coindesk.com
Solana is having a moment, and it's largely related to the frenzy of meme coin trading suddenly taking place - in tokens built around images of dogs and sloths, general ridiculousness and even the very concept of memes themselves.
Users have complained and posted screenshots of transactions failing to go through.
Solana Labs CEO Anatoly Yakovenko says he thinks meme coin trading is "bizarre," though he said the episode has provided a welcome stress test for the fast-growing network.
The Solana blockchain is in the midst of what some might call a renaissance, its SOL token rebounding almost entirely from all-time-lows in 2020. But recently, it's the source of activity on the chain that might give some analysts pause: Meme coins built around images of dogs and sloths, general ridiculousness and even the very concept of memes themselves.
The chain, which aims to offer cheaper and quicker transactions than rival networks like Ethereum, has become the go-to platform for meme coins like dogwifhat (WIF), bonk (BONK), and book of meme (BOME) – tokens whose value lies principally (and unabashedly) in their ability to generate internet buzz. A new arrival is SLERF, a sloth-themed token.
Hordes of "degens" – the accepted jargon for crypto traders who are, well, really into it – have flocked to Solana, chasing the trend. Mature observers might call it a display of some of the crypto industry's worst excesses, morphing the Solana ecosystem into a carnival of scams, schemes and screw-ups.
"To me, it's just a bizarre thing, I think, of people being terminally online and kind of having nothing better to do," Solana co-founder Anatoly Yakovenko told CoinDesk this week in an interview for The Protocol podcast.
The meme coin boom has triggered a flurry of activity for the wider Solana ecosystem, with decentralized exchanges on the network surpassing those on Ethereum in terms of overall transaction volume this week. But users are beginning to notice a problem: Many transactions on Solana are failing to go through – highlighting the consequence of meme coin-induced volatility and congestion.
The meme craze has ultimately been a mixed bag for Solana, leading to an influx in usage and liquidity, but dredging up problems with its architecture that have left a sour taste in the mouths of some traders.
"My guess is within five years, there's going to be a trillion dollars with the stablecoins in crypto, and that's an astronomical amount of real money," said Yakovenko. "Working out all the kinks now with memes is a blessing."
Meme coin madness
Meme coins are not new to Solana, but they're having a moment. Dogwifhat, the breakout star of Solana's meme coin explosion, skyrocketed to a market cap above $3 billion at its peak last week, boasting a high of almost $1 billion in daily trading volume according to CoinGecko. It is, literally, just a digital token associated with an image of a dog wearing a hat.
Bonk, an irreverently-named Solana meme coin mainstay, boasted an all-time-high market cap of over $2.5 billion earlier in March.
While the coins have helped bring cash into the Solana ecosystem, they've both strained and stained the network. Meme coins have fueled the rise of so-called "presales," with developers raising millions of dollars for tokens that don't exist yet. The trend has led crypto sleuth ZachXBT to warn users against the possibility of rug pulls – where tokens are unceremoniously ripped from the hands of investors or are dumped in large volumes onto the market, depleting them of any value.
In a recent example of a presale gone wrong, a developer raised $10 million for the sloth-themed SLERF token and subsequently lost all of the funds by sending them to a "burn" address on the Ethereum network. The token's pseudonymous developer chalked it all up to an honest mistake.
As for why Solana has become the ecosystem of choice for degen meme traders rather than Ethereum, its biggest competitor, Yakovenko said he wasn't sure. Some have speculated that it comes down to Solana's fees, typically much lower than those on other networks.
There exist layer-2 blockchains that work atop Ethereum to handle transactions with comparable fees to Solana, like Coinbase's Base network. But Ethereum liquidity is fragmented between all of them, and moving funds between them can be arduous and costly. Solana, by contrast, is more of a one-stop shop.
Network clogs
Aside from the worrisome potential for exit scams, the meme craze has exposed more existential problems for Solana's core infrastructure.
