If you had to pick a single cryptocurrency to highlight blockchain innovation in 2021, Solana would be it. The $SOL token has gone from a market cap of $490 million on January 1st to $53 billion on December 11th. Year to date, it has more than 100x’d.
It went from one of the thousands of tokens to now the third largest crypto by market cap, if you exclude Binance’s BNB. This has made several early investors, like Multicoin Capital, and their LPs, like David Sacks, quite rich.
On top of that, you would be hard pressed to find a set of more engaged and charismatic founders than Raj Gokal and Anatoly Yakovenko. The two write frequently, and push code even more so, while actively participating in the broader blockchain community. You would certainly not be able to find co-founders of a $53B company who are more engaged than the two on Twitter.
Things move at lightning speed in Solana land. In the past few days, there was a fairly large controversy about the most unique aspect of Solana: Proof of History (PoH). Justin Bons reported that a DDoS attack was fundamentally enabled by PoH. He further stated that this constitutes a major vulnerability in the blockchain’s security.
Raj and Anatoly were immediately on the case, via Twitter. Anatoly started, with a tweet the next morning that summarized why it is not a security vulnerability. Like any proof of stake (PoS) network – Solana is PoH and PoS – the DDoS attack would need to hit >1/3rd weight of all the physical links in the network:
Raj followed that up, and they also both retweeted a fairly persuasive thread from Tomáš Eminger of the Runaway Blockchain Fund. The controversy was quickly squashed.
Not every blockchain operates this way. This is a company that raised $314M its last round for its affinity with pi. Solana is a different type of company, team, and blockchain. Anatoly and Raj aim for Solana to be the builder’s choice layer 1 protocol: fast, with low transaction fees, and good UX for builders.
In a crowded field, with players from Ethereum to Cardano and Polkadot, it is the one that dominated 2021. This was, in part, because of its co-founders’ Twitter presences. But it was also because of so much more. So, let us dive in to understand: can Solana become the blockchain of choice amongst builders?
To get there, we’ll explore:
- The Solana Story
- Builders’ Other Options
- The Interoperable Future
Along the way, we’ll give it the typical product growth treatment, to learn the best tips and tricks to build for web3.
The Solana Story
Chapter 1 – Origin
Anatoly Yakovenko grew up on the Black Sea tinkering with new versions of Linux machines. Growing up admiring Kafka, Burroughs, and Godel, he had a particularly existential take on his technicality: as a teenager, he had the energy to make impact, just not the opportunity.
So, Anatoly was not going to let opportunity slip away years later, in October 2017. It was the peak of the crypto boom cycle. ICOs were happening left and right. Bros were buying lambos. A lifetime engineer, and at this point 15 years full time experience engineer, Anatoly Yakovenko was ideally positioned to contribute to the growing technical movement of blockchain.
So, he stayed in tune with all the latest happenings. One weeknight, after two coffees and a beer, he had his eureka moment at 4 AM – while still working at Dropbox. He could use the arrow of time to switch away from Ethereum and Bitcoin’s massively parallel, energy hungry networks. He was “manic for a week,” as a result of the insight.
Anatoly realized he could solve many of the large problems with the increasing cost of Bitcoin and Ethereum transactions. Just five months into his new job at Dropbox, he had to leave to found Solana.
A few weeks later, Anatoly reconnected with an old friend, Raj Gokal. Raj had a long career as investor, founder, and product leader. Anatoly shared the Solana white paper’s vision of building a blockchain with NASDAQ or Visa-level throughput. Raj understood the opportunity. He joined as Solana’s co-founder.
Anatoly and Raj’s backgrounds in corporate America influenced their choice of building style. Unlike the Ethereum and Uniswap crews, which were mainly young people with little work experience, both Anatoly and Raj understood the Bay Area startup game. As a result, they pursued a company-building strategy to build Solana.
