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Coinbase is making a lot of money from Solana traders these days, but the influx of demand is also causing some headaches for America’s largest crypto exchange.
Coinbase is receiving more Solana send and receive requests “than ever before,” according to an employee, and so-called dusting attacks have become commonplace, causing Coinbase to take longer than usual to show SOL transactions on users’ accounts. This gets at an interesting problem Solana faces: While the blockchain processes data very quickly, the venues that need to make use of that data sometimes struggle to keep up.
Coinbase’s struggle is with data indexing, which is the process of taking blockchain transaction data — which comes as a jumble of bits — and putting it in a format that things like crypto exchanges can read.
When a blockchain produces as much data as Solana does, this can get demanding and pricey.
To contextualize how much data Solana produces, Blockworks Research data lead Dan Smith pointed to an experiment run by Eigen Labs to show the capacity of its EigenDA data product. Eigen Labs posted every block from 19 blockchains for a period of time in September, representing roughly 20 terabytes of data, and Solana accounted for a staggering 97% of the total. Coinbase’s indexers currently “can’t keep up” with Solana demand, a protocol specialist at the exchange wrote on X.
Making matters worse, dusting has become “constant” on Coinbase, the protocol specialist wrote.
Dusting refers to sending tiny amounts of crypto to many wallet addresses in hopes of tracking them. I moved SOL around on Coinbase while writing this article, and my wallet received two different dust transactions. This “dust” is trivial to the sender, but it can become a big strain for Coinbase’s data load.
And Solana’s indexing challenges run deeper than just volume.
Solana indexing is particularly difficult compared to Ethereum because the former lacks a uniform interface for smart contracts, which are the computer programs that run on the blockchain.
“[W]hen you look at your transactions across many of these [Solana] programs, the data is just a jumble of bytes which are not human readable,” Tristan Frizza, founder of Zeta Markets, said.
Since there’s no established way to read the data, it becomes difficult for indexers, block explorers, or data platforms like Dune to break down what different Solana transactions are actually doing.
Helius CEO Mert Mumtaz said the Solana development platform will be rolling out three new features in the next two months that he estimated could solve 80% of Solana’s “read layer issues.”
But until then, exchanges will keep having to index a blockchain that is seeing record demand.
Time to man the battle stations, Coinbase.