What Is Solana? The Ultimate Guide to the Solana Ecosystem
Blockchain

What Is Solana? The Ultimate Guide to the Solana Ecosystem

3 months ago

CoinMarketCap Alexandria takes a look at promising layer-one blockchains and their most interesting protocols. Fasten your seatbelts because we're taking a look at super-fast Solana.

What Is Solana? The Ultimate Guide to the Solana Ecosystem

Table of Contents

Solana is a high-speed layer-1 blockchain created in 2017 that aims to scale throughput beyond what is commonly achieved by popular blockchains, like Ethereum and Bitcoin, while maintaining low costs.
It boasts a unique consensus mechanism called Proof-of-History that allows Solana to process transactions almost instantly. Solana can theoretically process more than 50,000 transactions per second without scaling solutions, thanks to this lightning-fast timing mechanism, which is a version of proof-of-stake.
Solana also has a vibrant non-fungible token (NFT) ecosystem, and was recently supported on OpenSea, the leading NFT marketplace, after Ethereum. Thanks to its fast and cheap transactions, maybe NFT enthusiasts and creators have called Solana home for their NFT projects, therefore it is no surprise that numerous decentralized applications (DApps) in this list are NFT-related.
The layer-1 chain has been many analysts’ favorite when it comes to challenging Ethereum, which has propelled it to a top-10 cryptocurrency. However, Solana has also faced an array of problems and criticism, due to the downtime suffered by the network, which is why it is facing increasing competition from other up-and-coming L1s, and Ethereum layer-2 (L2) scaling solutions like Arbitrum and Optimism.

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How Does Solana Work?

Solana targets the blockchain trilemma by designing a unique consensus mechanism that compromises on decentralization to maximize speed.
The more transactions per second (TPS) a blockchain can support, the more scalable it is. But in decentralized blockchains, higher throughput slows the blockchain down because of tiny discrepancies in time. With locally timestamped transactions, nodes verify timestamps to validate transactions. More nodes verifying transactions and timestamps takes more time.
Solana solves this by having one node as the leader sequencing messages between nodes, which is chosen based on a Proof-of-Stake mechanism.

Even without a centralized and exact source of time, nodes benefit from a reduced workload, leading to increased throughput.

By hashing one transaction output and using it as the following transaction’s input, the network creates a chain of transactions — in other words, a history of transactions, hence the name Proof-of-History.

The biggest benefit of Proof-of-History is the increased throughput, which allows Solana to process more than 50,000 transactions per second. In practice, the network has been mostly running at 1,000 - 2,000 TPS, which is still considerably more than many other blockchains. However, this increased throughput has come at a cost.

The Criticism Solana Faces

Solana has been facing stern criticism over two topics: high allocations to VCs and repeated outages.

The following video generated a lot of anger in Crypto Twitter a few months ago:

Solana has been the target of crypto purists, who are accusing it of having an excessively high allocation to venture capital funds. According to a Messari report, Solana does indeed allocate almost half of its tokens to insiders, that is “all team, company and VC purchased tokens.”

However, that is still less in comparison to other layer-ones, like Terra and Fantom, and almost on par with a supposedly “sustainable” blockchain, like Celo.

Not only Solana has come under scrutiny but also the projects built on the Solana blockchain. ZachXBT, an account on Crypto Twitter that has repeatedly called out dishonest practices in the space, had this to say:

Some Solana figureheads have responded to the criticism. Here is Anatoly Yakovenko, co-founder of Solana, pointing out that he sees nothing wrong with this:

Raj Gokal, another Solana co-founder, had this to say:

VC allocations are not Solana’s only problem, though. The other is repeated outages that have started to weigh heavily on the price of SOL. Solana suffered outages not once but several times, prompting users to criticize it for being little more than a slightly decentralized database. Its last outage was the fifth for the year, and the network was down for four and a half hours before validators rebooted the mainnet. During past outages, users suffered liquidations on DeFi protocols as a result, which sparked outrage on social media.

