First let me say that it was Ethereum that initially attracted me to invest due to my age and financial standing. All the possibilities that Ethereum offered had fascinated my young mind. As I learned more and more about Ethereum I thought to myself “wow this thing has the possibility to literally change the entire financial ecosystem as we know it” and a few years later DeFi emerged. That lightbulb moment is finally coming to an inkling of realization.
During 2017 we had the biggest hype-cycle to date. New blockchains were popping up left and right. We had more “Ethereum Killers” than we could count, yet none were actually running or even built yet. I’m not here to say they were vaporware, but many of these projects were nothing more than ideas without meaningful strategies of execution. That is why (without actually spending hours upon hours finding actual statistics) I would argue over 80% of these blockchains either never came to fruition, or just that nobody seemed to care.
What did come from the 2017 hype cycle though, were fascinating ideas on how to scale blockchains while attempting to stay decentralized. We had the likes of EOS (which I will not even begin to talk about the absolute horrendous way that was done in terms of capital formation), NANO (RIP Bitgrail), ICON (Probably the most hyped ETH Killer of its time), HPB (let’s not talk about this one), and many others.
The main narrative for the 2017 hype cycle were blockchains trying to solve a combination of high TPS scalability, and how to conquer interoperability. Among ALL of the projects created, we have two meaningful projects that emerged: Polkadot, and Cosmos. Polkadot is still in the process, while Cosmos has already experienced real usage due to the creation of Terra, Anchor Protocol, THORchain, and Mirror Protocol. Applications being used already. Cosmos itself has around 1.4k TPS and has a state finality time of around 1–3 seconds. Cosmos being the main topic of this paragraph, because it’s the one with the most actual usage out of almost every other blockchain that is not Solana, or an EVM blockchain like BSC.
So where does Solana fit into all of this you might ask. Well i’m glad you asked. What if I told you Solana has the current capability of achieving 60k TPS, sub-second global state finality (actually less than half a second), has over 600 separate validators and the same security as ETH in terms of delegated staking power being able to censor the network, scales nearly infinitely (as time progresses), and is all done on Layer 1. Welcome to Solana.
Solana uses a unique consensus algorithm called “Proof of History” which essentially uses time as the keeper of consensus instead of hashpower(PoW), Capital Allocated(PoS), or anything else. The way it works is that validators recursively run the SHA256 hashing algorithm in a loop, with every validator having a different length “puzzle”. Therefore there is not a gap between each block because every single validator is completing its task in their own respective place in time.
Anatoly Yakovenko (Co-Founder of Solana) thinks the most elegant solution to scale a blockchain is not to constantly change the software (which requires consensus at a massive scale) but to simply create the software so that it runs faster and better as hardware scales. Hardware itself has an exponential curve in terms of efficiency, so Anatoly’s idea makes complete sense. Right now Solana is capable of handling around 60,000 TPS. In 2 years it should be capable of 120k TP, 2 years after it should be capable of 240k TPS. The chain itself scales as fast as the hardware does. Quite elegant.
Anatoly has called ETH 2.0 “science fiction” in terms of it claiming to be able to achieve 100k TPS successfully and securely through sharding. While I personally remain cautiously optimistic, I do agree that it will be a mountainous feat. The simplest way to achieve scaling is not having to fork the software every x years, but to build the software from the ground up so that is capable of scaling in the first place. That way it doesn’t require you to do things like split the chain up into 100+ different shards, splitting up validators, and making it 100x harder to form consensus due to the massive split in communication channels. But that is all we will talk about in terms of Layer 1 vs Sharding for now.
Alright so we know Solana definitely scales, but is it decentralized, and is it secure? Let’s find out. We know that it uses Proof of History as the base layer of consensus, but it actually uses Proof of Stake as the second layer incase two blocks were mined at the exact same time. This way Proof of Stake serves as the “backup” consensus just in the off chance that Proof of History produces two blocks (much like how BTC has before, in its infancy). Solana is secured by the validators that run the network. These validators are analogous to DPoS in the fact that you can delegate your staked SOL to a validator which will earn you rewards. These validators currently earn both fees, and SOL in return. I won’t get too much into the specifics of how to run a validator, but if you are curious feel free to poke around on reddit or discord.
Right now there are a total of 615 validators with 11 validators being the minimum amount that can “censor” the network (totaling over 33% of staking power). With Ethereum, there are a total of 212,590 miners, and only 3 mining pools that make up over 51% of the entire hash rate. So one could argue that SOL is more “decentralized” than ETH in term of pooled censorship power, but I think that would be a hard argument to make and we would need to see over 10,000 validators to make that claim somewhat valid. It is very easy to tout statistics at a small scale, but not all statistics scale in a linear fashion.
So all in all this would be my rating for Decentralization, Throughput, and Security for BTC, ETH, and SOL.
Bitcoin:
Decentralization: 10/10
Security: 10/10
Throughput: 1/10
Ethereum:
Decentralization: 8/10
Security: 9/10
Throughput: 2/10
Solana:
Decentralization: 5/10
Security: 8/10
Throughput: 10/10
Due to the rising instability of fees on Ethereum, we have seen a user-leak from ETH on to other chains such as BSC, Terra, THORchain, and Solana. Many users are now trying out different chains and seeing that maybe it is not so bad. Some may feel like they are cheating on their wife, but nevertheless you can’t argue with a blockchain that can send a transaction before you can even click on the 35th tab you have open, nor can you argue that paying 1/10 of 4 cents is expensive. Keep in mind that Solana is still the new kid on the block, and has gained a ton of hype recently thanks to the ecosystem being bootstrapped by one of the biggest names in crypto, Sam Bankman-Fried.
Does Solana have a chance to overtake ETH? Maybe. That chance is slim, but not impossible. While ETH sits in limbo, Solana is nearly guaranteed to take market share from ETH. Will ETH be the one and only chain to rule everything that is not Bitcoin? Some may say yes, but I say that is bordering upon religion. And how many religions do we have? Many. Do we have one religion that has even 50% of the “market share”? No we do not. Investing in only one thing, shackles you down. And I am not a fan of shackles.
Disclaimer: Please keep in mind that Solana is still in “Mainnet Beta” and is still extremely early. Do not take this article as me telling you to go all-in Solana.
I plan to release another article that is more of a “Deep-Dive” into the growing ecosystem of Solana as I think the network being built is growing so fast it is hard to keep pace. So expect a deep-dive into the ecosystem soon :)
