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Solana is an open-source blockchain project maintained by the Solana Foundation, focusing on scalability and user-friendly experience, all while maintaining decentralization through ~1.9k nodes and keeping transaction costs low.
Solana uses an innovative hybrid consensus model that combines a unique algorithm called Proof of History (PoH), along with a version of Proof of Stake (PoS), the lightning-fast synchronization engine. PoH is a proof of verifying order and passage of time between events, helping the network achieve sub-second finality times through the reduction of messaging overhead between nodes. The Solana network can theoretically process over 710k transactions per second (TPS) without any scaling solutions needed.
In this quarterly report, we will look at Solana’s performance in Q2 2022 and list down the key developments implemented by Solana to improve overall network performance and user experience.
Key Developments: Q2
Solana established $100m investment and grant fund for web3 startups in Korea
- On Jun 8, 2022, Solana Ventures, the strategic venture investment arm of Solana Labs, and Solana Foundation announced the establishment of a dedicated $100m investment and grant fund in Korea.
- The fund is aimed to accelerate development and activity across all web3 verticals but with a particular focus on game studios, GameFi, NFTs, and DeFi.
- Korea has been at the forefront of the games industry for pioneering mobile games, free-to-play games, and e-sports, as well as establishing a dynamic web3 ecosystem, all of which have paved the way for this dedicated, geographic-focused fund.
- In the upcoming quarter, builders can also look forward to the annual Solana Hacker House event happening in Seoul, as well as several other locations featuring informative sharings on the Solana ecosystem and networking opportunities.
Mainnet Beta Outages
- In Q2 2022, Solana network experienced 2 mainnet outages, which were caused by stalled consensus. The first outage event was on Apr 30, 2022 that resumed on May 1, 2022 and the second event was on Jun 1, 2022 and resumed later on that day.
- Since early January, Solana suffered intermittent congestion issues resulting from bot activity targeted at NFT mints. The event in April was attributed to an enormous amount of inbound transactions (6m/s) flooding the network, surpassing 100 Gbps of traffic at individual nodes.
- In comparison, the event in June was due to a runtime bug that allowed a failed transaction to be processed twice. This led to nondeterminism, a situation where a validator processed the transaction twice and some nodes rejected the subsequent block, while others accepted it. Only around 33% of validators accepted the block, and to reconcile the nondeterminism, 66% of validators were required to accept the block.
To keep up with the demand of massive adoption, Solana network engineers were testing and implementing several network upgrades, as follows:
- Solana tried to prevent abusive behavior from their nodes by reimplementing Solana's transaction ingestion protocol atop QUIC, a protocol built by Google. The protocol was designed for fast asynchronous communication which fit the use case of Solana, but with sessions and flow control similar to a connection-oriented protocol.
- As a PoS network, Solana was extending the utility of stake-weighting to transaction quality of service. Under this model, a node with 0.5% stake would have the right to transmit at least 0.5% of the packets to the leader, and the rest of the network and no combination of the remaining stake will be able to fully wash them out.
- A new instruction was introduced into the Compute Budget program of Solana. This offered users the ability to specify an arbitrary “additional fee” to be collected upon execution of the transaction and its inclusion in a block. The ratio of this fee to the requested compute units would serve as a transaction’s execution priority weight. Additional fees would also be treated identically to the base fee.
Despite not being EVM-compatible, the Solana ecosystem has over 400 projects ranging from DeFi, Web3 applications, games/metaverses, and NFTs. Fast transactions with low fees had attracted a lot of users with several notable projects being built on the Solana network such as Serum, Mango Markets, StepN, Magic Eden and Star Atlas.
The EVM-compatible smart contract layer developed by Neon Labs launched Neon Alpha on devnet in Apr 2022. The functionalities that were being tested included limited dApps, NeonPass roll-out, NeonScan launch, and MoraSwap deployment. In the upcoming quarters, Neon Beta will be launched on mainnet, where Ethereum developers can integrate their applications on Solana.
Daily Active Accounts
On the graph above, the number of active accounts saw an increase from the beginning of the quarter, from around 400k wallets to nearly 1m towards the end of May. Since then, the number of daily active accounts fluctuated between ~600k to 1m wallets, ending with more than 600k wallets at the end of June. Growth could also be seen in the non-wallet accounts (vote, program, and token accounts). By the end of Q2 2022, there were more than ~1.1m daily active accounts on Solana.
The graph above shows the daily transactions on Solana, where the biggest transactions was attributed to vote transactions, which fluctuated between ~100m-200m transactions per day. The Other Transactions category showed a downward trend at the beginning of the quarter, which then increased from mid-April to the end of Q2 2022.
Daily Gas Paid
Throughout Q2 2022, users paid less gas on Solana compared to Ethereum. Daily gas paid on Solana was volatile from the beginning of the quarter up to mid-May, before eventually stabilizing within the $5-9k range. On Ethereum, the amount of gas paid daily was relatively stable below $20m, except at the beginning of April, May 1, 2022 and mid-May. The uptick in gas fees at the beginning of April was attributed to NFT sales in the secondary market, OpenSea. Notably, the gas fees shot up to more than $220m on May 1, 2022, when Otherdeed by Otherside NFT was released. During the UST de-pegging event in mid-May, there was another uptick in transactions. Most of these transactions were attributed to Ethereum users exchanging stablecoins such as USDT and USDC.
Daily Transaction vs Ethereum
Solana had significantly more daily transactions compared to Ethereum. An upward trend can be observed on Solana’s daily non-vote transactions in Q2 2022 albeit being a volatile one. Towards the end of Q2 2022, there were more than 40m non-vote transactions on Solana. In contrast, Ethereum’s daily transactions have been relatively stable throughout the quarter, hovering around 1m+ transactions.
Top Solana dApps by Transactions
The table above outlines the top entities on Solana based on the number of transactions in Q2 2022, with the notable ones that include:
- Mango Markets: Decentralized exchange where users can trade spot, margin and perpetual futures markets
- Serum: Another popular decentralized exchange
- Switchboard: Solana-based decentralized oracle network
01 Protocol, a derivative trading protocol, is a relatively new entity on Solana which showed massive growth in Q2, seeing nearly 50m transactions.
Please note that the “Unknown” entity refers to the sum of all entities that are not yet labeled in Nansen, rather than a single unknown entity.
In this quarter, despite various drawbacks from both the macroeconomic conditions and network outages, Solana remained steadfast in their efforts to improve the network and the ecosystem. This was evident from the establishment of the Korea grant and investment fund, as well as the focus on building QUIC and a new mechanism of fee prioritization. The upcoming events that welcome new builders to the Solana ecosystem also point towards a thriving and supportive community that is focused on building up the space and onboarding the next generation of talent.