Overview

Conceptualized in 2017 by Anatoly Yakovenko, the Solana protocol was born out of a deep-seated conviction that blockchain technology could facilitate a high-performance decentralized system without compromising security or censorship resistance.

Solana’s core innovation lies in its unique architectural design, which is a potent integration of a high-frequency Verifiable Delay Function (VDF), Proof of History (PoH), and a Byzantine Fault-Tolerant consensus model. This configuration positions Solana as a dynamic alternative to traditional blockchain configurations that often labor under scalability constraints.

Proof of History (PoH), Solana's centerpiece, tweaks the conventional understanding of a cryptographic sequencer, bringing in time as a crucial, scientifically verifiable factor. Contradicting the accepted industry standard of chaining blocks in sequence and subsequently struggling with speeds, PoH allows for concurrent processing across the network. By accurately ordering and stamping transactions, Solana drastically reduces the time taken for validation.

The ascent of Solana's ecosystem, once inextricably linked to the influence of Alameda/FTX, merits a critical examination in the wake of recent market upheavals. A discerning analysis suggests that while these entities may have significantly propelled the SOL token's valuation surge in 2021, the current absence of Alameda does not necessarily forecast an irreversible decline. Solana distinguishes itself through a foundation rooted in engineering pragmatism as opposed to theoretical design. This approach, despite causing initial setbacks, has led to the development of novel applications that remain unparalleled across other blockchain networks. Improvements in network stability and transaction processing speeds continue to outpace competitors, indicating a robust infrastructure with potential for further enhancement.

Improved Uptime and Transactional Performance

In assessing Solana's network performance, a notable improvement in average block times has been observed over the past six months, indicating a more efficient processing framework. This advancement is not solely due to an increased ratio of vote to non-vote transactions, which are inherently less resource-intensive. Significant strides have been made through a series of software enhancements aimed at bolstering the network's resilience and capacity.

During the tumultuous period of FTX's collapse, Solana encountered performance hiccups, such as delayed oracle publisher updates. However, the network demonstrated resilience, remaining operational amidst considerable stress from automated trading systems. The decrease in non-vote transactions per second (TPS) can largely be attributed to a downturn in activity, a trend that is not exclusive to Solana but observed across various blockchain platforms.

Currently, Solana's TPS, excluding votes and oracle transactions, stands at approximately 200, which is substantially higher than that of its peers. To gauge demand more accurately, compute units per block serve as a superior metric, encapsulating both the volume and complexity of transactions. An upward trajectory in this metric will be indicative of authentic engagement with Solana's offerings. Despite a recent decrease in demand for block space across the sector, as evidenced by lower Ethereum gas fees, Solana has established a new baseline for compute units, with a maximum capacity of 48 million units per block, underscoring its technical prowess and potential for facilitating complex operations at scale.

Technical Upgrades

Solana originally employed a proprietary UDP-based protocol to transfer transactions between RPC nodes and the current leader. Unfortunately, that meant there was no meaningful method of prohibiting nefarious behavior or spam. To remedy this, Solana has implemented QUIC, a protocol invented by Google, designed for rapid asynchronous communication like UDP but with sessions and flow control like TCP.

Upgrade 1.10 was released in Q2 2022 and aimed at solving many of Solana's previous spam issues through three specific changes: QUIC, stake-weighted transaction QoS, and fee-based execution priority.

QUIC is a transport protocol that came out of Google and stands for Quick UDP Internet Connections. It replaced UDP for packet delivery within the Solana protocol and is sent straight from the RPC Node directly to the block leader. By switching to QUIC, Solana can mitigate most "IP spoofing" while not sacrificing much speed. This means QUIC will disallow an anonymous spoofer to send the same transaction multiple times, a popular strategy in spam bots.

QUIC will help ensure that millions of transactions do not overwhelm block producers and that they can verify all their transactions within Solana’s 400ms block time. During this initial release, QUIC is optional for RPC and dApps, giving them time before having to officially upgrade.

Stake-weighted transaction Quality of Service (QoS) works in parallel with QUIC, aiming to prioritize network bandwidth based on stake-weight, e.g., how much SOL a validator has staked relative to other nodes. It is a computer science methodology to control data traffic for bandwidth-constrained networks. So, a node with a 1% stake-weight should be able to transmit 1% of packets to the leader.

Local Fee Markets

Local fee markets have also been rolled out in Solana. These new fee markets aim to compartmentalize network fee fluctuations, restricting them to segments experiencing high demand. Consequently, an action like minting a highly sought-after NFT would incur increased fees, yet routine transactions such as token transfers would remain unaffected. This contrasts sharply with the global fee structures of other blockchains, where an activity like NFT minting could inflate fees for all network participants.

