In 2024, Solana, often called the “Ethereum killer,” is making waves. During the week of July 22, Solana’s mainnet surpassed Ethereum in weekly total fees for the first time, generating approximately $25 million in revenue compared to Ethereum’s $21 million. On July 28, Solana’s total fees soared to over $5.5 million, marking a three-month high. Moreover, after a market-wide crash on Black Monday, Solana’s price skyrocketed by over 35% within less than 48 hours, outpacing Bitcoin as the market stabilized.

Source: Blockworks Research

After experiencing significant highs and lows over the past two years, Solana and its ecosystem are once again in the market spotlight. This time, its momentum seems to be overshadowing Ethereum. However, many projects previously dubbed “Ethereum killers” have ultimately failed in their challenges. Will Solana succeed where others have not? Today, let’s take a look back at the birth and rise of Solana and explore the latest developments in its ecosystem to see if we can find any clues…

The Birth of Solana

Solana was born out of its founder’s reflections on the blockchain trilemma. Bitcoin was created in 2009, and by 2013, Solana’s founder, Anatoly Yakovenko, became an early Bitcoin user and began focusing on the blockchain’s “impossible trinity”—the challenges of balancing decentralization, security, and scalability. At that time, blockchain networks were slow, and gas fees were prohibitively high.

Determined to build a faster blockchain infrastructure, Anatoly had a eureka moment one late night while working overtime. He realized that the passage of time itself could serve as a data structure, allowing transactions and events on a blockchain to be ordered chronologically. He immediately jumped up and wrote the first lines of Solana’s code. This idea became the key innovation that allowed Solana to operate at lightning speed, an advantage that would later set it apart from Bitcoin and Ethereum.

In 2016, Anatoly left Qualcomm, where he had worked for 13 years. In 2017, he teamed up with two former Qualcomm colleagues to found Solana, marking its official birth.

However, Solana wasn’t originally called Solana. The initial prototype blockchain was named “Silk.” In March 2017, the Silk project was rebranded as Solana. The name “Solana” was inspired by Solana Beach, a small town north of San Diego, California, where Anatoly and his co-founders lived, worked, and surfed during their time at Qualcomm.

From 2017 to 2020, Anatoly led Solana in gradually refining its technical infrastructure, making significant strides in improving transaction throughput and network performance. These advancements began to attract a certain level of attention and interest within the blockchain community.

However, the early days of Solana were fraught with challenges. The team, composed mostly of individuals without notable backgrounds, struggled to gain recognition, especially during the crypto bear market. The project’s prospects were not highly regarded at the time. After releasing their whitepaper in January 2018, they faced significant difficulties in securing funding, with doubts raised about the security of their technology. Before launching on Binance LaunchPad, the project had only managed to secure investments from Binance Labs and Coinbase Ventures, with total funding possibly amounting to less than $1 million.

It wasn’t until the market began to improve in 2019 that Solana started attracting tens of millions to hundreds of millions of dollars in investment. During this time, the team focused on internal testing and technical validation, dedicating their efforts to preparing for the official launch of the mainnet.

In this phase, the team also engaged actively with the developer community and blockchain enthusiasts, gathering feedback to refine their technology and ecosystem. As a result, in July 2020, Solana’s mainnet was officially launched. Thanks to its fast transactions and low fees, Solana quickly addressed some of Ethereum’s shortcomings and earned the reputation of being an “Ethereum killer.”

Growing Under Bear Market Conditions

After launching its mainnet in 2020, Solana experienced rapid growth over the next two years, becoming one of the most sought-after projects in the crypto world. It even caught the attention of prominent figures like Sam Bankman-Fried (SBF), the founder of FTX, which was then one of the largest crypto exchanges globally. SBF once stated, “I believe Solana will surpass Ethereum and become the next Bitcoin.”

FTX played a significant role in Solana’s rise. The first major boost came in July 2020 when FTX chose Solana as the preferred blockchain for building its decentralized exchange (DEX), Serum. Additionally, FTX helped Solana raise around $300 million to incentivize developers and grow the Solana ecosystem. FTX not only invested directly in Solana but also in many projects built on its blockchain, attracting a large user base, particularly within the rapidly expanding DeFi and NFT ecosystems.

From the summer of 2020 to the end of 2021, DeFi reached new historical highs, and SOL, Solana’s native token, saw its price skyrocket from $0.51 to $259.9 in just over a year—a 510x increase. Although Solana began as a concept during the late 2017 bull market, it didn’t launch until the 2020 bull market. This late entry meant that many early and secondary participants joined at a time when Solana was still underappreciated, which ironically helped filter out speculative bubbles, allowing its true value to shine through.

This marked Solana’s first explosive growth cycle. Leveraging its strengths, combined with the market boom and support from crypto influencers and companies, Solana successfully made the leap from zero to one.

