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Crypto Briefing looked under the hood of the Solana ecosystem in an interview with Anatoly Yakovenko, the creator of Solana and CEO of the core team at Solana Labs. He discussed the rate of development on the platform, how it can compete with Ethereum, and why it’s well-positioned to succeed.
Building a Non-EVM Ecosystem
Solana is a Layer 1 scalable blockchain that can support up to 50,000 transactions per second without the need for shards or roll-ups. The ecosystem is in its infancy. Nonetheless, the network has seen rapid growth in the last six months. Solana’s market cap has soared to a value of $9.5 billion this year, while many new projects have emerged on the network. Anatoly Yakovenko, the creator of Solana and CEO at Solana Labs, described the growth as “nonlinear,” particularly on the development side.
Yakovenko said that the network has attracted an influx of developers, noting that “the number of contributors outside of the core is probably larger than the core itself.” Solana uses the Rust programming language, which many builders are already familiar with. In recent months, the core team has been busy analyzing emerging projects and guiding them towards launching on Solana mainnet.
Solana uses Rust instead of Ethereum’s Solidity language to write smart contracts executed on the blockchain’s Low-level Virtual Machine (LVM). Building an independent ecosystem like Solana’s is challenging because developers do not have access to Ethereum’s DeFi money logos and other tools that have been developed over the years.
It is safe to say that decentralized finance, also known as DeFi, has found a home on Ethereum. The so-called “Ethereum effect” in DeFi is so strong that the Ethereum Virtual Machine (EVM) has become the standard for decentralized applications.
The recent growth of liquidity on Binance Smart Chain and Polygon is evidence of the Ethereum effect. Both chains benefited from offering EVM compatibility and attracted billions of dollars in liquidity after launching on mainnet.
Polygon is an Ethereum “commit chain” built to help the network scale. It currently holds $7.83 billion in total value locked, while Solana holds closer to $1 billion. But Yakovenko is not worried about that. “Language doesn’t matter, it never did,” he said. “An engineer is an engineer: they solve problems.”
Yakovenko also remarked that “the rate of development [of new applications] on Ethereum isn’t any faster than Solana.”
He supported his comments by noting that Rust is the programming language of choice over Solidity in the wider developer community. This was evident in Solana’s last hackathon, Yakovenko attests, where he said around “40% of the developers had no prior experience in smart contracts.” More than 13,000 developers registered for the event, with over 350 teams finalizing their code.
An EVM compiler to convert Rust to Solidity is also in production. When complete, it will allow for smart contracts in Solidity to be coded on Solana.
DeFi’s Growth on Solana
The next phase in Solana’s development involves developing “money legos” that match the composability of Ethereum’s DeFi ecosystem. Money legos offer a way to interact with numerous protocols in endless combinations, stacking activities on top of one another like building bricks.
Ethereum’s money legos got into full swing in 2020 as new protocols emerged on the network and liquidity grew. However, Ethereum’s rising gas fees have acted as a barrier to entry for many users.
Ethereum is hoping to improve scalability with its Ethereum 2.0 upgrade, but Yakovenko believes that the updated protocol will still struggle to support a central limit order book system like Serum.
Serum is a Solana-based decentralized exchange that enables composability between applications, using one order book and supporting a variety of applications. It was built in partnership with Alameda Research and FTX’s CEO Sam Bankman-Fried, who’s been a big supporter of the wider Solana ecosystem. It provides APIs and liquidity solutions for new applications on Solana. Yakovenko argued that Serum is one of Solana’s core strengths, explaining:
“Serum is an on-chain central limit order book that matches orders and bids from DEXes in the Solana ecosystem. It provides a more capital efficient alternative to AMMs and enables the development of financial dapps and platforms on the Solana blockchain.”
Yakovenko added that programming is a small part of any project; he says that most of the work in developing a successful application comes from focusing on the user experience, building a community, and other aspects aside from code.
Other than Serum, Solana has welcomed many promising projects in recent months. Yakovenko highlighted Mango, Synthetify, Psyoptions, Parrot, Jet, and Everland as key additions to the ecosystem. He also mentioned Metaplex, an NFT platform built on Solana, commenting that it is more sophisticated than any other existing NFT marketplace. Like DeFi, the NFT ecosystem is largely centered on Ethereum today.
Solana Labs is dedicated to supporting a base layer for finance that might someday host a major exchange like Nasdaq. Still, Solana has a long way to go catch up with Ethereum. The total value locked in Solana’s DeFi network is approximately $1 billion today, whereas Ethereum holds almost $55 billion. Solana needs growth in liquidity pools, users, and developer contributions if it’s to compete with the biggest smart contract blockchain.