Bixin Ventures: Solana's development remains vibrant after the FTX incident

Original Title: "What happens to Solana now?"

Authors: Henry Ang, Mustafa Yilham, Allen Zhao & Jermaine Wong, Bixin Ventures

Compiled by: Evan Gu, Wayne Zhang, Bixin Ventures

Introduction

Solana has always had close ties with Sam Bankman Fried, FTX, and Alameda Research, with the best proof being the viral tweet SBF posted in January 2021.

Source: https://twitter.com/SBF_FTX/status/1347964322459262977

In 2021, this close relationship allowed Solana and its ecosystem projects to develop rapidly, but since the collapse and bankruptcy of FTX and the negative impact it had on Solana, the price of the SOL token has dropped about 58% from its peak, and the TVL (in USD) has decreased by about 70%.

The chain reaction has also affected on-chain user activity. The number of active accounts on Solana in the past 30 days was only 7.15 million, while BNB Chain (17.9 million), Polygon (13.7 million), and Ethereum (9.94 million) all lead in this metric.

However, there is a glimmer of hope amidst the chaos. Despite the FTX collapse, the Solana developer community has expressed their commitment to building on Solana.

From a recent survey of the developer community, we can see that they intend to continue adopting Solana. Notably, about 73% of developers believe there is no need to leave Solana, and about 67% of developers choose to deploy only on Solana. This can be interpreted as the remaining developers still maintaining optimism about Solana's future and continuing to commit to development on Solana.

Should we be bullish or bearish on Solana?

Source: https://twitter.com/SOLBigBrain/status/1590446631966543872?s=20&t=F8GClfwcTXx5wbI9LtSdkQ

We should calmly analyze the future of Solana, starting with the fundamentals of the blockchain.

Since its inception, the network has made tremendous progress in terms of users, developers, and on-chain activity, with NFTs being particularly popular.

Although the number of users, developers, and on-chain metrics have been negatively impacted by the FTX collapse, we must recognize the progress Solana has made since its establishment. Solana's this article comprehensively covers various statistics, and we highlight some interesting data:

• As of October 2022, there were over 11.5 million active accounts on Solana, with 1.7 million active paying (transactions that incurred Gas fees) users. The historical peaks for these two metrics were 22.4 million and 2.7 million, respectively.

• The open-source code repository and developer activity have grown exponentially. As of November 2022, there were 20,717 repositories and 1,114 programs, representing an increase of approximately 7.6 times and 8.3 times since August 2021.

• DAO tools and adoption are also growing rapidly. Since August 2021, approximately 15 million SOL have been managed across 1,700 DAOs, representing growth rates of about 43.3 times and 1,700 times.

• NFTs have been a breakthrough use case on Solana, attracting millions of new users to the network. Users have minted over 21.9 million NFTs across 7.2 million wallets, with primary sales totaling $1.1 billion and secondary sales totaling $2.5 billion.

Solana has addressed network instability issues.

Since early 2022, Solana has been plagued by network instability, which has been a major criticism against it. We explored the long-term viability of Solana in early July here and discussed potential fixes planned for the stability of the Solana network.

The fixes that have been implemented include:

1. The creation of QUIC, a protocol built by Google that better controls the flow of transactions to validators.

2. The development of QOS (Stake Weighted Quality of Service) to ensure that any validator with X% stake can forward at least X% of transaction packets to the leader validator.

3. The introduction of priority fees, allowing users to express the urgency of their transactions by specifying additional fees, which are paid during transaction execution and block packaging.

These three fixes work together to reduce spam and improve network stability. QUIC allows validators to limit the traffic they receive so they can build blocks more efficiently, while QoS ensures that no single validator can monopolize others. With these improvements, the likelihood of spamming the leader validator has decreased, and users wanting to complete transactions first should utilize the priority fee feature to ensure faster inclusion in blocks.

These optimizations have led to better network stability; despite significant volatility during the FTX collapse, the network has remained stable.

Source: https://twitter.com/mattytay/status/1590805725642510336

Solana will become faster and more reliable.

With the independent validator client Firedancer developed by Jump, Solana will break through the limits of blockchain throughput. Without any technical debt, Jump will build layer by layer, following the data paths of packet entry, runtime, and consensus to optimize Solana and increase network speed. During Solana Breakpoint 2022, it was announced that Firedancer has the potential for 1.2 million TPS under test conditions, bringing Solana closer to its vision of "becoming a state machine that processes transactions at the speed of light."