With the implementation of 1.10, a user is able to attach an optional fee to their transaction to get it prioritized. 50% of the additional fee will go to the validator, and 50% will be burned. With such a fee, validators can then start prioritizing transactions based on fees. The fee would still be deducted even if the transaction fails. Thus penalizing spam transactions.

Originally in Solana, Solana accounts had pre-determined compute limits that, once met, further transactions could not affect the account's state during a block. Local fee markets were proposed in 2022 to avoid some of the poor user experience created by the compute limits. Local fee markets permit users to transmit priority fees to validators in order to communicate an urgent need to modify a specific account's status after the account has reached its compute limit. As a result, spam is reduced (since it can be outbid), and blockspace markets become more efficient.

The computation of priority fees is predicated on the estimated computational resources a transaction will consume. Hence, a transaction with less computational complexity, such as a standard DeFi operation, incurs a lower priority fee compared to a concurrent, resource-intensive NFT mint. This dynamic fee adjustment, tailored to the nature of the transaction, is a strategic innovation aimed at optimizing network performance and cost-efficiency.

Multi-Client Future

Solana has made noteworthy advancements toward becoming a multi-client network, with a considerable portion of its stake now being managed by a new client from Jito Labs—a significant increase from the previous year. Additional validator clients are also in development, which speaks to the ecosystem's growing maturity and resilience.

Jito

The Jito relayer, which acts as a separate transaction processing unit, has shown the potential to reduce the load on validators, thereby improving network stability. At a high level, the Jito validator not only enables a more efficient market for miner extractable value (MEV) but also effectively filters spam.

MEV has been a challenging issue for Solana, with spam transactions contributing to network congestion and outages. Jito's solution, by creating an off-chain auction system for transaction processing, addresses this by discouraging spam and promoting more efficient network usage.

Jito has effectively created an off-chain fee market for Solana, which was originally designed without one, proving that market forces often find a way to emerge even in seemingly closed systems. This has parallels with other blockchain platforms, such as Ethereum, where market dynamics have led to unforeseen developments in delegation and fee structures.

Jito's validator operates by streamlining the MEV market and providing a robust filter against spam—a prevalent issue that has previously caused network disruptions on Solana. The Jito-Solana validator has undergone six months of testing on the mainnet before its open-source release. The shift towards an off-chain market alleviates network traffic because searchers can now tip validators for transaction prioritization, a strategy that is more competitive than bot spamming. With an increasing number of validators adopting the Jito-Solana validator, the prevalence of spam transactions is expected to dwindle, thereby enhancing the stability of Solana's blockchain.

Firedancer

Highlighting the forward momentum, the Solana Breakpoint 2023 conference revealed the launch of Firedancer on testnet, a validator client developed by Jump Crypto. This client is ambitiously designed to enhance Solana's capacity to up to one million transactions per second, with a substantial increase in data throughput. The existence of multiple clients, such as those from Solana Labs, Jito Labs, and the in-development Firedancer, is a strategic approach to network stability. This diversity is a preventive measure against the entire network being compromised by client-specific bugs or failures, evidenced by the major network outage experienced by Solana in February 2023.

The main difference between Firedancer and the Solana Rust validator is its modular architecture, which runs many individual C processes called "tiles" (compared to the Solana Rust validator, which runs as a single process).

Key Features of Firedancer:

Modular Design: In contrast to Solana's monolithic Rust validator, Firedancer is built on multiple independent C processes called tiles. This structure improves resilience against failures and facilitates seamless upgrades without any downtime.
High-Speed Packet Processing: Firedancer incorporates an innovative message-passing framework that allows it to access network interface buffers directly. By utilizing high-performance computing principles, Firedancer can handle and filter around 100 Gbps of network traffic on a standard Solana validator server.
Runtime Consistency: Firedancer prioritizes dependable results for every stage of the blockchain process to ensure reliability. Comprehensive testing strategies, including integration testing, fuzz testing, and the creation of specification documents, will further enhance the validator's runtime accuracy.
Secure Supply Chain: To reduce dependency on external sources, Firedancer relies on a minimal number of external dependencies, treats all build-process tools as dependencies, and uses the Bazel build system to ensure high-reliability software.