However, Solana’s rapid rise was not without issues. Decentralization advocates criticized its aggressive tokenomics, high validation requirements, and venture capital allocations, arguing that these were unfair to retail investors. Additionally, between 2021 and 2022, Solana’s network suffered multiple outages, which damaged its reputation as a “high-performance” blockchain and drew criticism from the community.

But these problems paled in comparison to the impact of FTX’s collapse. In 2022, DeFi experienced its first significant downturn, and in November 2022, FTX’s implosion directly brought Solana to its knees. The collapse led to the liquidation of a large amount of SOL held by FTX, causing Solana to face severe asset devaluation, capital outflows, and market sell-off pressure. Within a matter of days, SOL’s price plummeted by about 75%, falling to a low of around $10. The total value locked (TVL) on Solana dropped to approximately $200 million and remained at that level.

Source: Coinmarketcap

This challenging period for Solana lasted for a year, during which time applications on the Solana chain suffered from capital outflows and multiple hacking incidents, including the draining of over 8,000 Phantom wallets and a loss of $116 million from the CEX Mango. Furthermore, throughout most of 2022 and 2023, the entire crypto industry was under severe pressure, with external market conditions deteriorating.

Rather than being a setback, the bear market presented Solana with a unique opportunity. The Solana community remained actively committed to addressing two major challenges facing the Solana blockchain: network outages and decentralization. Subsequently, a series of upgrades were implemented, significantly improving network stability and opening up new avenues for growth.

In December 2023, the “Airdrop Story” from Solana ecosystem projects brought renewed hope, leading to a revival within the ecosystem. The total value locked (TVL) increased from around $300 million to nearly $1 billion within two months.

Source: DeFiLlama

At that time, rumors circulated that Solana’s resurgence wasn’t merely driven by retail investors but possibly by Wall Street’s interest in reviving FTX. Since Solana was one of FTX’s largest assets, boosting Solana’s value could help increase FTX’s valuation, aiding its potential reboot. However, the authenticity of these rumors remains unconfirmed.

Current Developments

Regardless of the speculation, the Solana community is optimistic about this year. With continuous improvements to its ecosystem, Solana has solidified its position as a cornerstone of the crypto industry. Its functionalities are constantly being refined, and ecosystem applications are expanding rapidly.

As of April 28, 2024, according to public data, Solana’s ecosystem now spans eight major areas: DeFi, tools, infrastructure, NFTs, gaming, wallets, DApp applications, and development. These encompass nearly 15 sub-sectors, including DEXs, derivatives, trading analytics and visualization, lending, synthetic assets, and stablecoins. This number continues to grow almost weekly. Additionally, this year, the ecosystem has expanded into new sectors such as DePIN and AI.

In the competitive landscape of L0/L1/L2 blockchains, Solana stands out as the most significant player after Ethereum. Solana has made remarkable progress in nearly every area, except for ZK and L2 solutions. Thanks to its performance advantages, Solana can also support features that are challenging to develop on Ethereum.

Let’s dive into some of the thriving sectors within the Solana ecosystem:

1. Memecoin

The Memecoin sector has been a significant trend in the market this year. In our previous article, “Memecoin: Is Base Ready to Challenge Solana’s Throne?”, we discussed several Memecoin trends, including those driven by Pepe, BRC-20, and the Solana ecosystem.

The rise of Memecoins has brought a wave of traffic to Solana. From “dogwifhat” to “Bonk” to “Slerf,” Memecoins on Solana have sparked unprecedented hype and excitement. The surge in internal funds from airdrops by platforms like Jito, Jupiter, Kamino, Parcl, and Tensor helped push the market cap of Memecoins to $1 billion within a week. According to a report by node service provider Syndica, up to 92% of trading on Solana’s DEX Raydium previously came from Memecoin transactions.

During a relatively quiet second quarter in the crypto market, when most tokens were declining, Memecoins on Solana became a hot topic. Low transaction costs, combined with the emergence of platforms like Pump.fun, lowered the barriers to issuing tokens, making Solana the most active playground for on-chain speculation. Memecoins on Solana outperformed their counterparts on Ethereum, highlighting that Memecoin activity was a key factor in making Solana the darling of this market cycle.

1. DeFi

Currently, Solana ranks as the fourth-largest DeFi ecosystem, with a total value locked (TVL) of around $5 billion. Solana’s DeFi landscape covers a wide range of sectors, including DEXs, derivatives, oracles, insurance, prediction markets, stablecoins, IDO platforms, trading and liquidity, yield and aggregators, synthetic assets, and lending.