How To Buy Solana

You can buy Solana (SOL) on many different exchanges. Here is a step-by-step guide on how to buy Solana on Binance.

1. Open Binance and log in to your account.

You need an account at Binance (or any other exchange offering SOL). If you do not have an account yet, sign up to Binance and pass the KYC verification. You can choose from two options (circled in the screenshot): buy crypto if you don’t have any cryptocurrencies in your account yet or trade to swap another cryptocurrency for SOL.

2. Select SOL from the dropdown menu.

Click on your preferred payment option (credit card in this example) and pick SOL from the dropdown menu. You will be forwarded to another window where you need to add your credit card details to process the transaction. After that, you can confirm the transaction.

3. Add a credit card and process the transaction.

To swap another cryptocurrency for SOL, head to trade and select convert from the dropdown menu. You will see the following option, where you have to choose which coin you want to swap for SOL (in this case USDT).

Where To Buy SOL

SOL is available at all major centralized exchanges like Binance, FTX, Coinbase, Kraken, Huobi, Gemini, KuCoin, Bitfinex and Gate.io. It is also available on decentralized exchanges on Solana, such as Raydium, Serum and others.

Solana Wallets

Phantom

Phantom is a simple and user-friendly Solana wallet that has become the most popular wallet on the market. It works as a browser extension or on iOS and Android. Phantom is non-custodial and supports hardware wallets like Ledger Phantom also offers biometric authentication for additional security.

Solflare

Solflare is another non-custodial wallet that supports token swaps, staking, and sending SOL and Solana-based tokens. It is available on desktop, mobile, or as a browser extension. Solflare is very popular and accounts for more than $7 billion staked via its wallets.

Solong

Solong is another browser-based Solana wallet. It is a lightweight wallet with a simple interface and only available on Chrome.

Solana Ecosystem

Despite its problems, Solana’s impeccable tech saw its TVL rise significantly in 2021. In contrast to other blockchains, Solana boasts various niches and use cases, from DeFi over GameFi to a significant NFT sector.

The Top DeFi Projects on Solana

  1. Serum: the ecosystem’s main decentralized exchange.
  2. Raydium: the biggest automated market maker on Solana.
  3. Tulip Protocol: one of the main yield aggregators of the ecosystem.
  4. Jupiter: Solana’s main liquidity aggregator.
  5. Soldex: an ambitious high-speed DEX.

Serum

FTX, formerly known as Blockfolio, is a centralized exchange popular for derivatives trading. It was launched by a team of traders, headed by Sam Bankman-Fried (SBF), one of the most well-known figures in the cryptocurrency space. FTX is backed by Alameda Research, also founded by SBF, a crypto trading hedge fund and market maker in the cryptocurrency space.
FTX stands out due to its impeccable performance, resulting in fast transaction execution and near-zero downtime even in times of increased market volatility. This has led to a massive surge in trading volume on the exchange. It has also bought the naming rights to the Miami Heat arena and began building an NFT marketplace, based on Solana, on its platform. Furthermore, the exchange has become (in)famous for being very quick to list new tokens and introduce new innovative products, such as leverage tokens that allow investors to speculate on assets with higher risk exposure and no risk of liquidation.
Launched by FTX and Alameda’s Serum Foundation, Serum is the ecosystem's main DEX, boasting an on-chain central order book and matching engine, thanks to Solana's performance. This allows users to choose the price, size and direction of their trades and other projects to benefit from its architecture, bootstrapped liquidity and matching service.
Its core product is the asset-agnostic order book for matching any Solana-based trading product. This essentially allows Serum to have the performance of a centralized exchange and allows a greater source of pooled liquidity. Its Wormhole token bridge connects Solana to other blockchains but was recently the victim of a massive $320M exploit.