Solana monitoring services like Solana Beach show that, at any given moment, most of the transactions on the network are currently failing. Last week, an X user who goes by the handle rektbuildr found one block on the network in which 100% of the transactions failed.
According to Yakovenko, Solana's traffic problems have been exaggerated on social media, and the "failed" status tags on Solana's monitoring services have been misrepresented by the network's critics. Many of the failed transactions aren't from humans, asserts Yakovenko, but from "machines" that are programmed to spam the network with hundreds of transactions that have a small chance of going through – taking advantage of the cheap fees.
Even if the machine has "a one percent probability of success," he explained, "It's still net positive for them."
Although the transaction-spamming bots might explain some of the story, social media is awash with reports from real Solana users who claim they've struggled to use the network – sometimes needing to repeatedly issue transactions to force them through.
The complaints have spurred dunks from Ethereum fans who say their network of choice is more stable, but Yakovenko doesn't see it as an apples-to-apples comparison: "When a user has transaction failures on Solana, it's more or less an insignificant amount of money. When they have a failed transaction in Ethereum, it's hundreds of dollars potentially."
Priority fee problems
There's no single diagnosis for Solana's networking woes, but much of the issue appears to stem from two sources: priority fees and block sizes.
Similar to other blockchains, "blocks" of transactions submitted by users of the Solana network get added to the chain by validators – a large community of hardware operators that help run the network behind the scenes.
Solana, like many of its peer networks, allows users to attach a "priority fee" to help ensure transactions are added to a block – an allotment of tokens paid to validators as an incentive to give a transaction a coveted block spot.
Unlike on Ethereum, where higher-paying transactions generally have a better chance of reaching the network, priority fees on Solana are frequently ignored. Every so often, this means that a user will pay a high fee and still see their transaction fail or, conversely, see it succeed alongside a bunch of transactions that paid less in fees and were processed anyway.
There are plenty of reasons why Solana's fee-accounting system doesn't work as intended, including that the fees can be difficult for protocols to implement: Many Solana developers appear to have ignored priority fees when building out their programs, and the Solana Foundation has begun explicitly urging developers to implement the tech as a way to improve network performance.
According to Yakovenko, future Solana updates are likely to target how priority fees are accounted for and used to schedule transactions. "There's a bunch of fixes to how transaction flow and scheduling works that are coming up in [upgrade] 1.18," which is expected sometime in April, said Yakovenko.
Even with the updates, fixing Solana's transaction-scheduling mechanism by improving the priority fee system will ultimately present a challenge: "Nobody wants a lot of fees to go as high as Ethereum just to make it easier for that $200 fee-paying transaction to land faster," Yakovenko said.
Solana, in contrast to Ethereum, was specifically designed to keep costs down – in part by removing the ability for people to pay big money for preferential treatment. "These are challenging constraints we put on ourselves," said Yakovenko, "but people obviously see the benefit of it."
Bigger blocks
For Solana to scale without compromising on its core ethos, it will need its network capacity to expand without increasing fees for users. Beyond making some additional tweaks to how transactions are scheduled, Solana will probably need to expand the size of its blocks.
Yakovenko frequently talks about how Solana, in contrast to other networks, is designed to scale with hardware; the chain's proof-of-history model is supposed to increase transaction capacity as validators adopt more powerful machines to interact with the network.
Solana isn't really taking advantage of its hardware-scaling abilities, however, if it doesn't expand block sizes. For a network that has struggled in the past with reliability, a change to block sizes would be major, and despite Yakovenko advocating on X for an increase to block sizes, he wouldn't say whether more changes to block sizes would be coming anytime soon.
Solana has addressed the network struggles in an official note on its website, calling out priority fees, the 1.18 upgrade, and other measures that it is taking in the short-term to improve performance for users.
Bigger picture changes to the Solana network will take time, however, and the ecosystem's co-founder is urging patience.
"There's about one major release per year on Ethereum. There's three or four in Solana," said Yakovenko. "Solana moves quite a bit faster than that, but it's still not instant."