Firedancer will also be developed using C/C++, reducing reliance on existing validator clients, thereby enhancing network reliability. It also lowers hardware requirements while making node operation cheaper and easier through performance improvements.

Blockchain infrastructure, developer tools, and programmability are also continuously improving to help developers build on Solana.

Google Cloud

Google Cloud announced a series of initiatives during Solana Breakpoint aimed at improving existing node and data query infrastructure. Google Cloud has been running a block-producing validator on Solana to participate in the network and will leverage its experience to introduce a blockchain node engine to Solana in 2023. This will enable one-click deployment of Solana nodes in the cloud, which previously had high hardware requirements (128 GB RAM, 2.8 GHz CPU, and 24 cores/24 threads), making node deployment very expensive.

Google Cloud will also begin indexing Solana's historical data and enable BigQuery in the first quarter of 2023, allowing the Solana developer ecosystem to access historical data. Given the high costs associated with maintaining archive nodes and the complexities related to interpreting on-chain data, this plan is a significant boost for developers using Solana data. Google Cloud will also accept service fees paid in USDC, which is significant for projects that primarily generate revenue in cryptocurrency.

Account Compression

With the vision of synchronizing global state at light speed, on-chain storage will only grow over time. To proactively address this potential issue, Solana Labs and Metaplex Studios have been closely collaborating to research account compression technology to reduce the amount of data stored on-chain. The on-chain state of compressed NFTs will be stored in a Merkle tree, and detailed account data can be retrieved from data storage managed by RPC providers.

This will also ensure that developers can easily implement account compression while familiar with the existing RPC infrastructure. The first use case will extend to the NFT space, with Solana Lab's Concurrent Merkle Tree program (Gummyroll) and Metaplex Foundation's compressed NFT program (Bubblegum) available for use. This means that storage costs will no longer grow linearly and can save significant amounts of money, as shown below:

Looking ahead, account compression will extend beyond NFTs into social media applications, gaming, ticketing, metaverse, enterprise use cases, etc., and we look forward to developers creating more interesting use cases.

xNFTs

xNFT is a revolutionary new standard that will represent the tokenization of ownership. In its first iteration, Backpack, it innovates the way Web3.0 wallets are built. Like other wallets, it manages your private keys and connects to applications, but unlike other wallets, it is agnostic to assets and protocols, allowing developers to build permissionless asset management tools on a single interface. It is also open-source, meaning anyone can implement new core functionalities by requesting interfaces, providing a testing ground for new features and applications. Essentially, xNFT will drive more mobile clients to achieve a friendlier user experience.

Token 2022

A new program that adds new token functionality is currently in development. Previously, adding composability to tokens required adding new programs to existing token standards, which could be cumbersome. With Token 2022, extensions can be included after the 165-byte standard token account, supporting many new use cases, such as:

1. Confidential transactions that provide users with more privacy by obscuring the amount being transferred, importantly noting that the parties involved can still see relevant information on-chain.

2. Interest-bearing/resettable tokens that can provide more functionality for applications like staking pools and lending protocols.

3. Transaction memo requirements, where consumer-facing applications only accept transactions with specified memos, helping to categorize payment types more easily.

4. CPI protection extensions that mandate dApps to transact through delegation, meaning users only allocate a specific number or type of tokens that the program can use. This will reduce wallet depletion when interacting with "low-quality dApps."

Click here to read a wealth of resources available for Token 2022 extensions and implementations.

This makes Solana an innovative breeding ground for various applications that can be adopted by the mass market.

While many applications are currently being built on Solana, we want to highlight projects in different verticals that have immense potential to attract the next wave of non-crypto native users.

Dialect

Dialect has partnered with over 50 projects on Solana to launch its own smart messaging protocol that supports actionable link previews. Users will be able to use a wallet-to-wallet mobile messaging layer to remit, mint and purchase NFTs, vote on DAO proposals, play games, all within the Dialect application. They have also launched a $100,000 incentive program to encourage developers to build applications on their smart messaging layer. Our view is that messaging is a core communication component currently lacking in Web3, and Dialect can help bridge this gap while protecting user privacy.

