that takes a different approach.
In the area of privacy, Light Protocol is leveraging zero-knowledge proofs (ZKPs) to enable privacy-preserved on-chain payments and transfers. Otter Cash is another privacy solution available to Solana users.
Summary Part 1 - Solana at the Protocol Layer
Historically, one of the biggest criticisms Solana has faced is the gap in ecosystem maturity compared to Ethereum. This gap still exists, but the items shown above suggest that the gap is closing. The closure rate is up for explanation, but theres no denying that Solana has an ecosystem dedicated to improving its core infrastructure and functionality.
Describing Solana as merely a SBF chain seems largely unwarranted.
The best technology wont matter if there are no applications built on top of it. Solana has a wide range of applications in DeFi, Web3 infrastructure, NFTs, and gaming — too many to highlight every project in this report. Instead, we created an ecosystem map that covered most of the names in each subsector as well as the top projects and narrative highlights for each subsector.
DeFi applications
DeFi applications
It’s fair to say that Solana DeFi is the subsector hardest hit by FTX. Solana DeFi’s TVL took a huge hit as Alameda’s on-chain activity was cancelled, with the price of SOL dropping 67%.
That said, there are still innovators building for the future. Here are some wonderful ones.
Spot DEX
When it comes to spot decentralized exchanges, three names to look out for are OpenBook, Ellipsis Labs, and Lifinity. OpenBook, a community-run fork of Serum V3, was launched after Serums upgrade key may have been compromised. Serums public Twitter handle has publicly endorsed the new fork.
Ellipsis Labs Phoenix order book expands on Serums original central limit order book (CLOB) vision with a series of design decisions aimed at improving efficiency, such as removing operation-intensive launches (definitions) from the DEX design.
Lifinity leverages centralized liquidity and an active market maker model (actively adjusting prices using sub-1 second oracle latency) to remove reliance on arbitrageurs, reduce impermanent losses by limiting trades against stale prices, and more.
Derivatives and Structured Products
Many teams are building in the derivatives, options and structured products space: Drift, Zeta Markets, Mango Markets, Friktion, PsyOptions, 01 and Cega are just a few. The team has been working hard to solve key issues such as procurement liquidity, new asset support, cross-margin and user usage.
Liquid Collateralized Derivatives (LSD)
Jito Labs JitoSOL may be grabbing all the headlines, but Marinade and Lido are still far ahead in terms of market share. That could change if JitoSOLs higher yields (9.10% for Lido, 8.80% for Lido and 8.08% for Marinade as of Dec. 7) persist.
Look for integration across Solana DeFi as a potential catalyst for additional demand.
TIPIN project
TIPIN, or Token Incentivized Physical Infrastructure Networks Token Incentivized Physical Infrastructure Network, is a little-known area. Helium, the first protocol to use token rewards to incentivize individuals to complete real-world activities, recently made headlines by voting to migrate its network from its own blockchain to Solana. The move aims to address scaling and throughput issues for the network, and to allow the community access to Solanas ecosystem of developers and infrastructure, including wallets, DeFi applications, and the Solana Mobile Stack. Other TIPIN networks available to watch on Solana include:
Pollen Mobile – Helium competitor in 5G. They already offer cheaper coverage than traditional competitors—sometimes as much as 90% cheaper.
Hivemapper - A money-making network that incentivizes users to contribute high-quality Street View map data to the network.
Teleport – An Uber-like app that incentivizes drivers and riders to join the network.
NFT projects and infrastructure
Amid all the chaos, JPEG remains relatively and surprisingly resilient. Daily sales denominated in SOL hit a near-record high in November, as both holders and traders rushed to adjust their NFT valuations to the plunge in SOLs price.
The royalty debate dominates the narrative in the JPEG space. At first, the adoption of aggregators made it possible to evade royalties as much as possible.
Now, leading platforms Magic Eden, Metaplex, and Cardinal have all announced a form of royalty protection for creators at the protocol level. The pendulum has swung to the other end, with several designs enabling creators to ban marketplaces that dont enforce royalties. Time will tell which design wins out in the long run.
Additionally, Solanas NFT ecosystem is fueled by the continued optimization of the Metaplex Digital Asset Standard, the underlying token standard for all NFTs on Solana. Metaplex continues to iterate on its popular open-source minting solutions such as Candy Machine and recently announced a no-code solution for less technical creators. Together, Solana and Metaplex provide creators with a place to efficiently distribute NFTs.
Metaplexs compression of NFTs may also support the NFT ecosystem. Compression will reduce the on-chain storage cost of NFTs, enabling enterprise-level users such as airlines and live events to store on-chain tickets and roll them out at scale. Compression will allow the simultaneous minting of up to 1 million NFTs for about 6 SOL ($204) and 100 million NFTs for about 50 SOL ($1,700).
Despite the bear market and recent macro events, Solanas strategy and position in the NFT space remains strong. Solana remains the second largest network in terms of secondary sales and is closing the gap with Ethereum.
game ecosystem
game ecosystem
Solana Ventures is leading the charge as the crypto space positions itself as backing GameFi. Their $150 million fund to boost the online gaming ecosystem has attracted additional investment capital and fueled the games appeal.
Other efforts since then have included more investors, infrastructure like Magic Edens Magic Ventures, Ancient 8s DoJo (the games launchpad), and builders like Eternal Dragons.
Developments like these put GameFi on the cusp of catalyzing a wave of activity across the crypto space, and Solana is poised to grow its GameFi ecosystem.
Most of the big games in the Solana ecosystem are either not yet live or are in their early stages. Some of the top games to watch include ev.io, BR 1: Infinite, No Way Back, Aurory, and Star Atlas, among others.
If some of these do succeed, take note - games have proven to generate unusually high usage and revenue in the past.
Investors in Solana
A common criticism from outsiders of the ecosystem is that FTX is one of a small group of investors who only want to capture value from Solana-based projects. “Sam coins”—especially Serum, Oxygen, MAPS, etc.—are often cited as examples.
Newer investors such as Placeholders Chris Burniske and Twitter personality R 89 Capital have publicly offered fresh perspectives on Solana following the FTX debacle. If these and more names can combine to solve some of the long-standing problems of the ecosystem - especially when it comes to token economics - the private and public market venture capital landscape on Solana could take off from FTXs implosion become stronger than ever.
in conclusion
in conclusion
The Solana ecosystem is not without its problems. One of the most hard-core SBFs ever could be an outright fraud. The technology is not yet complete. And, yes, prices have dropped.
However, the ecosystem is not without hope. New apps may re-boost usage. Potential new winners could surpass SBF in terms of positive contributions to the network. Actively developed technology upgrades may continue to alleviate network issues and improve network performance.
As for the price?