Chapter 2 – VC Backed
Unfortunately, shortly thereafter, the crypto market tanked. By early 2018, right when Anatoly and Raj were looking to raise, every crypto-bear was smugly smiling that blockchain was a ponzi scheme. Undeterred, the duo continued to build out the team. They recruited Greg Fitzgerald and Stephen Akridge, two engineers Anatoly used to work and surf with. With the additional engineering horsepower, they were able to make the first release in February 2018.
To celebrate the engineering team’s surfing days, in March they named the company Solana after Solana beach, the scene of their surf sessions. The momentum helped the team land institutional backers in April. The team sold 16% of the initial token supply for 4 cents per token. That $3.2M today is worth more than $8B.
The extra funding allowed the company to further build out the team. This allowed the company to quickly harden the tech. Raj regularly shared updates on transaction speeds. By May, Solana could already handle 250K TPS. Today, Bitcoin can handle 7 and Ethereum 30. While the world was experiencing Crypto Winter, the Solana team was working on making blockchain comparable to major global payment networks.
By June, 2018, the team released a multinode testnet for smart contracts. By contrast, that took Cardano three years. As Packy McCormick notes:
The difference between Solana and all of those other chains was, of course, speed and throughput. Not just in the blockchain itself, but in the cadence at which the team built and shipped
The team used all of 2018 and 2019 to maniacally focus on shipping more features faster. In this time period, the team set the goal to, “make Solana the first billion-user blockchain.” This gave everyone a north star for each future release.
In this regard, Raj has had a clear impact on Solana. The team has built a blockchain from the mind of a product manager. It takes the needs and jobs to be done by a blockchain developer – low fees, high speed, and easy to build on – and delivers. It prioritizes shipping fast. These are PM things.
Throughout this time, Solana also developed a very unique community. Instead of one that constantly talked about the price, they were a group of developers who geeked out on shaving milliseconds off of confirmation times.
Chapter 3 – FTX and Beyond
In July, 2020, Solana hit a major turning point. The buzzy crypto exchange FTX announced that it was going to build a decentralized exchange, Serum, atop Solana. Validation from FTX is akin to winning the Nobel in crypto. In the crypto world, narrative rules, and the writers of the narrative are its celebrities – celebrities like FTX founder Sam Bankman-Fried (SBF). Now, Anatoly and Raj are amongst those celebrities.
But it was not always that way. When Anatoly and Raj first talked to SBF, the conversation was brief. As Anatoly tells it on Acquired:
We were like, hey, you guys are cool. You’re building cool products, you have an up-and-coming exchange. What if we did options or something interesting on Solana? They’re like, ‘Is it live? We don’t have enough time for this, we’ve got to ship stuff tomorrow.’
Like all great product teams, Anatoly and Raj were out there talking to customers and hearing their needs. They understood that Solana needed to be live and have a working product before talking to Sam again. So, they came back to Sam and the FTX team with the demo for break, wonderfully captured in GIF form for us by Not Boring:
It is a fun game to try to break Solana – send transactions faster than Solana can handle. Each button smash represents a transaction sent. Sam would have tried, like Packy, to smash as fast as he could – 6-7 keys a second, the ‘transactions per second’ displayed live on the top right. That, as the screen after notes, represents a mere 0.011% of Solana’s capacity, versus actually fast enough to ‘Break’ Bitcoin, at 115.9% of its capacity.
The ability to ship fast showed up again. And Sam was sufficiently impressed to build Serum on top of Solana. As an iconoclastic builder in web3, Sam’s move has spurred on nearly the rest of the ecosystem. By the time Solana hosted its first Hackathon in November 2020, over 1,000 developers signed up.
Solana was off to the races, and 2021 would turn out to be the biggest year yet. To begin, that amazing 1,000 developers at the hackathon? That number tripled by February to 3,000. Then it quadrupled by May to 13,000. Solana was going exponential on the metric that matters – developer adoption.
Chapter 4 – Solana Summer
With that builder adoption firmly in place, a16z invested in the aforementioned ‘pi’ sized round of $314M. June, 2021. This kicked off the so-called Solana Summer. Developers flocked to the blockchain with the newfound validation, and found Solana had a much more complete developer ecosystem tooling than might have been expected for the young blockchain.