DEX trading volume on Solana continues to grow, with Jupiter serving as the key liquidity aggregator, offering the widest range of tokens and the best routes between any token pairs. Lending and yield protocol Kamino has become the largest DeFi protocol on Solana. As of the second quarter, approximately 63% of SOL’s supply was staked, with Marinade being Solana’s first native liquid staking solution. The leading staking protocol is Jito, and Sanctum LST saw significant market share growth in the second quarter.

Source: DeFiLlama (as of August 9, 2024)

1. Web3 Gaming

With a 400-millisecond block time and lightning-fast confirmation speed, Solana is ideally suited for game developers. Developers can build games using Javascript, Canvas, Flutter, or one of Solana’s gaming SDKs, such as UnitySDK and UnrealSDK.

One of Solana’s leading play-to-earn games, Stepn, announced a $30 million airdrop in April 2024. Additionally, Solana’s “Hunger Games” (based on the popular book and movie series) quickly gained traction on Twitter in Q1, amassing over 100,000 followers and receiving more than 2 million page views within the first 24 hours, causing its website to crash.

1. Payment Infrastructure

A recent research report by Alliance Bernstein highlights that Solana has become the most popular stablecoin transfer network, particularly for cross-border payments.

In March 2024 alone, Solana processed approximately $1.4 trillion in stablecoin transfers. According to Artemis, Solana commands a 43% market share in stablecoin transfer value, significantly outpacing Ethereum.

PayFi is now a reality, with the Helio Solana Pay plugin on Shopify saving Solana Labs over $1 million in Chapter2 sales fees. It has also become more versatile, allowing users to pay with their preferred tokens, which can be instantly converted to the merchant’s preferred currency through Jupiter.

As of Q2 2024, Solana’s native payment infrastructure companies include Stripe for crypto payments and the Solana Pay plugin for Shopify. Notably, the Solana Pay Shopify plugin has saved Solana Labs over $1 million in fees and supports USDC payments on Solana, Ethereum, and Polygon.

Additional advancements include the launch of Decaf’s on/off-ramp, Code’s launch on Google Play, Phantom’s integration with Meso for onramp services, support from Brazil’s digital bank Nubank, and XPOS’s integration with Solana.

1. DePIN

Solana’s low transaction costs, high throughput, and scalability make it an excellent fit for DePIN (Decentralized Physical Infrastructure Networks) projects. Solana is quickly becoming a hub for DePIN applications, hosting projects like the cloud computing network iot.net, wireless network Helium, mapping platform Hivemapper, decentralized computing network Render, communications project Teleport, and storage service GenesysGo.

In addition to these advancements, Solana has ventured into mobile technology. Its first Web3 phone, Saga, released in May 2023, sold out quickly in the U.S. market. On January 17, 2024, Solana Mobile announced plans to launch its second smartphone, the SAGA CHAPTER 2. The new phone will feature a crypto wallet, custom Android software, and a crypto app store. Compared to the first Saga phone, SAGA CHAPTER 2 is expected to be more affordable, with a preorder deposit of $450. The phone is anticipated to ship in the first half of 2025.

Other notable achievements in various sectors include:

• RWA: Maple Finance
• NFT: Magic Eden
• Hardware & Meme: Sage & Bonk
• Inscriptions: Nos-20 (Neon)
• Wallets: Backpack, Atomic Wallet, Exodus, Phantom Wallet

Summary

In essence, Solana’s growth story can be summed up as “progress through adversity.” According to CoinGecko, Solana was the most popular blockchain in 2024, highlighting its increasing influence in the industry.

Looking back at its early days, Anatoly Yakovenko introduced a new consensus mechanism, Proof of History (POH), inspired by his background in telecommunications, to solve blockchain congestion issues. The project quickly gained traction after its launch, fueled by top influencers and strategic partnerships that ignited market excitement and attracted a large number of developers and users. On the technical front, Solana focused on performance and user experience, improving stability through technological upgrades even as it faced market fluctuations, pressure from institutional involvement, and token dynamics.

While Ethereum opened up the blockchain market with innovations like smart contracts, Solana has taken a different approach, similar to traditional Web2 companies like Google and Microsoft, by focusing on Dapps to attract users.

Anatoly has stated that achieving dominance will hinge on the next big breakthrough application on Solana’s blockchain: “I think if we really see a breakthrough of 100 million users on Solana, that will be a critical part of how we win. And I don’t know what that experience will look like, but for me, if anything equivalent to Facebook or NFTs is built on Solana, I think that will be the key to our success.” He also expressed hope that in the next 7-10 years, a large number of consumer-facing Web3 applications will emerge, possibly in payments or something similar to DePIN/Helium.

Of course, there are criticisms as well. For instance, Solana’s ecosystem is currently dominated by Memecoins, which tend to have short life cycles and may leave the network vulnerable when the trend subsides. Additionally, past outages have shaken confidence in Solana’s technology and community. With both innovation and challenges ahead, the future of Solana remains to be seen.

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