1. Background

The rapid development of blockchain technology has established Ethereum (EVM) and Solana (SVM) as two dominant design philosophies, each leading in their respective fields. Historically, Ethereum has dominated total value locked (TVL) in EVM chains due to its unique philosophy and approach, while Solana has led among non-EVM chains. However, as activity has grown and new chains have emerged, Ethereum has begun ceding dominance to faster EVM chains and has shifted toward Layer 2 (L2) scaling solutions.

In contrast, Solana’s monolithic architecture has avoided such fragmentation through unique technological innovations and significant performance reserves, albeit at the cost of requiring higher bandwidth and speed. Meanwhile, the concept of Rollups has presented dApps with a significant opportunity: creating customizable runtime environments. However, this has led to an interesting phenomenon: L2s fragment Ethereum’s liquidity and user base, and L2/L3 application chains exacerbate this fragmentation further. Solana adheres to the philosophy of a monolithic ecosystem, but the benefits of providing customizable environments for different use cases cannot be ignored.

2. The Catalyst for Network Extensions: Layer 2 – A Path to Fragmentation

From Plasma in 2017 to Optimistic and zk-rollups, Ethereum’s scaling journey has demonstrated the need to address scalability issues. However, it is worth noting that a portion of Ethereum’s L2 TVL is backed by bridged ETH, which remains on L1.

These scaling solutions have also exposed a significant risk—the fragmentation of liquidity and users, commonly referred to as the “vampire effect” in the blockchain space. The significant decline in Ethereum’s fee revenue after the implementation of EIP-4844 serves as evidence of this. Analysts, including Justin Bons of Cyber Capital, have pointed out that Ethereum’s fee growth is being overtaken by L2s.

Figure 1: Dynamics of ETH supply. Source: ultrasound.money

This indicates that as users leave L1, the fees remaining on L1 decrease significantly, leading to a decline in burn rates. This should have been evident from the beginning. Now, usage and revenue are captured by L2s aiming to earn rent! This greed is apparent because only a small portion of the fees return to L1, with the remainder retained by commercial entities. At the same time, these entities lobby to maintain limited block space on ETH L1. Unchained Pod released a chart showing that Optimism (OP) earns $300 for every $1 of fees paid on L1:

Figure 2: Fees earned by L2s for every $1 paid on L1. Source: GrowThePie

L2s exhibit a “vampire effect” on L1’s transaction activity and economic appeal. Transitioning to application chains (Appchains) independent of Ethereum exacerbates this issue.

This perspective is supported by Anatoly Yakovenko, who posted the following on Twitter:

“If the Solana ecosystem sacrifices L1 execution optimization to support all user transactions by relying on the ‘arb/op’ general L2 stack, it will have a parasitic effect on Solana’s mainnet. This is easy to understand. When L2s take more priority transactions from the base layer rather than adding new ones, they become parasitic. Since the mainnet will continue to maximize its throughput, ‘L2’ or any other SVM will struggle to compete on price. User fees should not outperform the mainnet.”

Kyle Samani, Managing Partner of Multicoin Capital, expressed a similar view, writing:

“Anything that could have happened on L1 but happens outside L1 is, by definition, parasitic. For this reason, I’m not interested in EVM/SVM rollups. They are essentially no different from L1. I highly doubt these copy-paste L2s will succeed on Solana because L1 is already good enough.”

Against this backdrop, Solana’s approach of maintaining a monolithic architecture and unified ecosystem philosophy becomes highly attractive.

But how can a scenario similar to Ethereum’s L2 fragmentation be avoided? Let’s dive deeper.

3. Solana’s Rapid Rise and Core Advantages

Compared to traditional blockchain systems designed around the Ethereum Virtual Machine (EVM), Solana demonstrates a completely new architecture.

Solana adopts Proof of Stake (PoS) as a mechanism to defend against Sybil attacks while introducing one of its core innovations—the Proof of History (PoH) algorithm. PoH is a Verifiable Delay Function (VDF) used to order and timestamp transactions transmitted across the network. Additionally, Solana stands out for its use of high-performance hardware, the Gulf Stream protocol (a transaction forwarding protocol without a mempool), the Sealevel parallel processing engine, and a unique design different from traditional blockchain account models (resembling the file system of the Linux operating system).

Solana adheres to a monolithic design philosophy, achieving significantly higher scalability, speed, and throughput through its unique consensus mechanism, technical innovations, and ongoing architectural optimization.

Solana also benefits from a strong developer community: over 2,500 developers actively participate in its ecosystem. This has driven Solana’s remarkable growth. Solana’s total value locked (TVL) grew from $210 million in 2023 to $7.73 billion in 2024, an almost 35-fold increase. Compared to November 2022, Solana’s decentralized exchange (DEX) trading volume saw 200-300 times year-over-year growth, and daily active users (DAU) increased fivefold since the summer of 2023. By November 14, 2024, Solana’s transaction volume had exceeded Ethereum by more than fourfold. Active wallet numbers also continued to rise, peaking at 9.4 million active users on October 22, 2024.