There is now a constellation of services that makes Solana an ideal blockchain to begin developing atop. Solana supports third party auditors of smart contracts, the open source program library has swap and lending starter kits, and Solana capital funds projects building on the blockchain. As a product leader, Raj drives the relentless drumbeat of focusing on developers.
The developer community appreciates it, and has also stepped up to support one another. A developer at Alameda Research released Anchor, which Solana developers have described as reducing “the code you need to write on Solana by 90%.” It is the decentralization of developer tooling.
After the NFT craze on Ethereum earlier in the year, NFTs really took off at the end of the Solana Summer, with the launch of Degen Apes. Suddenly, the project became one of the most well-known projects in the Twitterverse.
Chapter 5 – Solana Winter
The Solana Summer was capped off when Not Boring published its piece in August. Suddenly, Solana was a regular topic from fora as mainstream as CNBC to as high-level tech strategy as the All-In podcast. So much has happened that people are calling it Solana Winter.
One of the funny things that happened on the aforementioned All-In podcast is that Jason Calacanis asserted that there are only 8 developers working on Solana. As readers know, there are hundreds more developing atop Solana just at hackathons. The Solana team itself is also a full-fledged company, bigger than the 8 core Solana engineers. It has 125 employees on LinkedIn.
These employees have a lot to do. In September, Solana had a fairly clamored about network outage. It was for a few hours. These tend to be the moments Solana receives the most criticism – for instance, the opening vignette of the DDos attack earlier this week. Like last week, in September the team also responded quickly. As a result, Solana has maintained a 99.85% uptime overall throughout the 2 year Mainnet beta.
Another criticism that has been mounted regularly against Solana is that it is centralized. The narrative goes, “Solana is the VC’s centralized chain.” You’ll see it in the replies of every major Solana tweet. The claim is that it is running on just 11 servers at a16z. That might have been the case in the early days. On September 3rd, Solana hit 1000 validators. In other words, it had 1000 separate people running machines to process transactions on the blockchain.
It is a globally decentralized blockchain now, thanks to its traction. In particular, many of the NFT groups have set up validators. These NFT groups are well backed, from a financial perspective. Later in September, a project called Stratos NFT took over Times Square:
Solana officially crossed over to the mainstream – even Times Square. The success of Solana NFTs was a major milestone for the blockchain. Projects like Stratos launch regularly now. Nowadays, both major Solana NFT marketplaces – Magic Eden and Solanart – do over $1M in trading volume a day. As a platform, artists are investing in building atop Solana.
Financiers are as well. Total value locked represents the amount of fiat currency people lock into DeFi protocols to enable lending, liquidity, and other applications. That number has been growing exponentially for Solana. It started the year in the hundred of millions. By September 10th, it reached $10B.
Now it is over $12B. And this is across a wide variety of projects. There is momentum across all the major DeFi use cases: stable coins, decentralized exchanges, wallets and more.
As wallets alludes to, the final area Solana is seeing massive adoption is payments. Executing at such speed, low fees, and throughput, Solana is beginning to embody the original blockchain vision of free, fast, and global payments. The user experience of Phantom and Metamask, the leading Ethereum wallet, is miles apart. Phantom is far easier to use. It feels like an interface built for web3 adoption. That is important for payments to go beyond hardcore crypto degens.
This success of Solana across DeFi, NFTs and payments has led to an explosion of new projects launching atop Solana. Solana games, social networks, DAOs, oracles, sports betting protocols, and more are all under development. New projects are launching literally every day. It is dizzying to keep up.
That has resulted in a myriad of requests coming to the Solana team on what to build. In How to Prioritize a Roadmap, I wrote that one of the trickiest areas for PMs is to brainstorm product feature improvements. Raj has been running Solana’s in public.
