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Solana’s DeFi ecosystem has exploded over the past year, with the ease of trading meme coins attracting more participants to this Layer 1 chain. The latest stats on DeFi Llama show a total value locked (TVL) of $4.7 billion, almost 3x since the beginning of 2024.
Behind this success is the Solana Virtual Machine (SVM), the blockchain’s execution software which performs similar functions to Ethereum’s Virtual Machine (EVM) – smart contract execution and transaction processing. However, unlike the EVM, Solana’s runtime environment is more efficient; it can handle up to 4000 transactions per second (tps) while EVM touts an average of 30 tps.
In the next sections of this article, we will explain how the SVM works, what makes it superior, and the innovations being built on top of it to extend its value proposition beyond Solana’s DeFi ecosystem to the broader Web3 space.
The SVM Explained
A virtual machine in the context of smart contract networks is simply the software that is designed to run programs and update the state of the blockchain. In Solana’s case, the SVM plays an important role by enabling these functions to be executed seamlessly.
How exactly?
Program execution
Solana’s smart contracts can be written in several languages, including C, C++, and Rust. However, for the programs to be validated effectively, these languages need to be compiled into BPF bytecode to make the execution process seamless for Solana’s decentralized network of validators. The SVM is responsible for this compilation.
Modifying the State of the Blockchain
Each node on Solana (validators) runs its own isolated environment of the SVM; consensus on updating the network can only be achieved if the nodes are in agreement. So, when a smart contract is deployed and requires changes to be made on the blockchain, the SVM communicates these updates to individual nodes, which then translate and approve the updates.
Horizontal Scaling
The main reason why the SVM is faster than the EVM is because of a unique engine dubbed ‘Sealevel’. This unique feature allows multiple smart contracts to be executed simultaneously unlike on Ethereum’s VM where smart contracts can only be processed one at a time. Simply put, SVM’s Sealevel component supports parallel transactions making it easier to scale the network.
SVM Beyond the Solana Ecosystem
The SVM has proven to be a valuable runtime environment by significantly reducing the operational costs on Solana’s DeFi applications while at the same time improving the speed at which transactions are completed. But what’s even more exciting is that the value of this VM is being felt across other blockchain networks as well.
For example, Zeus Network, a cross-chain communication layer, is currently building an interoperable DeFi ecosystem powered by the SVM. Key to the operations of this permissionless layer is the Zeus Programmable Library, a network of pluggable and programmable nodes designed to make it seamless for Web3 developers to deploy or integrate DApps or services from other smart contract environments to SVM.
This seamlessness in interoperability is essential for the expansion of the Web3 ecosystem which has long been struggling as most blockchains were operating in siloed environments. The Zeus network has also gone a step further to provide additional security through fraud proofs and programmable signatures. In doing so, this SVM-built chain-agnostic platform is not only providing interoperability but a secure DApp building platform as well.
Although a nascent DeFi ecosystem, the first DApp focused on interoperability, APOLLO, has already launched its public testnet on Zeus Network. What stands out about this DApp is its specific focus to bring Bitcoin’s liquidity to Solana’s DeFi ecosystem. As of writing, there’s close to $1 trillion in idle BTC, most of which owners cannot move around Web3 due to limited options. APOLLO solves this shortcoming by enabling more Bitcoin native assets to be used in Solana’s fast growing DeFi portfolio which includes GameFi DApps, NFTs, and more.
SVM Rollups
Similar to Ethereum’s Opportunistic and Zero-knowledge (ZK) chains, the SVM has also become a fundamental building block for rollups. One notable project that is currently leveraging the SVM on this front is Termina – an opportunistic rollup which enables developers to deploy Solana-based smart contracts in minutes.
At the core, this SVM rollup provides a cloud platform which essentially allows any interested Web3 innovator to launch their projects with their preferred Solana frameworks, coupled with the flexibility to customize the projects with modular options.
Eclipse is another popular rollup solution that has tapped into Solana’s Sealevel virtual machine, launching the Polygon SVM back in 2023 as part of its DeFi interoperability product suite. According to a commentary by Eclipse CEO, Neel Somani, the collaboration between Polygon and Solana’s communities presents an opportunity to develop even more superior scaling solutions.
The Future of DeFi?
For a while, Solana has been touted as the Ethereum killer, although there is also a fair share of skeptics who strongly disagree. While it is still early to state conclusively that the former will emerge as the winner, the latest stats point to a situation where we’ll likely see more DeFi activity on Solana in the next bull run.
The reason behind this argument is simple: the SVM has proven its efficiency over the EVM, Solana’s native token price has had a better run than ETH over the past year, it is much easier and less costly to use Solana, and finally, the meme coin mania, which has been a driver of activity in past cycles, is now thriving more on Solana than Ethereum.