Figure 3: Solana DEX Trading Volume and Active Wallet Trends. Source: Dune, Artemis

As a result, Solana is a powerful ecosystem with a large and active user and developer community, experiencing exponential growth in its user base and activity. This growth trajectory underscores Solana’s importance as a leading non-EVM chain, particularly in its dynamic expansion.

Figure 4: Comparison of TVL in Non-EVM Blockchains. Source: DefiLlama

Decentralized applications (dApps) on Solana significantly improve functionality by enhancing accessibility and user-friendliness. Solana is becoming a super system with exceptional characteristics. However, some applications, such as Zeta Market, plan to launch their instances (L2) to achieve similar objectives.

One standout fact is that the Solana Virtual Machine (SVM) performs excellently in isolated environments. This is well demonstrated by applications like Pyth Net and Cube Exchange, which leverage SVM to support application chains—referred to in the Solana ecosystem as Solana Powered Environments (SPEs).

Although there are scenarios where independent “application-specific” SVM chains are used, these chains are not significantly different from standard Solana clients. We believe that native Solana extensions as Layer 2 (vanilla Solana forks) have limited value, as they may replicate Ethereum’s fragmentation issues.

Clearly, Solana needs an independent approach to avoid compromising the characteristics of its monolithic architecture. This is why Lollipop developed the Lollipop Network Extensions, which will significantly reshape the Solana ecosystem.

4. What Does Solana Need? — Modular Support for Off-Chain Runtime Environments in a Monolithic Architecture

4.1 Core Concept of Network Extensions

The factors above have led the Solana community to discuss the necessity of moving some computational tasks elsewhere. Scaling is not a new phenomenon for Solana. As early as 2022, Token Extensions emerged, providing new features such as confidential transfers, transfer hooks, and metadata pointers.

Thus, introducing the concept of “Network Extensions (NE)” to enhance Solana’s functionality and expand dApp capabilities is logical. In addition to improving Solana’s features, NE introduces modular elements into the ecosystem—different environments within NE can be customized based on specific needs and shared across multiple dApps and protocols.

Based on insights and discussions within the Solana ecosystem, we identified several fundamental principles that should define the architecture and functionality of Network Extensions (NE). These principles aim to ensure seamless integration with the Solana network while preserving its core architectural advantages:

• No fragmentation of liquidity
• No fragmentation of the user base
• Interaction experience identical to direct Solana usage for users
• Unified technology stack
• NE transactions are sent directly to Solana validator nodes

For NE, Solana serves as a true settlement layer where funds flow occurs. NE acts as an execution layer that avoids fragmentation with the main chain and directly interacts with accounts and programs at this layer.

Figure 5: Simplified Process Diagram of Lollipop Network Extensions (NE)

These characteristics distinguish Network Extension (NE) from different expansion solutions such as rollups, side chains, subnets, different variants of L2, and application chains. Compared to similar solutions, Lollipop aims to develop a technical framework for Network Extension (NE) that enables developers, consumers and end users to seamlessly interact with Solana’s liquidity and user base at the Solana level.

4.2 Comparative Analysis

Lollipop is currently the first solution that provides a direct connection to Solana’s mainnet without causing fragmentation of liquidity or users.

Lollipop’s native environment can serve as the foundation for new products or support the migration of existing dApps without disconnecting from Solana’s ecosystem or liquidity. For existing dApps, this improves speed, stability, and functionality.

Figure 6: Comparison of Existing Solana Solutions

Key Differences from L2s, Subnets, and Sidechains:

L2s: L2s batch transactions and send proofs to L1 for validation. Execution and settlement occur primarily within the rollup, while L1 (e.g., Ethereum or Solana) is used for proof verification. In contrast, Network Extensions (NE) send transactions directly to Solana validator nodes and programs.

Sidechains: Sidechains lack a direct connection to the main chain. While sidechains can anchor data to the main chain, the gap between ecosystems is significantly larger compared to L1 and L2. Essentially, sidechains operate as entirely independent networks.

Subnets: Subnets may create independent ecosystems within subchains, where liquidity and users are concentrated in separate spaces.

In the Solana ecosystem, the projects most aligned with the concept of Network Extensions are Getcode and Sonic SVM (based on HyperGrid). However, Getcode primarily acts as a fund transfer layer, akin to Bitcoin’s Lightning Network, and does not support the deployment of complex environments. Sonic, while capable of delegating programs deployed on Solana to its instances with a 10-millisecond latency, focuses more on gaming and lacks the flexibility and customizability envisioned by Lollipop.

