Our NewsletterInvestor RelationsOur NewsletterInvestor RelationsOur NewsletterInvestor RelationsOur NewsletterInvestor RelationsOur NewsletterInvestor RelationsOur NewsletterInvestor Relations
Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.
Preference cookies enable a website to remember information that changes the way the website behaves or looks, like your preferred language or the region that you are in.
Statistic cookies help website owners to understand how visitors interact with websites by collecting and reporting information anonymously.
Marketing cookies are used to track visitors across websites. The intention is to display ads that are relevant and engaging for the individual user and thereby more valuable for publishers and third party advertisers.
Image Solana Guide

Solana Guide

Timer7 min read

Solana: Pioneering scalability 

Solana has developed a censorship-resistant, fast and cheap network. While it believes it has solved the blockchain trilemma- the tradeoff between security, scalability and decentralisation- some of its innovations have led to security and operational vulnerabilities and outages. Whether Solana successfully achieves its goal depends on which features users ultimately prioritise. 

  • Launch date: November 2017 

  • 3month average transactions per second: 659 between between 30 Oct-24 to 28 Jan-25.

Solana at a Glance 

  • Innovative: By leveraging innovations such as proof of history (PoH), Solana has developed a fast blockchain with low latency and quick finality.  

  • Scalable- Unlike other networks, Solana scales using hardware rather than software, allowing it to capitalise on Moore’s Law, which suggests the network’s speed should double every two years and running costs should halve.    

  • Censorship-resistant- the threshold at which a bad actor could attack the network- 33% in Solana’s case- currently consists of 19 validators.  

Key figures

Solana Price and Market CapPerformance YTD: 21%, as of 30th Jan 2025

Market cap: $111bn, as of 30th Jan 2025

Proof of Stake, optimised 

Solana optimizes its proof of stake (PoS) consensus mechanism with proof of history (PoH), effectively a cryptographic clock. Having to agree on when a transaction occurs slows down validation in proof of work and traditional PoS mechanisms. PoH skips this step by timestamping transactions, creating a chronological order which means validators don’t have to wait on each other to complete the verification process. As a result, Solana’s throughput is higher than rival networks. Over the last 3months, it averaged 659 transactions per second (TPS), compared to Base’s 101 TPS, Sui 61 TPS, Arbitrum 23 TPS and Polygon POS TPS 37, between 30 Oct-24 to 28 Jan-25.

Solana TPSThe key participants in the Solana network are leaders and validators. A leader produces blocks during an assigned time slot and sends them to validators to confirm the validity of the transactions. Leaders and validators earn staking rewards of just over 6% APY, although the annual inflation rate was originally 8% which decreases the rewards by 15% per year.  

History

Solana launched as Loom in December 2017, inspired by its goal to weave all the world’s transactions together on a single blockchain. It rebranded as Solana (the name of the founders’ local beach when they worked for Qualcomm) in February 2018 to avoid confusion with the Loom Network. 

Key milestones

  • November 2017: Founder Anatoly Yakovenko published a whitepaper outlining the PoH innovation  

  • April 2018 to July 2019: Raised $20 million in private token sales 

  • March 2020: Launched its beta mainnet 

  • March 2021: Minted its first non-fungible token (NFT) project, Kreechures 

  • January 2022: Launched its payment product, Solana Pay 

  • November 2022: Google Cloud became a Solana validator 

  • December 2023: Solana sets records for monthly new and active addresses. The number of active addresses on Solana surged by 50% higher than November figures to finish at over 15.6 million.

  • 2024 - Institutional adoption: Stripe began accepting Solana payments, and PayPal launched its PYUSD ; retail memecoin mania on pumpdotfun with breakthrough applications such as Jupiter and Drift ; surpassing Ethereum in monthly DEX volumes

  • January 2025 - metrics: Fees, Revenues, DEX Volumes, stablecoin supply and volumes, number and quality of projects built on top - continually hit all-time-highs

  • 2025 - potential for SEC to approve a SOL spot ETF

What’s next/ future upgrades 

Details about Solana’s next upgrade, 1.17 (due at the start of 2024) are scant, but it’s expected to introduce further zero-knowledge proof support. 

CoinShares’ Analysis

Solana’s innovative design may help to attract a significant share of the DeFi market. However, it has also left the network vulnerable to outages, which have damaged its reputation.  

Strengths

  • Solana boosts censorship resistance by maximizing the number of validators required to reach the 33% threshold which would allow bad actors to collude 

  • By focusing on hardware, Solana can take advantage of Moore’s Law, which suggests that the speed of hardware doubles every two years and costs halve  

Weaknesses 

  • Solana’s focus on speed, cost and censorship resistance leaves the network vulnerable to cyber-attacks and lack of capacity, causing disruption for 22 hours in 2023, 4hrs46mins in 2024, although none so far in 2025

  • The combination of PoH and Turbine, Solana’s block propagation mechanism, encourages deterministic block creation which bad actors can use to predict and attack new blocks   

Opportunities 

  • The way liquidity is separated across different Ethereum Layer Two protocols could make Solana, where all transactions are processed on a single chain, more attractive 

  • Solana’s speed and cost advantages and outage prevention measures present an opportunity to secure market share in DeFi, NFTs, gaming and social media 

  • DeFi protocols continue to mature, adding new features and functions and creating more MEV opportunities.

  • Entrepreneurs are building novel financial markets natively on-chain (e.g. compute and telecom and energy markets, BECMs, and more).

  • More assets are being issued on-chain, from memecoins to US equities.

  • Firedancer upgrade gives developer clarity to the protocol, enhancing the attractiveness to invite developers and teams onto the protocol ; increases the performance capacity of the blockchain ; increases client diversity which should lead to a more robust protocol and less frequent downtime

Threats 

  • If users prioritise decentralisation and security over speed, Solana could lose market share

  • If Ethereum Layer Two scaling solutions prove effective, Solana loses its USP 

Published on23 Feb 2025

Related articles

Welcome
to CoinShares

Personal data

0102

When you visit CoinShares website, cookies enhance your experience. They help us to show you more relevant content. Some cookies are necessary for the site to work and will always be active. Blocking some types of cookies may impact your experience of the website and the services which we offer on our website.

We use cookies on our site to optimize our services. Learn more about our EU cookie policy or US cookie policy.

  • Necessary
    Question circle icon
  • Preferences
    Question circle icon
  • Statistical
    Question circle icon
  • Marketing
    Question circle icon