We Know About Solana's (SOL) Network Outages But Did You Know This...

By Michael @ CryptoEQ | CryptoEQ | 4 Apr 2022


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Core Report Vulnerabilities

Solana has two broad vulnerabilities that are necessary to understand for the potential longevity of the network. This includes potential problems with its monolithic construction (leading to centralization) and subsequently, problems with overall security. With such a large concentration of on-chain wealth being held by a small number of addresses, this prompts potential issues with governance, limits the number of individuals that could become validators, and reduces overall network security. For investors, it’s especially important to note that large, institutional investors could potentially unload holdings over the broader market. 

As discussed in the Technology section, Solana performance is wholly dependent on hardware/computer performance of its validators, e.g. higher throughput is only achieved by more expensive, performant hardware. This works well when your chain only needs less than 10,000 TPS, but it can’t support millions of users and transactions without centralizing around a few mega datacenters facilitating all transactions. This future is not unlike the current state of the internet and, therefore, adds little value.

Even at today’s transaction numbers, Solana has been overloaded by transactions that have led to outages and a degraded network (discussed more below). This has, of course, happened to other chains like Ethereum in 2017 with Crypto Kitties and ICOs, but is precisely why Ethereum was forced to find a sustainable scaling solution.  

Ethereum’s EVM can, in theory, handle up to ~2,000 TPS, as seen in Binance Smart Chain when you max out the gas limit and block times. However, even this is insufficient to service long-term block space demand. To scale sequencing, Solana made some impressive innovations: taking advantage of a parallelizable execution environment and a clever consensus mechanism, which allows for far more efficient throughput. But, despite its improvements, this is neither sufficient nor scalable. As Solana increases its throughput, the hardware costs to run a node and process transactions also increase.

Monolithic chains suffer from the fact that all use cases and dApps compete for the same limited block space. There can be no compartmentalizing of resources or efficient resources pricing like in modular chains. This means, for example, a top Solana dApp like Serum, a DEX that relies on lightning-fast transactions and low latency, will likely face increased competition for block space (to its detriment) by the rise of NFT adoption and minting. The two use cases are equally valid, but have very different blockchain needs to service very different customers at very different frequencies. A monolithic chain can do nothing to rectify this.

In contrast, most modern blockchains are or intend to implement a modular approach to their chains and the scalability problem. Ethereum PoS and rollups, Polkadot, Cosmos, Avalanche, Celestia, Polygon, NEAR, etc. are all working on different approaches to scaling that involves splitting the blockchain’s total work among different layers and nodes so that greater throughput can be achieved than a single node.

Another downside to monolithic blockchains is the validator costs to maintain a highly competitive blockchain. While a minimum amount of SOL is not required to become a validator, it’s been stated that simply voting to agree with each block can cost up to 1.1 SOL daily. This could potentially cost 33 SOL per month or the equivalent of  ~$36,500 per year based on Q2 2022 prices, or ~$91,000 per year based on all-time high SOL prices. For most of the population, this is simply already out of reach. Additionally, the hardware requirements for becoming a validator are also out of reach for many.

 

L1 validator requirements Source: Galaxy Digital Research

 

Hardware requirements on Solana, compared to Bitcoin & Ethereum:

  • Bitcoin¹: 350GB HDD disk space, 5 Mbit/s connection, 1GB RAM, CPU >1 Ghz. Number of nodes: ~10,000
  • Ethereum²: 500GB+ SSD disk space, 25 Mbit/s connection, 4–8GB RAM, CPU 2–4 cores. Number of nodes: ~6,000
  • Solana³: 1.5TB+ SSD disk space, 300 Mbit/s connection, 128GB RAM CPU 12+ cores. Number of nodes: ~1,600

 

Taking Jameson Lopp’s 2020 Bitcoin Node and 2021 Node Sync Tests as an indicator, Table 1 compares the time it takes to sync a full node of Bitcoin vs. Ethereum vs. Solana on an average consumer-grade PC.

 

SOL node sync times vs BTC and ETH Blockchain throughput and node-sync comparison

To break even as a validator, it would require at least ~$500,000 worth of SOL that’s self-delegated with a 100% commission rate. This is simply unobtainable for the majority of participants. With the high costs of purchasing the hardware, paying for consensus votes, obtaining a meaningful stake, and running a profitable validator, network validator growth on Solana may experience difficulties. 

Another reason is the majority of the stake distribution is controlled by the foundation which has a program where validators can apply, perform KYC, and sign an agreement in return for the foundation delegating stake to their node. This raises possible concerns with how decentralized Solana could even become over time. 

Additionally, a regular user also can't run an archival node and validate the chain from genesis. The early history is only stored by the foundation in Google Cloud and is around 20 TB despite launching less than two years ago. Due to the bandwidth costs, this isn’t available for others. With such a significant barrier to entry, validator growth will undoubtedly be stunted. With only a small number of on-chain validators, issues could arise more frequently.

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


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