NE works directly with Solana’s liquidity, avoiding the creation of separate chains, spaces, or communities. It provides infrastructure solutions for Solana and its dApps while supporting their operations. This concept is somewhat similar to the ideas of appchains and L2s. Many dApps are transitioning to dedicated instances to optimize performance, scalability, and user experience.

There are numerous L2 solutions: OP-Stack, Arbitrum Orbit, Polygon CDK, StarkEX, zkSync Era, Termina, etc. These toolkits have enabled the successful launch of many L2 projects, significantly advancing blockchain scalability and usability. However, as discussed earlier, the current layered models and fragmented environments are incompatible with Solana’s monolithic architecture.

4.3 Market Demand

The cases and narratives above reflect a broader trend: decentralized applications (dApps) are creating independent instances to optimize operations and functionalities, offering better services to users. These applications span various sectors, including DeFi, gaming, verification and identity protocols, privacy protocols, institutional and enterprise solutions, and more. Most of these environments are built on different rollup implementations.

As previously noted, rollups exhibit a “vampire effect” on base chains. Lollipop aims to address this issue by introducing modularity to Solana without compromising its monolithic architecture.

Here’s why Network Extensions (NE) are revolutionary for Solana:

• Custom Execution Logic: NE allows developers to deploy modified SVM instances tailored to specific needs, such as unique governance rules, reward structures, or decentralized computing environments. Parameters like latency, block time, and block size can be adjusted to enable real-time performance and explore novel use cases.
• Direct Settlement: While NE operates independently, all transactions settle directly on Solana, maintaining unified liquidity and user flow without fragmentation or vampire effects.
• Economic Flexibility: NE leverages Solana’s efficiency to introduce innovative economic models. For instance, dApps can offer gas-free experiences using subscription-based models.
• Fragmentation-Free Flexibility: Unlike L2s, NE does not create isolated spaces. Everything remains unified, resembling Token Extensions in functionality.
• Seamless UI/UX for Users: Unlike subnets or L2/L3 solutions, NE offers a superior user experience. Users interact directly with Solana without switching networks, using cross-chain technologies, or dealing with address concerns.
• Lower Program Deployment Costs: Deploying a program on Solana currently costs 1-3 SOL or more, depending on size. NE enables the deployment of multi-component, complex programs across different environments at a fraction of the cost.

NE can also support use cases involving Automated Verification Systems (AVS) based on re-staking protocols, such as decentralized oracles, co-processors, verifiable computing, decentralized sorting, and fast finality.

Another key scenario for NE is creating gas-free economies within environments similar to EVM’s account abstraction (Account Abstraction). This is particularly beneficial for protocols generating high transaction volumes, such as high-frequency trading (HFT), gaming, rebalancing protocols, or dynamic pools with concentrated liquidity.

Lollipop envisions the following use cases for NE:

• Gaming: Imagine a gas-free gaming experience where players enjoy seamless interaction, and developers earn stable revenue through subscription models. This introduces a new approach to developing Web3 gaming components, allowing users to interact with wallets or marketplaces without leaving the game.
• DeFi: Build high-frequency trading platforms using session-based fees instead of per-transaction gas fees, making transactions faster and cheaper. Design off-chain order books and clearing logic for increased scalability and higher leverage.
• AI Models: Deploy compute-intensive AI environments using GPUs, with direct transaction settlement on Solana. Applications range from security assessments to routing, arbitrage, and various intent-based model implementations.
• Enterprise Solutions: Tailor environments for institutional and enterprise clients with strict management, compliance, encryption, and governance rules.
• PayFi: Address complex financial challenges with programmable environments for supply chain finance, cross-border payments, corporate cards backed by digital assets, credit markets, etc.
• Decentralized Computing: Enable advanced decentralized GPU or TEE computing for cryptography, co-processors, AI models, or data-intensive tasks.
• Trusted Environments: Deploy trusted environments for oracles, decentralized storage (DAS/DAC), verification systems, decentralized physical infrastructure networks (DePIN), and more.

The core mission of the Lollipop team is to ensure that dApps and protocols can create custom environments within the Solana ecosystem while maintaining direct connectivity to Solana. In essence, although execution appears off-chain in NE, all actions settle and finalize on Solana.

At the same time, user wallets remain anchored within Solana’s block space. After extensive research and development, the Lollipop team has finalized its current NE design, paving the way for Solana’s next stage of innovation.

5. Technical Explanation of Lollipop

Lollipop enables projects to modify the Solana client in off-chain execution environments and seamlessly transmit the execution results back to the Solana mainnet, eliminating the need to create separate chains. Solana itself lacks a global state tree, which is crucial for securely settling off-chain execution results. Lollipop addresses this issue by introducing Sparse Merkle Trees (SMT) in its Network Extension to encrypt and verify execution results.