The incremental release strategy for Firedancer allows for a systematic deployment of its components. The integration of the QUIC protocol for transaction propagation represents a significant milestone in Firedancer's rollout, having demonstrated the capability for 1 million transaction propagations per second in performance assessments. The objective is a methodical reconstruction of each Solana architecture component, with QUIC serving as the foundational step towards realizing Firedancer's full potential. As the development progresses, the anticipation of Firedancer's complete integration underscores its critical role in Solana's technological evolution, though the timeline for its full deployment remains undefined at this juncture.

Mainstream Adoption

Recent strategic alliances and technological advancements present a favorable outlook for Solana's user adoption and network utilization. Visa's announcement to integrate its stablecoin settlement system with the Solana blockchain stands as a critical development, poised to facilitate seamless USDC transactions for merchants in collaboration with Worldpay and Nuvei. This integration promises to streamline fund transfers between banks and merchants and to revolutionize cross-border settlements, leveraging Solana's cost-effective transaction network.

The synergy between Visa and Solana arrives on the heels of a similar partnership between Shopify and Solana Pay, which further augments Solana's capacity for USDC settlements. These collaborations are timely, given the observed decline in Solana's daily active users, and could catalyze a resurgence in on-chain activity by tapping into the prevailing dominance of stablecoins within the cryptocurrency market.

The importance of stablecoins as a driver of blockchain activity is further accentuated by Ethereum's settlement volumes in the first quarter of 2023, which rivaled that of Visa, illustrating the substantial influence of stablecoin transactions on the financial ecosystem. Ethereum's current stronghold on the stablecoin market, with $65 billion in holdings compared to Solana's $1.5 billion, indeed highlights the expansive growth potential for Solana in this domain. Such advancements not only signify a step forward for Solana but also underscore the broader potential of cryptocurrency infrastructure to enhance and possibly redefine the landscape of global payments.

Finally, a recent partnership with Amazon Web Services (AWS) has allowed for straightforward node implementation on the Solana network. Beyond just facilitating RPC nodes, this collaboration extends to consensus nodes as well. AWS's blockchain node runner simplifies the node setup on Solana to a mere handful of steps. This advancement opens the door for a broader range of users to establish and expand their services on the Solana platform by eliminating the technical complexities that once deterred widespread node deployment.

NFTs and State Compression

Optimized storage solutions become invaluable for enhancing operational efficiency in the rapidly evolving domain of cryptocurrency. Solana offers a compelling solution known as state compression. However, to truly grasp the brilliance of state compression and concurrent Merkle trees, we must discern the nuances between Solana’s ledger and its state.

The ledger serves as a chronological catalog of all transactions authenticated by users, extending back to Solana's inaugural block. Unyielding in its integrity, it is irreversible once a transaction finds its place in the ledger. Validators are tasked with authenticating these transactions prior to their incorporation into the ledger. For the sake of resilience against potential failures, this ledger is disseminated among numerous nodes in the network. However, a validator might only retain the fresher blocks in their ledger copy, deeming older blocks redundant for future validations.

Conversely, the state is a live snapshot, encapsulating every account and program within Solana. Exhibiting mutability, the state undergoes transformation with every processed transaction. Envision the state as a streamlined database, ripe for extraction of data regarding token balances, programs, and accounts.

To encapsulate:

The ledger, unwavering in its composition, stands in contrast to the ever-evolving state.
While the ledger enshrines every transaction's history, the state mirrors the real-time status of all entities and operations.
The ledger's primary role is in verification, while the state oversees transaction execution and program operation.

A Deep Dive into State Compression

At its core, state compression is a technique to economize storage and minimize the volume of data stored on the blockchain. It achieves this by converting a ledger's data into a cryptographic hash and securing it within an account. Indexers play a crucial role in sustaining the current state of the Merkle tree by processing relevant transactions. Users are thus able to swiftly access their data via the indexer. The on-chain root is instrumental in ensuring the validity and security of program interactions, enabling users to cross-verify the data with the on-chain root for accuracy and authenticity. This method capitalizes on the ledger's intrinsic security and unalterable nature while furnishing a solid framework to authenticate the stored data.

One notable benefit is the economic advantage it affords, particularly to applications constructed atop Solana, like NFT projects. Rather than resorting to the more expensive account-based storage, developers can allocate ledger storage, offering cost savings and data integrity assurance. State compression has made minting NFTs on Solana an order of magnitude cheaper than other top chains.

solana compressed nfts — Source: Flipside

What sets Solana's state compression apart is its integration of concurrent Merkle trees. The underpinning structure of a Merkle tree warrants explanation. A Merkle tree is a data structure designed for efficient and swift verification of substantial data volumes. It operates by segmenting the data into smaller units, termed "leaves," and subsequently amalgamating these leaves into progressively larger "nodes." Each node embodies a hash of its child nodes, culminating in a singular hash at the apex of the tree, referred to as the "root hash." This root hash serves as a verifier for the entirety of the data within the tree, negating the need for individual leaf inspections.