Raydium

Raydium is a DEX running on an automated market maker (AMM) model built on Solana. that leverages the central order book of Serum to provide fast trading and shared liquidity.
Raydium offers the standard features of money market protocols like a decentralized exchange, liquidity farming and staking.
As with any protocol on Solana, Raydium mainly benefits from the fast transaction speed and the quasi-zero gas fees. In addition, it has access to the order flow and liquidity of the Serum ecosystem, reducing slippage and liquidity shortages.

Tulip Protocol

Tulip Protocol, formerly known as Solfarm, is a decentralized yield aggregator on Solana. It offers auto-compounding yield strategies, meaning users can engage in more passive investment strategies and farm the protocol's native TULIP token.

Thanks to its leveraged yield farming, investors can increase their annualized yield and take on riskier positions. In contrast to other AMM protocols, Tulip Protocol offers a fairly high loan-to-value ratio of 85%. It is one of the few yield farming protocols on Solana to date.

Jupiter

Jupiter is a liquidity aggregator that searches for the best prices across the Solana ecosystem. It combines more than a dozen different liquidity sources, both automated market makers and order books.

In total, over 860 tokens can be traded on Jupiter, and it makes up 2% of the non-voting transactions on Solana per day.

The Jupiter algorithm supports multi-hop swap routing and trade splitting.

A multi-hop route enables token swaps in a single transaction even if these tokens cannot be directly exchanged against one another. It also facilitates better price discovery since it improves market efficiency across different tokens.

Splitting swaps send trades to different exchanges to reduce slippage and improve the price at which a trade is matched.

Soldex

Soldex is a permissionless and non-custodial decentralized exchange that allows for trading perpetuals of any listed trading pair. It boasts efficiently incentivized liquidity pools and a slick trading experience with real-time settlement and ultra-fast swaps. In the future, Soldex strives to become the leading DEX of Solana.

The Top Lending Protocols on Solana

  1. Alfprotocol: a protocol for leveraged yield farming
  2. Solanium: an all-in-one lending protocol.
  3. LP Finance: an interest-free borrowing protocol.
  4. Trush: an independent banking protocol.
  5. Enrex: a DeFi gateway to carbon allowances.

Alfprotocol

Alfprotocol is a liquidity protocol for leveraged and unleveraged yield farming. It deploys a bespoke version of an invariant-based automated market maker. Alfprotocol contributes to Solana by enabling leveraged liquidity providers positions in AMM pools and yield farming protocols.

By improving capital efficiency, Alf facilitates the creation of liquid markets and connects risk-averse investors with lending protocols hosting risk-affine liquidity providers.

Solanium

Solanium is a decentralized all-in-one lending solution for Solana. It offers an integrated wallet, a DEX, transaction management and a decentralized launchpad. Solanium focuses on improving the user experience over comparable projects and prioritizes decentralization.

LP Finance

LP Finance is an interest-free borrowing protocol on Solana. Users can collateralize more than 20 different tokens to borrow a synthetic stablecoin minted by the protocol. Other services include short-selling of cryptocurrencies like BTC, ETH, and SOL with up to 20x leverage.

LP Finance also offers a Liquidity Pool 2.0 service that pairs the synthetically minted stablecoin with other assets and pays liquidator rewards to LP providers for liquidated positions. Finally, it can also be used as a mobile payment app.

Trush

Trush is a next-generation DeFi banking protocol offering lending and borrowing services, as well as staking and peer-to-peer payments.

It aims to provide a user-friendly and globally available lending platform that connects lenders with borrowers looking to generate revenue, while maintaining a revolving loan. The Trush Payments subsection of the protocol is supposed to bring banking to the unbanked by emitting custom Trush cards for payments.

Enrex

Enrex is a DeFi gateway to carbon allowances and renewable energy certificate markets. Users can trade energy certificates and carbon allowances through the ENRX token and contribute to saving the environment by offsetting their carbon emissions.

Enrex aims to launch only sustainable and carbon-neutral IDOs and IEOs and tracks cryptocurrencies for their sustainability.

