Thread by @MTorygreen

On March 16th, 2020, the world of #crypto changed forever

@aeyakovenko and @rajgokal launched @solana, ushering in the era of high-performance blockchains

I've spent over 100 hours researching the protocol

Here’s why I think $SOL could become a core layer of #web3

👇

🧵

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Solana is one of the largest #Layer1 s by market cap, TVL in #DeFi and #NFT sales (we will explain all these concepts in a bit)

It has a MC of $7.0BM, FDV of $9.8B, and its $SOL coin trades at $18.19

In 2021, the coin price hit $260.06

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This thread will cover the following:

• What is a Layer1?

• What problem does #Solana solve?

• How does it work?

• Who are the key players in the ecosystem?

• What are its #tokenomics?

• What’s the potential value of #SOL?

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🔶 What are Layer 1s?

Layer 1s (L1s) are the computers that run #Web3

Like most computers, they can run programs and host applications

Unlike traditional computer networks, they i) can’t be shut down, ii) aren’t controlled by any one entity and iii) anyone can use them

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🔶 Problem

Ethereum is the dominant Layer 1, but it has a major problem – it’s slow and expensive

For much of 2022, average fees were in the range of $10 — $30 per transaction (and sometimes were in the thousands!)

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🔶 Solution

As such, in 2021 a set of “alternative L1s” started to emerge to challenge Ethereum’s dominance with higher throughput, faster speeds and cheaper transactions

Some of the most prominent include BNB, Avalanche, Cardano, Polkadot and – of course – Solana

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🔶 Protocol Overview

Founded by former Qualcomm, Intel, and Dropbox engineers in 2017, #Solana is a single-chain, dPoS protocol whose focus is on delivering scalability without sacrificing decentralization or security

It is currently the 6th largest #L1 by market cap

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Like most Layer1s, the $SOL “computer” can handle a variety of functions including:

• #NFT trading

• #DeFi

• Payments

• Gaming

• #DAO s

Let’s look at each

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🔹 NFTs

#SOL currently hosts over 20M #NFTs with a combined value of nearly $1B.

Notable projects include @DegenApeAcademy, @cryptokickers and @SolanaMBS

Key marketplaces on Solana include @MagicEden, @SolanartNFT and @SolSeaNFT

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🔹 DeFi

At its peak, the protocol currently held over $11B locked in #DeFi, generated an average of 430M of volume every 24 hours and boasted an average transaction fee of $0.18

#SOL has over 156 DeFi protocols including @MarinadeFinance, @orca_so and @RaydiumProtocol

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🔹 Payments

Solana’s high #TPS and low transaction fees ($0.00025) make it an ideal fit as a payments channel

There is over $4B in USDC in circulation on the network and > 280K active accounts

Solana’s payment channel is used by @Checkout, @circle, @Kytpay and others

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🔹 Gaming

$SOL is building a robust presence in gaming. Notable titles include:

• @zepeto_official

• @MiniNations

• @staratlas

• @AuroryProject

• @panzerdogs

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🔹 DAOs

#SOL 's high throughput, low latency and low fees ($0.0025) make it an ideal fit for decentralized governance

To date, 140 DAOs have been created on Solana with $1B in AUM

Major DAOs include Star Atlas DAO, Mango DAO and @MonkeDAO

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🔶 How does it work?

#Solana is a “monochain” network - it executes all of the major functions of an #L1 on a single blockchain:

• Security

• Data

• Execution

Most L1s have abandoned monochain structures in favor of “modular” ones as they’re considered faster

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Like adding lanes to a highway, splitting a blockchain into multiple chains allows it to handle a lot more transactions and therefore run at a much faster speed

That’s why nearly every #L1 today uses a modular structure, and Ethereum is migrating to one as well

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Solana has taken a different approach though, using a concept known as “Proof-of-History”

#PoH acts as a “decentralized clock”, automatically ordering all transactions

(arranging transactions correctly is one of the hardest things for a decentralized network to do)

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Proof of History allows Solana to be unbelievably fast and cheap - boasting a theoretical TPS of 65,000 to 710,000 and fees under $0.00019 - WITHOUT sacrificing its monochain architecture

As we will soon see, this may prove to be a major long-term competitive advantage

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🔶 Competitive Advantage

#Solana boasts several unique benefits including

• Cost

• Speed

• Scalability

• Composability

• Decentralization

Let’s explore each

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🔹 Cost

$SOL is the cheapest major chain with average transaction fees of $0.00019

This makes it an ideal #blockchain for high-volume use cases such as:

• Micropayments

• Remittance payments

• Gaming

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🔹 Speed

#SOL 's maximum TPS is estimated to be anywhere from 65K to 750K and it has consistently proven real world speeds of 3,500

Unlike ETH, transactions on Solana are almost instantaneous (400ms)

This seamless UX is essential to recreating the Web 2.0 feel on Web3

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🔹 Scalability

Solana has proven its ability to scale

The network processes more transactions than all other L1s combined

Even when voting transactions are removed, Solana is doing 7x more transactions than its closest competitor

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🔹 Composability

Solana is unique among L1s in that it has chosen to retain its single-chain structure

While critics argue that so called monochains are inferior and risk becoming irrelevant, this might ultimately prove to be Solana’s biggest long-term advantage

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Monochains allow for very efficient communication between dapps and may be able to support products and uses cases - such as flash loans – that wouldn’t be possible in a modular architecture