This is why Solana is just built differently. It embodies the web3 principle of building collaboratively in the open. Raj is able to hear from his developer community, and even marshall them to air their feature requests in public. This creates a public record of how Solana continues to meet and exceed its developers’ expectations.
Instead of a centrally planned roadmap, Solana has a globally distributed developer force.
Builders’ Other Options
If you thought that there were a lot of builder related crypto back in 2017 – from EOS to IOTA – today we live in a Cambrian explosion of options for blockchain developers. Today, a builder has a litany of layer 1 options from Ethereum and Cardano to Polkadot. They also have layer 2 options. Square is choosing to build its DEX atop bitcoin using RSK.
Perhaps the option most awaited by the crypto community is ethv2. Ethereum is still a much bigger player than Solana in NFTs and DeFi. Daily volume of NFT transactions on OpenSea is regularly above $60M – that is 30x the combined $2M across Magic Eden and Solanart. In the world of DeFi, Solana’s TVL of $12B is #5 behind Ethereum, BSC, Terra, and Avalanche. Ethereum’s TVl of $169B is about 15x Solana.
Clearly, developers have chosen other chains in the past. But, what will they choose in the future? The options are endless. For Solana to succeed, it is going to need to continue its momentum. It has a history of shipping features faster than any other blockchain. If it can keep it up, it may just be the place most builders start in the future. More of the journey is ahead than in the past.
The Interoperable Future
When I set out to write this article 3 months ago, the question I had in mind was “could Solana be an Ethereum killer?” But as I have gotten into the community, followed its leaders, and used the products, I have increasingly learned that Solana is not attempting to replace or kill Ethereum – or Bitcoin.
That is exactly the opposite of what Raj and Anatoly intend.
Instead, they recognize the TAM of web3 is the 3 billion people with a computer. They want to fill in gaps where Bitcoin and Ethereum do not play, like making the leading blockchain for developers.
The team is working on building an interoperable future. One interesting project along these lines is Wormhole. Its bridging technology makes it possible to transfer assets, from tokens to NFTs between chains. Recently, a punk was bridged to Solana. The solution is getting real traction.
This is the “you win, I win, we all win” world Solana wants to build. Ethereum and Bitcoin cannot be killed, but Solana wants to be part of the picture. And its role will be to make it easier for developers to find product market fit with their applications.
Lessons for Product People
Finally, as this is a product growth production, I could not leave you without a summary of the lessons we learned from Raj and Anatoly’s amazing product leadership.
After closely studying Solana for the last two years, and doing the research for this piece, five product growth lessons stick out.
Lesson 1: Have a Relentless Focus
Since day 1, Anatoly focused on building a best-in-class blockchain. Raj has only strengthened that vision with the drumbeat of “focus on developers.” The team has never deviated away from their core user and their needs. All great product teams do this.
Lesson 2: Ship Fast
It is a cliche and we all try to do it, but Solana lives it. They learned early from SBF. In contrast to Cardano, Ethereum, and Bitcoin, Solana quickly ships features that developers need.
Lesson 3: Engage With the Community
From Day 1, Solana has had an incessant focus on the community. It has built out the developer ecosystem so that developers feel supported. This has attracted people to build on Solana. Nothing exemplifies this more than Anatoly and Raj’s Twitter presence; hence the prolific use of their tweets in this piece.
Lesson 4: React Quickly to Crises
There has been manufactured fear and destruction several times in the Solana story. Each time, the team has quickly responded. This helps investors feel confident in the team, developers in the platform, and users in the future.
Lesson 5: Go for “Win, Wins”
Like Stripe, Solana is trying to build a platform for a huge market. It does not need to be an “Ethereum killer” or a have a “flippening” with Bitcoin to succeed. Anatoly and Raj are actively spending time to build Solana as an integrative component of the ecosystem. These “win wins” help you stay on everyone’s good side. Avoid zero sum games where someone loses.
There is much more to the story. Subscribe to the newsletter to stay up to date with everything that is going to happen with Solana and web3.
Reminder: I am just a newsletter writer. This does not represent my employer, and is not investment advice.