The Top NFT Marketplaces on Solana

  1. MagicEden
  2. SolSea
  3. Solanart
  4. Metaplex
  5. Alpha
  6. Digital Eyes
  7. Exchange
  8. Artz
  9. Solport
  10. SupaDrop

Magic Eden

Magic Eden is probably the best NFT marketplace on Solana thanks to its selection of high-quality NFT collections. It accounts for over 90% of secondary-market trading on Solana. Magic Eden owes part of its popularity to its fee-free listing service, even though there is a two percent transaction fee.

Magic Eden doesn't stop at being an NFT marketplace but is also a DAO and a launchpad for other projects. Furthermore, it provides a dedicated section for games and API services to other platforms.

The platform shines with its intricate auction and collection statistics that allow you to filter for different traits and prices. This is reminiscent of OpenSea, the market-leading NFT marketplace on Ethereum.

Magic Eden also enjoys the backing of venture capital funds like Sequoia, Coinbase Ventures and Alameda Research.

Solsea

Solsea.io is another popular Solana NFT marketplace that shines by offering different minting tools like a rarity calculator, collection rankings, and a verification service for popular collections. These collections are verified by the Solsea team and receive a blue checkmark next to their name.

Solsea also offers a licensing service to collections. Sellers can specify how buyers may use their work and can define commercial or private-only licenses. It also provides a calendar for upcoming NFT mints and has launched the First 100 Virtual NFT Art Fair that aims to feature pioneers and early adopters. Solsea charges three percent transaction fees.

Solanart

Solanart is a major Solana NFT marketplace that lists many popular Solana NFT collections like Degenerate Ape Academy, Aurory, Abstractica, SolPunks and others. It is a curated marketplace, meaning collections have to pass an application process by the platform so as not to dilute the quality of collections.

Collectors can search for various NFTs by their traits and buy and sell Solana NFTs according to their needs. Solanart charges a 3% transaction fee. Furthermore, the NFT creator gets to choose what kind of royalties they want to receive, which are not included in the platform fees.

Metaplex

Metaplex is an unusual NFT marketplace because it functions as your own storefront for NFT collections. NFT projects are listed in accordance with the marketplace’s guidelines and standards, which may be an advantage to some collections but a disadvantage to others. In essence, Metaplex works as the Shopify equivalent of NFT marketplaces.

It also lists popular collections like Solana Monkey Business, Degen Ape Academy, Genopets, Nyan Heroes, and others and offers social integrations and developer tools.

For more advanced NFT collectors and creators, Metaplex is definitely worth looking into.

Alpha Art

Alpha is a Solana NFT marketplace that is very similar to OpenSea and offers many of the same options like property filters, creator tools and common listing options. It also has a bespoke NFT collection called ‘Piggy Sol Gang’ that can be staked on its website. Alpha charges a 2% platform fee.

Digital Eyes

Digital Eyes claims to be the first "open" Solana NFT marketplace that is still in its alpha stage and only lists verified collections. It has a limited search function but lists some popular collections like Solana Monkey Business, Thug Birdz, Solarians and Degenerate Ape Academy. With the mint calendar, NFT collectors can plan for the next mints.

Digital Eyes only charges a 2.5% transaction fee.

Exchange

Exchange is a Solana NFT marketplace focused on unique, curated art from independent creators. Compared to other NFT marketplaces, it has a high proportion of handpicked art collections, illustrations, photography, and other art.

Furthermore, Exchange boasts a Creators Portal with an integrated dashboard for artists and creators to manage their collections.

The platform fee on Exchange is a standard 2.5%, and it offers minting tools like a rarity calculator and search filters.

Artz

Artz is the self-proclaimed first truly decentralized NFT marketplace on Solana. In this way, the platform tries to set itself apart from some of the other marketplaces that may be more centralized.

Artz offers various listing options and minting tools and promises to publish a mobile app for its marketplace. Furthermore, it has a user verification feature to enhance platform security. The platform also stands out with its transaction fee of only two percent.

