The Occasional Slow Transaction Throughput on the Solana (SOL) Network Is a Near-term Bullish Catalyst as It Indicates Soaring Demand
Solana (SOL), a decentralized blockchain platform that promises a very fast transaction throughput, has seen its native SOL coin plunge over 28 percent in the past 7 days, as the sentiment around the nascent crypto project was hammered by ongoing malaise in the wider crypto sphere as well as internal network congestion leading to inevitable delays in transaction processing.
While the market-wide panic that is currently ensconced in the crypto sphere is expected to continue to act as a dampener, we view the growing instances of network congestion on Solana as a bullish factor, provided that the underlying constraints are tackled effectively via timely updates.
Before going further, it might be prudent to discuss the differential tech that Solana has employed as it works toward its goal of offering unmatched transaction throughput in the crypto sphere.
Why is Solana Often Touted as the “Ethereum Killer”?
To say that Ethereum-based transactions are expensive is a euphemism at this stage. The world’s second-largest cryptocurrency continues to be plagued by sky-high fees amid structural bottlenecks that are not expected to be resolved until Ethereum 2.0 goes live in the next few months, possibly even in 2023. In the intervening time, Solana has emerged as one of the most viable alternatives to Ethereum.
There are eight different innovations that underpin Solana’s technological advantage at this stage:
- Proof of History (POH) – Each Solana validator (nodes that process transactions) encodes the passage of time in a distinct hash. This is essentially a cryptographic timestamp that is implemented via SHA-256 Verifiable Delay Function (VDF). This allows the entire network to keep track of time, including the order in which transactions are received, without communicating with other nodes and expending precious network bandwidth in the process.
- Tower BFT Consensus Mechanism – BFT stands for Byzantine Fault Tolerance and refers to a network’s resilience in case a few nodes fail to respond or do so with incorrect information. Solana’s Tower Consensus method utilizes POH to forge consensus. In this method, nodes allow progressively more time for reaching consensus by increasing their timeouts. Since the ledger is also a trustless source of time (via cryptographic timestamps), nodes are able to observe and examine timeouts of all network validators, identifying outliers in real-time.
- Turbine – This protocol breaks incoming data into small packets that are then easily transmitted, thereby reducing bandwidth congestion on the Solana network.
- Gulf Stream – This protocol encourages transaction caching and forwarding of transaction data to the edge of the Solana network. Since every validator knows the order of upcoming leaders in Solana architecture, clients and validators forward transactions to the expected leader ahead of time, thereby minimizing the time required to process transactions.
- Sealevel – This is a hyper-parallelized transaction processing engine designed to scale horizontally across GPUs and SSDs. Sealevel allows for concurrent transactions on the same chain, resulting in a better runtime for smart contracts on the Solana network.
- Pipelining – This protocol assigns a stream of input data to different hardware for processing, enabling a faster replication and processing of transactions across the various network nodes.
- Cloudbreak – It organizes the database of accounts, making concurrent reads and writes between the network’s 32 threads possible.
- Archivers – These are dedicated nodes consisting of laptops or PCs that can be used by the network to store data.
So, how is a transaction processed on the Solana network? Well, a pre-selected leader receives incoming transactions and generates POH. The leader node then sequences these transactions and executes them. These executed transactions are then published along with final state signatures. The verifier or replication nodes execute similar transactions on their respective copies of the state and then publish state signatures. These published signatures then serve as votes in the consensus process.
Solana’s Slowing Transaction Throughput
This brings us to the crux of the matter. On the 14th of September 2021, Solana faced a major slowdown in its transaction throughput. Amid swirling rumors, Solana’s SOL coin took a heavy beating. Nonetheless, it later emerged that the issue stemmed from network resource exhaustion and not a malicious attack.
Then, in early December 2021, the entire Solana network froze for around 5 hours, with only a hard cluster reboot managing to restore normalcy. According to the platform, the Solana Mainnet Beta cluster had stopped producing blocks at slot 53,180,900, which prevented any new transactions from being confirmed.
👋, sorry that’s not at all what happened. There was some congestion due to mis metered transitions, and some users experienced their txs timing out and had to retry.
— anat◎ly 🦀🤿🏒 🤙 (@aeyakovenko) January 5, 2022
So far, in January 2022, Solana has gone through at least two distinct disruption episodes. On the 04th of January, reports emerged that the network was under a DDoS attack. However, the root cause of network congestion was later identified as mis-metered transitions that caused some transactions to timeout.
Quick 🧵 on our understanding of the current issues & fixes: Due to market volatility many leveraged positions on DeFi become eligible for liquidation. Liquidation can be triggered by anyone on an eligible position, if one liquidates an eligible position one receives a bounty...
— Laine | stakewiz.com (@laine_sa_) January 22, 2022
Finally, over the past weekend, Solana mainnet experienced network congestion again. This time around, program cache exhaustion was identified as the culprit. Specifically, heightened market volatility allowed many levered positions to become eligible for liquidation. Since a bounty is received on such liquidations, bots are often used in this high-stakes race to submit the same transaction multiple times in order to trigger such liquidations and improve the odds of winning the bounty. This, naturally, created network congestion. Solana rolled out a hotfix via the update 1.8.14 that applied a de-duplication filter. In update 1.9, Solana has limited account writes to one account per block.
Can you identify the pattern here? Solana is suffering from teething problems and an unexpectedly high transaction load. For context, Solana processed 45 billion transactions in December 2021, outpacing all of its biggest rivals. The network also continues to identify vulnerabilities that have been causing network congestions and then fix them in short order. Yes, this cadence creates temporary upheaval. But it also paves the way for a much more resilient network down the road.
We would urge Solana bulls to keep a close eye on the network's developer and transaction activity. Unless there is a marked slowdown in both metrics, which would correspond to teething problems finally surpassing the pain threshold of the network's main proponents, the occasional temporary hiccups are unlikely to create any long-term hurdle.