Unlike traditional Merkle trees, which render their proofs void with every alteration, concurrent Merkle trees are devised to handle a flurry of transactions in quick succession. Their uniqueness lies in storing an encrypted record of their freshest modifications, inclusive of their root hash and its requisite proof. This record finds its home on-chain within an account earmarked for the tree.

In real-time operation, this changelog emerges as a veritable reference point when a validator is inundated with several requests to refresh an on-chain Merkle tree in the same time frame. This facilitates simultaneous modifications to the Merkle tree, up to its buffer limit. The outcome? Even in environments demanding high throughput, the system upholds the integrity of the "proof of inclusion." In simpler terms, it can validate a particular data piece's inclusion within a hashed set of data, condensed into a Merkle root.

SVM Usage Expands to Ethereum Rollups

Eclipse has recently released its mainnet architecture that aims to harness the strengths of multiple, existing blockchain technologies. This unique amalgamation stands to revolutionize throughput and efficiency and offer cost-effective solutions for users and investors alike. Eclipse Mainnet aims to offer a cohesive solution that brings together Solana's high-performance architecture and the security, verifiability, and network effects of a rollup-centric model. This synergy optimizes user experience, reduces costs, and significantly increases the platform's overall throughput.

Eclipse introduces a nuanced, multi-faceted approach to blockchain architecture. The platform utilizes Ethereum's well-established settlement layer, incorporates Solana Virtual Machine (SVM) for transaction execution, adopts Celestia for data availability, and employs RISC Zero for fraud proofs. This combination draws from Ethereum's trusted financial infrastructure while benefiting from Solana's technological advancements in speed and cost-efficiency.

Ethereum's Monetary Layer: A Pillar of Stability

Ethereum, with its long-standing reputation as a secure and versatile blockchain, serves as the settlement layer within Eclipse's architecture. This alignment ensures that transactions on the Eclipse platform inherit the robustness and wide user trust that Ethereum has garnered over the years. Additionally, Ethereum's robust smart contract capabilities offer a flexible and programmable layer for complex financial transactions, making it an ideal foundation for Eclipse.

The Speed and Scalability of Solana Virtual Machine

Regarding transaction execution, Eclipse opts for Solana Virtual Machine (SVM), a technology known for its high throughput. Unlike the Ethereum Virtual Machine (EVM), which processes transactions in a single-threaded, sequential manner, SVM enables parallel transaction execution. This aspect significantly enhances efficiency and allows Eclipse to deliver a performance level that outstrips many alternative rollup solutions.

One of the most innovative features of Eclipse Mainnet is the implementation of local fee markets, an idea borrowed from Solana's uniquely parallelized runtime. Unlike the typical global fee markets, where a surge in demand in one application could hike fees across the board, local fee markets allow for application-specific fee settings. This ensures that a fee spike in one app does not render the entire chain exorbitant for other users.

The Efficacy of Celestia's Data Availability Solutions

Eclipse Mainnet has selected Celestia as its data availability partner, opting for a system known for its high throughput and secure, scalable data availability. Unlike traditional Data Availability Committees (DACs), which bring with them certain honesty assumptions and limit user verification, Celestia plans to implement Data Availability Sampling (DAS) light nodes from the outset. These DAS light nodes serve two critical functions: enabling end-users to self-verify the availability of Eclipse block data and contributing to the scalability of the entire network. Celestia will become the first data availability layer to launch with DAS in production, setting it apart from more traditional systems that might entail greater risk or less user empowerment.

Eclipse Mainnet's goals for throughput and fees find little compatibility with Ethereum's existing bandwidth, an issue not slated for immediate resolution even after the forthcoming EIP-4844, colloquially known as "Proto-danksharding." Ethereum's post-EIP-4844 environment will offer around ~200+ transactions per second (TPS) for basic ERC-20 transfers and approximately ~75+ TPS for compressed swaps.

On the other hand, Celestia is expected to launch with 2 MB blocks, with a planned escalation to 8 MB blobspace as more DAS light nodes come online and the network proves its stability. The enhancement in blobspace will contribute directly to increased throughput, hence providing Eclipse Mainnet with the scalability it requires for its targeted transaction volume and fees.

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