Solport

Solport is a cookie-cutter Solana NFT marketplace with standard tools like rarity filters, user auctioning, and marketplace activity notifications via Discord and Telegram. Prominent featured collections include Solana Monkey Business and Realm Kings Mutant. Solport's redeeming feature is the lower-than-usual two percent transaction fee.

Supadrop

SupaDrop is a niche NFT marketplace focusing on independent creators with authentic digital art. Artists can publish work that has been created in various ways, such as paintings, 3D art, or video. It sponsors Artist Drop Part Sessions every week for artists to promote their work on Supadrop.

The platform charges a 2.5% transaction fee.

The Top Web3 Apps on Solana

  1. Star Atlas: a blockbuster MMORPG.
  2. Aurory: an NFT fantasy game.
  3. Stepn: a web3 fitness app.
  4. Audius: a decentralized music streaming platform.
  5. Samoyedcoin: Solana’s native meme coin.

Star Atlas

Star Atlas is a next-gen blockchain massive multiplayer online game. Set in a futuristic space environment, the game revolves around three factions and their battle for resources and political influence. Built on Unreal Engine 5, Star Atlas will feature photorealistic graphics and real-time environments.
The game combines several genres like combat, space exploration, flight simulation and strategy. As with other blockchain games, assets acquired in the game are all NFTs and can be traded for other cryptocurrencies.
The game has a two-token economy model consisting of ATLAS and POLIS. ATLAS is the in-game currency that players will acquire through playing and trading with other players. POLIS is the game's governance token that will serve for in-game governance, as well as influencing decisions regarding the development of Star Atlas.

Aurory

Aurory is a role-playing game set in a retro-futuristic universe revolving around a set of NFTs called Aurorians. Players can engage in a solo-player mode, where they follow the quest of Helios, a retro-futuristic cat that accomplishes quests and battles opponents that can be earned as NFTs. These can either be traded or used later in the game's multiplayer mode.
Aurory replicates the success of  Axie Infinity (AXS), and its IDO was the largest IDO on Solana. The game will also offer land ownership in its metaverse and an annual Aurory Championship Tour, where players can win rare items and significant cash prizes.

STEPN

STEPN (GMT) is a web3 lifestyle app that has pioneered the move-to-earn movement. In essence, STEPN is a fitness app that combines exercise with a chance to earn its GMT token by buying custom NFT sneakers you wear while working out. That has made STEPN one of the fastest-growing applications in 2022.

STEPN offers different modes like a solo mode, a marathon mode, and more multiplayer modes in the future. Users purchase NFT sneakers with SOL and let the app track their movement while walking or working out. The more the user moves, the more GMT they can earn and level up their NFT sneakers, buy more powerful ones, or cash out their tokens.

With the combination of an existing concept (fitness applications) with monetization through crypto, STEPN has unlocked a whole new field of interesting applications and will likely stay relevant for the foreseeable future.

Audius

Audius is a decentralized music streaming platform that aims to remove inefficiencies in the music industry, such as intransparent rights, ownership, and the excessive presence of intermediaries.

Audius does this by aligning the interests of the industry's various stakeholders: artists, fans and node operators.

Artists can publish content on the platform's content ledger, with music being streamed at a comparable quality to Spotify and Google Play Music.
Fans can listen to music for free and will be able to support their favorite artists by staking AUDIO on the platform.
Furthermore, nodes can help maintain the content availability on the protocol or improve user queries through indexing metadata. Both things happen via staking.

Samoyedcoin

Samoyedcoin is Solana's native meme coin that is a dig at Dogecoin. It revolves around Samoyed, an Eastern European dog breed and the same breed that Anatoly Yakovenko, founder of Solana possesses.

The coin was brought into life in April 2021 and has since become the blockchain's "mascot and ambassador." There are now SAMO NFTs and a SAMO Swag Store with dog-themed merchandise. Unlike other dog coins, Samoyedcoin is not fully community-owned, with the core team reserving a 3.9% allocation.

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