Key Technical Features:

• Off-Chain Execution Environment: Lollipop allows dApps to process complex logic off-chain while ensuring that the results of each operation can be cryptographically verified using Sparse Merkle Trees, ensuring security and integrity.
• Sparse Merkle Trees (SMT): SMT is a special type of Merkle Tree used to verify the existence of data without storing all data. It enables Lollipop to efficiently and securely validate off-chain execution results, ensuring these results are reliably settled on the Solana mainnet.
• Seamless Connection with Solana Mainnet: Lollipop’s Network Extension directly connects to the Solana mainnet, avoiding the fragmentation issues of traditional L2 or sharded chains and ensuring unified liquidity and user bases.

Advantages of This Technology:

• No Need to Create Independent Chains: Projects no longer need to create additional chains or ecosystems. Instead, they can modify the Solana client and achieve off-chain execution through Lollipop. This reduces development and operational costs while ensuring tight integration with the Solana mainnet.
• Decentralized and Secure: Using Sparse Merkle Trees for cryptographic verification ensures that the results of off-chain execution remain tamper-proof and consistent.
• Compatible with Solana dApps: Lollipop enhances the scalability of Solana’s decentralized applications while avoiding performance and security issues associated with off-chain environments, making it an ideal choice for Solana dApps.

Lollipop provides Solana with an innovative solution to improve scalability and operational efficiency without introducing fragmentation, making it an indispensable part of Solana’s future ecosystem.

Figure 7: Lollipop Diagram

Lollipop’s architecture consists of several main components:

1. Network Extensions Layer (NE Layer)
2. Programs on Solana Layer (Solana Layer)
3. Polkadot Cloud Layer

Lollipop is directly built on Solana, leveraging its parallel execution capabilities and unique transaction data structure. The parallel processing power of the Solana Virtual Machine (SVM) depends on the Solana client itself. By modifying the Solana client, Lollipop maximizes the performance advantages inherent to Solana’s architecture.

This architecture allows decentralized applications (dApps) to seamlessly migrate from Solana’s L1 to Lollipop’s NES without modifying their program code. Additionally, developers can continue using the same tools and technology stack as Solana while consuming fewer resources.

It is important to note that the parallel execution of SVM is based on Solana’s unique transaction data structure. In each transaction, the initiator pre-declares the account information it intends to read or write. This allows SVM to efficiently process a batch of transactions in parallel based on the declared account information while ensuring that parallel transactions do not simultaneously read and write to the same account. Simply porting SVM to other execution frameworks does not bring the advantage of parallel processing.

Lollipop aims to become a trusted supercomputer for Network Extensions, offering permissioned and permissionless environments, multi-core execution, global consistency, customizability, and cost-effectiveness. Lollipop provides a complete infrastructure for NE deployment, including shared sequencers, validators, and stateless validated contracts.

By leveraging Polkadot Cloud, Lollipop can also function as a data availability (DA) layer. Each contract operates on dedicated cores, supporting parallel and synchronized execution across validators, sequencers, and DA, ensuring high processing efficiency.

Figure 8: Lollipop Architecture Diagram

6. Conclusion

Lollipop’s Network Extensions (NE) represent a significant advancement in enhancing the functionality of dApps and protocols within the Solana ecosystem. By introducing a new development paradigm for dApps and protocols in the Solana ecosystem, Lollipop ensures seamless integration with Solana’s mainnet while maintaining a monolithic architecture and avoiding chain fragmentation. Unlike traditional Layer 2 solutions that often create isolated environments and lead to liquidity fragmentation, Lollipop ensures that liquidity and user bases remain unified across both layers through its direct connection with Solana.

Lollipop’s Network Extensions (NE) provide developers with a universal framework to create customized runtime environments tailored to specific use cases. Notably, NE can deploy speed-optimized SVM instances to enable more efficient operations for perpetual decentralized exchanges (Perp DEX). They can also reduce user interface and user experience friction for decentralized applications (dApps) in the Solana ecosystem by introducing intents and account abstraction. This capability could catalyze the growth of Web3 gaming on Solana.

The configuration independence of NE instances from Solana further paves the way for enterprise-grade products, institutional solutions, PayFi applications, and even niche use cases such as insurance products.

Ultimately, Lollipop’s design provides a forward-looking solution for the scalability of dApps on Solana, laying the foundation for a new era of high-performance blockchain environments. As the Solana ecosystem continues to grow, Lollipop’s unique architecture positions it as a critical driver of future innovation, equipping developers with the tools needed to build secure, efficient, and sustainable applications.

Lollipop Links:

Twitter: x.com/LollipopHQ

Blog: medium.com/@LollipopBuilders

Website: https://www.lollipop.builders/

Litepaper: https://lollipop.builders/research

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