Teleport

Solana is also the choice for Teleport, a ride-sharing company aiming to eliminate centralized matching between passengers and drivers through TRIP, a decentralized marketplace where various ride-sharing applications can be embedded. Passengers will be able to pay with USDC credit cards, while drivers will receive payments directly through their bank accounts or via USDC. Ride-sharing has become intertwined with urban life globally, and we hope to see Teleport disrupt existing operators by attracting new Web3 users through real-world utility.

Helium

Helium is another application that can attract millions through real-world utility. Originally a network for IoT devices, Helium has now branched into wireless mobile networks and has recently chosen to migrate to Solana.

The project aims to cover any blind spots in the Helium network through a partnership with T-Mobile, offering mobile plans as low as $5, and each mobile plan subscriber will have immediate access to a Solana wallet. This is a low-barrier entry tool that allows new Web3 users to engage with those applications, while Solana also facilitates composability between applications.

Through Saga and the mobile dApp store, Solana aims to showcase what Web3 means for mobile.

Whether in use or not, mobile phones are carried with us everywhere. The mobile experience enriches the daily lives of billions of users, and Saga aims to showcase the benefits of Web3 through mobile devices. Saga will provide a familiar mobile experience for everyone, with the ability to send asynchronous notifications to inform you when it's time to mint or when someone requests payment from you.

Saga can also serve as a digital gateway where users can make payments using Solana Pay, utilize biometric verification, and play crypto games anytime and anywhere, seamlessly integrating with our daily tasks.

The main features of the Saga phone are Seed Vault and the Solana dApp store. Seed Vault is a key management feature deeply integrated into the phone's hardware and software stack, constantly protecting private keys. It is a trusted user interface where the Android operating system cannot see the password you enter for your mnemonic phrase, cannot take screenshots, or utilize keylogging. This allows users to freely sign transactions anytime and anywhere, knowing their keys are secure.

The Solana dApp store will become a free application hub, providing cryptocurrency-friendly policies for DeFi, gaming, wallet, and NFT applications. This will enable developers to focus on building products that can be accessed by billions of users anytime and anywhere. The Solana dApp store will open for submissions in January 2023, and we look forward to the innovative applications that will be built.

Our view is that this is the right way to bring the next wave of users onto the Solana chain. While most other blockchains focus solely on improving underlying blockchain technology, Solana has been addressing user experience issues while improving.

Community-driven efforts like Solana Spaces, SuperteamDAO, and Metacamp are low-key yet impressive, helping countless aspiring developers and new users join the network.

Solana Spaces is an experiential space that allows people to understand and experience Solana in real life. The experience space features Phantom, allowing customers to learn about self-custody wallets, after which they can scan QR codes to complete tutorials, such as learning DeFi with Orca, understanding blockchain games with Aurory, exploring NFTs with JustApe, and experiencing 1/1 Art at Formfunction. These experiences are realized within the Phantom wallet in-store, and customers receive NFT rewards after successfully completing each tutorial, establishing a deeper connection with end users.

Since its launch three months ago, they have welcomed over 30,000 customers and completed over 10,000 tutorials in two physical stores in New York and Miami. They are now expanding this initiative through SpacesDAO to anyone interested in operating their own Solana store. It is an open-source retail model where all designs or constructed IP, from architectural plans to fixture blueprints and software, are available for anyone looking to establish their own store.

Interested parties can join through GeoNFT, which represents the coordinates of the on-chain store, granting holders the right to redeem it through a contract with the DAO, thus providing the store with real-world legal protection and territorial exclusivity. To kickstart this initiative, SpacesDAO and the Solana Foundation can provide up to $50,000 in loans or grants to store owners looking to open new locations.

SuperteamDAO is a resource center led by the community, aimed at aspiring developers looking to build on the Solana ecosystem. The organization is made up of four local super teams from India, Germany, Turkey, and Vietnam, organized around the three pillars of learning, earning, and developing. Aspiring developers will gain a better understanding of Solana Core and find opportunities to earn through project rewards, while members can seek inspiration for building content through a creative repository and apply for non-equity grants within 48 hours.

Metacamp is an NFT membership-based co-working space in Singapore that brings together investors, startups, and talent from the Web3 industry in Southeast Asia. This Solana-focused company offers members educational programs, community events, and corporate workshops to further enhance the skills of professionals in the Web3 space.

