The search for a blockchain that can combine scalability, low costs, and decentralisation has driven much of the industry’s innovation since Ethereum popularised smart contracts. Among the contenders, Solana has gained particular attention for its bold claims and rapid adoption. Marketed as one of the fastest blockchains in the world, capable of processing tens of thousands of transactions per second, Solana has become a cornerstone of the Web3 conversation.
From decentralised finance and NFTs to payments and gaming, Solana’s ecosystem has grown at a remarkable pace. Its performance has attracted both praise and criticism, with advocates pointing to its low fees and high throughput, and detractors raising concerns about outages and centralisation. Fintech Review explores Solana’s origins, technical foundations, ecosystem, strengths, weaknesses, and prospects in the broader blockchain landscape.
Origins and Vision
Solana was founded in 2017 by Anatoly Yakovenko, a former Qualcomm engineer with a background in distributed systems. Yakovenko identified time synchronisation as a core bottleneck in blockchain performance. Traditional consensus models struggled to coordinate nodes efficiently, leading to delays and limited throughput.
His solution was Proof of History, a mechanism that cryptographically timestamps events before they are added to the blockchain. By integrating this with a proof of stake system, Solana aimed to achieve high performance while maintaining security and decentralisation. The Solana mainnet beta launched in 2020, and within two years the network had grown into one of the most active ecosystems in crypto.
Core Architecture
Solana’s architecture is designed for speed and throughput.
- Proof of History (PoH) provides a verifiable record of time, allowing nodes to agree on the order of events without constant communication.
- Proof of Stake (PoS) secures the network, with validators staking SOL tokens to participate in block production.
- Parallel execution engine enables multiple smart contracts to be processed simultaneously, avoiding bottlenecks that plague other blockchains.
This design allows Solana to achieve thousands of transactions per second with fees measured in fractions of a cent. The result is a network capable of supporting consumer-scale applications that would be prohibitively expensive on Ethereum during periods of congestion.
Ecosystem Growth
Solana’s ecosystem expanded rapidly during the DeFi and NFT boom of 2021. Low fees and fast settlement times made it an attractive alternative for developers and users.
- DeFi: Solana hosts decentralised exchanges, lending platforms, and yield farming protocols. Applications like Orca, Serum, and Raydium became popular during the height of DeFi activity.
- NFTs: The network emerged as one of the most active hubs for NFTs outside Ethereum. Marketplaces such as Magic Eden enabled creators to launch collections with significantly lower minting costs.
- Payments and Consumer Apps: Projects like Solana Pay aim to position Solana as a real-time settlement layer for merchants and customers, extending use cases beyond speculation.
- Gaming: Developers of blockchain games have turned to Solana because its performance can support high frequency in-game transactions without prohibitive costs.
By mid-2022, Solana had established itself as one of the top blockchains by active users, transactions, and developer activity.
The SOL Token
The native token of Solana, SOL, plays multiple roles within the ecosystem.
- It is used for paying transaction fees, which remain extremely low compared to Ethereum.
- It serves as a staking asset for validators and delegators, securing the network.
- It is integrated into DeFi protocols as collateral, liquidity provision, and reward incentives.
- It is used within NFT marketplaces and payment solutions, giving it practical utility beyond speculation.
Like Ethereum’s ETH, SOL functions as both the fuel of the network and a store of value within its ecosystem. Its performance during bull and bear cycles has closely tracked the growth and challenges of the Solana network itself.
Strengths of Solana
Solana’s strengths are closely tied to its design choices and adoption trends.
- High throughput: Solana consistently handles thousands of transactions per second, far surpassing Ethereum’s current capacity.
- Low fees: Transactions cost a fraction of a cent, making the network attractive for microtransactions, gaming, and NFTs.
- Vibrant ecosystem: From DeFi to NFTs and gaming, Solana supports a wide range of applications.
- Strong developer community: Hackathons and grants have attracted thousands of developers.
- User-friendly experiences: Wallets like Phantom have made onboarding more accessible for retail users.
These strengths have enabled Solana to stand out in the crowded layer one space.
Weaknesses and Criticisms
Despite its achievements, Solana has faced recurring challenges.
- Network outages: The blockchain has suffered from several high-profile outages that disrupted transaction processing. These events damaged confidence in its ability to operate as a reliable financial layer.
- Centralisation concerns: Solana’s high-performance requirements mean validators must run powerful hardware, limiting accessibility and raising questions about decentralisation.
- Competition: Ethereum continues to dominate developer mindshare, while other layer ones like Avalanche, Near, and BNB Chain also compete for attention.
- Regulatory uncertainty: As Solana grows, it may attract increased regulatory scrutiny, particularly if integrated into consumer payments and mainstream finance.
For Solana to maintain momentum, it must address these weaknesses and prove its resilience at scale.
Competitive Positioning
Solana competes directly with other high-performance layer one blockchains, while also positioning itself as a faster, cheaper alternative to Ethereum.
- Compared to Ethereum, Solana offers dramatically lower fees and higher throughput, though Ethereum benefits from the largest developer ecosystem and strongest network effects.
- Compared to Avalanche, Solana focuses more on raw speed and less on modularity.
- Compared to BNB Chain, it offers a more decentralised validator set but does not yet match Binance’s user funnel.
Solana’s differentiator is its performance. It aims to provide a blockchain infrastructure capable of supporting mainstream applications at scale, something that remains challenging for most competitors.
Who Should Use Solana
Solana is well suited for:
- Developers building applications that require high transaction throughput and low costs, such as gaming and micropayments.
- NFT creators and marketplaces seeking affordable minting and trading.
- DeFi platforms aiming to offer users a fast and low-cost alternative to Ethereum.
- Retail users who want to participate in decentralised apps without facing high fees.
It may be less suitable for projects that prioritise maximum decentralisation or for developers who require the largest and most mature ecosystem, which Ethereum continues to provide.
Future Outlook
Solana’s roadmap focuses on improving stability, scaling, and ecosystem growth. Technical improvements aim to reduce the risk of outages and enhance validator efficiency. The network is also investing in better developer tools and infrastructure to make it easier to build and scale applications.
Partnerships and integrations will play a major role in Solana’s next phase. Its push into payments through Solana Pay and continued emphasis on NFTs and gaming suggest it wants to position itself as a consumer-facing blockchain, not just a base layer for DeFi.
The biggest question is whether Solana can maintain its performance and reliability as adoption continues to grow. If it succeeds, it has the potential to become one of the few blockchains capable of supporting mass-market Web3 applications.
Conclusion
Solana represents one of the most ambitious efforts to solve the blockchain trilemma of scalability, security, and decentralisation. Its innovative use of Proof of History, combined with proof of stake, delivers remarkable throughput and ultra-low fees. This has made it a leading platform for DeFi, NFTs, and gaming.
At the same time, Solana must overcome recurring outages, centralisation concerns, and the intense competition of other layer one blockchains. Its long-term success will depend on balancing performance with stability and on sustaining developer and user engagement.
For developers and users seeking speed, affordability, and a growing ecosystem, Solana offers one of the strongest alternatives to Ethereum. It is not without its challenges, but it remains a key player shaping the future of decentralised applications.
