What the data really shows

Few platforms have faced as much skepticism as Solana. Critics often portray it as a centralized network that suffers from frequent service outages. However, such a narrative does not align with the actual data and progress the Solana ecosystem has seen. This article seeks to debunk these misconceptions through a comprehensive analysis of Solana’s key metrics.

Contrary to common negative perception, Solana is showing remarkable growth and innovation on several fronts. The increasing volumes of stablecoins transacted on its network, and higher decentralized exchange (DEX) volumes compared to Ethereum, highlight Solana’s growing utility. Moreover, the platform’s superior data transfer rate demonstrates its technical capabilities and flexibility. Additionally, the significant increase in new addresses and daily active users reflects growing trust and adoption among the broader cryptocurrency community.

By examining these metrics, this article aims to provide a balanced, data-driven perspective on why Solana represents an undervalued asset in the cryptocurrency market as of June 2024.

Centrality

Decentralization in a blockchain network is complex and cannot be assessed simply using a single metric. Diving into what the truly decentralized network is based on all the details could fill an entire article. Therefore, we will focus on the Nakamoto coefficient. The Nakamoto factor measures the minimum number of entities in the network required to collude to disrupt the system. For proof-of-stake networks like Solana and Ethereum, 33% stake is important, while for proof-of-work networks like Bitcoin, 51% control is crucial.

As of June 20, 2024, Solana has 1,525 active validators, of which 20 hold more than 33% of the stake. On the other hand, Ethereum has 1,024,619 active validators, with only two entities controlling more than 33% of the share. A validator must stake 32 ETH to become a node on the Ethereum network. The problem here is that a single entity can control multiple validators, which hides the actual level of decentralization.

according to Sand dunesLido and Coinbase own more than 33% of Ethereum shares. If each node contains 32 ETH, out of 1,024,629 active nodes, these two entities potentially control 432,389 unique validators. Concentration of control within two entities is detrimental to the spirit of decentralization.

For Bitcoin, the network has 17,692 full nodes that are not pruned, with 7,516 nodes capable of disrupting the network. Unfortunately, there is no information about the individual hash rate of each node. This number was calculated using the Isotope Index (PIX). The PIX value, which ranges from 0.0 to 10.0, is updated every 24 hours based on node characteristics and network metrics, with 10.0 being the most preferable. Nodes with a PIX value of 5 or more were taken into account.

Some may argue that Bitcoin’s decentralization should be evaluated through the hash rate distribution. currently, Two mining poolsFoundry USA and Antpool control more than 51% of the network hash rate.

However, it is incorrect to consider these pools as network controllers because they are pools of individual miners. Mining pools allow miners to combine their computational resources to increase their chances of solving blocks and earning rewards. If the pool starts behaving maliciously, individual miners can simply switch to a different pool, keeping the network decentralized.

While decentralization in blockchain networks is multi-faceted and cannot be accurately assessed by a single metric, the Nakamoto Coefficient provides a useful lens for comparison. Solana’s position is not as alarming as it may seem at first glance. With Nakamoto Factors indicating that 20 validators hold more than 33% of the stake, Solana appears more decentralized than Ethereum, where only two entities hold more than 33% of the stake. Furthermore, although Solana is not as decentralized as Bitcoin, it still maintains a strong level of decentralization, which contributes to its security and reliability.

stability

Solana, known for its high-speed transactions and low fees, has faced scrutiny regarding the stability of its network due to numerous outages it has experienced in recent years. However, a closer look reveals that the situation may be exaggerated. Network stability becomes apparent despite the occasional hiccup when examining the Solana Uptime date.

In 2021, Solana experienced no outages and demonstrated a full year of uninterrupted service. However, 2022 saw a significant increase, with 27 outages totaling 108 hours. Going forward, 2023 showed a significant improvement, with only two outages totaling 19 hours. In 2024, until June 19, the network experienced only one outage that lasted for five hours. Although these numbers are notable, they only tell part of the story.

When considering uptime, these outages represent a small portion of total operating hours. For example, in 2022, despite 27 outages, the network maintained 99.47% functionality throughout the year. Likewise, 19 hours of downtime in 2023 and 5 hours in 2024 through mid-June represent negligible interruptions in stable performance.

The main reason behind these interruptions is Solana’s design. The network prioritizes speed and low costs, attracting heavy usage. This high traffic can lead to congestion and instability. For example, Solana produces a block every 400 milliseconds, which is much faster than other blockchains. Due to the rapid rate of production, when block generation stops for an hour or two, it seems even more dangerous. However, other blockchains, even Bitcoin, are also facing downtime. For example, it took more than two hours to mine the block 689301 Next block 689300.

Solana’s strategy of pushing the limits of its performance allows it to confront and solve real-world challenges that theoretical models and simulations cannot predict. This approach is similar to SpaceX’s iterative process of learning from failures to achieve rapid innovation. Although some critics view Solana’s historic downtime as a drawback, this rigorous testing and problem-solving phase ultimately provides a significant competitive advantage.

Solana in numbers

Daily active wallets

Solana currently has 1,600,000 daily active wallets, which is much higher than Ethereum’s 367,000 daily active wallets.

Inflows and outflows

in addition to, Between April 2023 and June 2024Solana had $801.73 million in inflows and $654.21 million in outflows. In contrast, Ethereum had $694.17 million in inflows and $694.1 million in outflows. This results in a net inflow of about $150 million for Solana, compared to Ethereum’s net inflow of about $70,000.

Dex folders

In terms of DEX volumes, Solana also performed excellently. It has begun to match or exceed Ethereum’s trading volumes on several occasions. This is important because Solana’s market cap is around $63 billion, much less than Ethereum’s $430 billion. Additionally, the Solana token was only launched four years ago, compared to Ethereum’s nine years on the market. Despite being newer and smaller, Solana’s ability to compete with Ethereum in decentralized trading volumes shows its potential.

Stablecoin transfer volumes

Solana’s high stablecoin transfer volumes stem from its fast transaction speeds and low fees, making it attractive to users. The network’s ability to process many transactions efficiently supports high-volume activity. Additionally, Solana’s focus on scalability and user-friendly experience increases its dominance in stablecoin transfers.

he won

Solana’s revenues rose to 50% of Ethereum’s revenues in mid-2024, an unprecedented level. Historically, during peak activity periods in 2021 and 2022, Solana’s revenues were less than 1% of Ethereum’s revenues. At the beginning of 2024, this number was about 10%. This significant increase in revenue indicates growing use of Solana and its economic activity on the network.

Conclusion

The narrative of Solana as a centralized and unreliable network does not hold up to actual data. With its strong technical capabilities and growing adoption, Solana has demonstrated significant progress and resilience. The Nakamoto coefficient shows that Solana’s decentralization is more favorable than Ethereum’s, with fewer entities required to collude to disrupt the network. Although it is not as decentralized as Bitcoin, Solana still maintains a significant level of decentralization, which contributes to its security and reliability.

Network stability, which is often criticized due to previous outages, shows significant improvement, with great uptime and continuous improvements. Solana’s strategic focus on high performance and scalability leads to occasional instability but also rapid innovation and flexibility similar to the iterative evolution we see in other cutting-edge technology areas.

Metrics such as daily active wallets, inflows and outflows, decentralized exchange volumes, and revenues indicate Solana’s growing importance in the cryptocurrency ecosystem. Despite its small market cap and young age, the network’s ability to handle large transaction volumes at low costs positions it as a formidable competitor to Ethereum.

Overall, Solana’s performance and growth reflects a platform that is not only maturing, but also setting new standards in the industry, challenging prevailing negative perceptions and establishing itself as a valuable asset in the market.