For the reasons mentioned above, the Solana network has made significant improvements and has the right infrastructure and tools that will empower developers to create new applications that have the potential to attract the next billion users. Saga will also increase the number of developers who can reach new user groups in Web3 that have yet to be tapped.

How can Solana change the negative public perception of it?

Despite having no fundamental technical flaws, the public opinion and perception surrounding Solana remain negative and pessimistic. Here are several ways we believe can change this status quo and shift public focus back to the inclusive community and the technological advancements already achieved.

Dissociating from FTX/Alameda

According to recent reports, the Solana Foundation has a cash exposure of $1 million to FTX, which is less than 1% of its funds, and no assets are held in custody by FTX. The Solana Foundation also holds about 3.24 million shares of FTX Trading, as well as approximately 3.43 million FTT tokens and 134.54 million SRM tokens, most of which have very little remaining value. On the other hand, Solana Labs has no exposure to FTX.

Among the SOL held by Alameda, all of it is locked, with the earliest unlock time being 2025 and extending to 2028. Alameda currently holds 48.6 million SOL, accounting for 65% of all locked equity, which is currently all locked and staked. Furthermore, even if the staked tokens begin to unlock, given the nature of its Chapter 11 bankruptcy proceedings, this may take years to complete, and Alameda may not be able to utilize them.

Source: https://solanacompass.com/tokenomics

While these tokens will eventually enter the market, our view is that Solana will build a new thriving ecosystem through its vibrant developer community, which will then drive high user activity, translating into demand for the tokens. As Alameda enters liquidation proceedings, it is also likely that the Solana assets they hold will be distributed more evenly among various investors and creditors.

Addressing decentralization/censorship resistance issues

The public perception of Solana remains that it is a centralized chain. Anatoly describes decentralization as the number of independently available state history copies, and as of today, the Bitcoin network has over 15,000 full nodes, while Ethereum and Solana have approximately 8,000 and about 3,000 full state copies, respectively. By this definition, Solana is currently the third most decentralized blockchain.

Solana has also achieved impressive operational diversity among its approximately 2,000 consensus-participating validators, with staking distributed across 230 unique data centers, and no single data center accounting for more than 9%. It also has a Nakamoto Coefficient of 31, ahead of AVAX and Thorchain (29 and 28, respectively).

Looking ahead, Solana is also committed to developing lightweight (Diet) clients to reduce validation costs. Through these clients, the trust-minimized assumptions of most consensus-participating validators will be improved. Thus, if most are untrustworthy, Solana can adopt a user-activated soft fork similar to Ethereum's proposal. For those interested in censorship resistance in POS networks, we will provide extensive coverage here.

Addressing the "business development" issue

Despite the common assertion that Solana has "great technology," it lacks in business development compared to the achievements of Polygon. Business development head Ben Sparango recently mentioned in a podcast that while existing Web2/ Fortune 500 companies are still their intended partners, they are taking a gradual approach because some of these companies are fulfilling other tasks that do not help increase blockchain usage or activity. A successful example is the recent partnership between ASICS-StepN and Solana, where ASICS integrated Solana Pay, selling 3,000 devices and generating $600,000 in revenue priced in USDC, with no credit card transaction fees. The related NFTs accompanying each sale are priced at about 1,000 SOL on the secondary market.

In contrast, the foundation's primary task is to attract more underlying developers to build unique applications that leverage Solana's technological advantages. These applications that achieve product-market fit will naturally become new business growth points for Solana and attract the next wave of users. This was evidenced when Stripe announced its facilitation of fiat-to-crypto payments, with 11 out of 16 pilot applications coming from Solana (Magic Eden, Audius, Orca, etc.).

Conclusion

In summary, the relationship between Solana and FTX & Alameda resembles a roller coaster ride. While Solana's future may currently seem bleak, if we peel back the layers, we will continue to see a promising community and a high-performance, scalable blockchain. Solana is innovating in many ways, such as becoming the choice for consumer-facing applications like Dialect, Helium, Teleport, and opening up a whole new customer base in the mobile space with its flagship Saga phone.

We believe Solana can emerge from this setback, changing the public's negative and pessimistic views regarding its relationship with FTX/Alameda, lack of decentralization, and slow business development, paving the way for new applications that can attract the next billion users.

If you are a Builder on Solana, please feel free to reach out to us; we are more than happy to support you in any way we can.