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The Rise of the Solana Ecosystem

As early as this year, most crypto communities were solidly behind the Bitcoin or the Ethereum camps, building infrastructure and applications to support them. There was also a lot of interest starting to build up for the Binance Smart Chain, before it got tied up into regulatory issues globally. Sporadically, Avalanche, Polkadot and Cosmos communities were also in the race to grab attention from developers and the crypto community alike.

Seemingly out of nowhere, Solana started to pop up on the radar like a breath of fresh air. The company was established in 2018 by ex-Qualcomm and Intel engineers and in 2019 raised $20M in a Series A financing led by Multipoint Capital. The premise was simple, yet ambitious. A new protocol that could scale to over 50K transactions per second (TPS) and promising ultra low transaction costs in doing so. And they have consistently delivered. Earlier this year, Andreesen Horowitz led a $329M funding round into Solana, and has continued to invest in its supporting ecosystem with another investment in Phantom, a Solana wallet. If this works, it can solve the blockchain trilemma problem of achieving decentralization, security, and scalability simultaneously.

For distributed systems, keeping time and agreeing on a clocking mechanism is a hard problem to solve for. External clocks cannot be simply trusted, as they may be open to manipulation. The core of Solana’s innovation stems from its ability to provide a Proof of History mechanism to solve for a globally verifiable timestamp for events and transactions. In other words, it serves as an internal clock for the blockchain. By providing a verifiable timestamp prior to a consensus mechanism, Solana can optimize for block time, block propagation, and throughput. From this basis, Solana has created its own stack of innovations for consensus, mempool management, and data storage that is separated from nodes participating in the consensus.

Below is a quick comparison of Solana vs the rest of the Layer 1 blockchain ecosystem.

The Solana ecosystem is continuing to grow, with 322 projects today, spanning all major crypto verticals including market making, infrastructure, NFTs, stablecoins, and applications etc. One such app is Audius, where creators can generate immutable and time-stamped records for their creative works and register their assets to the Audius network - bringing the benefits of decentralization and censorship resistance to streaming music. The markets have taken notice and the market cap of the native token $SOL has skyrocketed to $53B in a year.

The allure of Solana is its potential to enable blockchain networks to scale at Layer 1. Over the years, there has been a lot of interest in creating a throughput that can be practically meaningful and allows for security and convenience of use. Ethereum has tried various methods and after faltering on every one of them, the advocacy for scaling moved to Layer 2 solutions. This is inherently complex and from both the developers and users perspective requires a deep understanding of both the layers. The only exception seems to be the Lightning Network, which as a Layer 2 solution has attracted enough momentum to enable Bitcoin transactions to scale, but one that is also far less noisy than the burgeoning applications and the constant evolution of the Ethereum network.

It is in this environment that Solana is trying to carve a niche for itself. Surely it can co-exist with Ethereum and other competing ecosystems in the short to mid term. Strategically, it is playing nice with existing networks and just recently launched Wormhole - a bridge that allows existing projects, platforms, and communities to move tokenized assets seamlessly across blockchains with support for Ethereum, Binance Smart Chain and Terra. Such interoperability will be an essential toolkit for DeFi applications to expand their user base and take advantage of innovations and built up communities across platforms.

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News From The World This Week

Currency | El Salvador Buys Its First 200 BTC a Day Before Its Bitcoin Law Becomes Effective: El Salvador President Nayib Bukele announced that his government has bought 200 BTC on Monday, a day before the country’s Bitcoin Law, which will make the cryptocurrency legal tender within the Central American nation, goes into effect.
El Salvador has just bought it’s first 200 coins. Our brokers will be buying a lot more as the deadline approaches.
- Nayib Bukele, President El Salvadore
This makes ElSalvador the first country to push for Bitcoin as a legally acceptable currency for monetary transactions. In contrast to the original law, it is not mandatory to accept Bitcoin. El Salvador’s government has also been working on building infrastructure to support the new Bitcoin Law, including creating a $150 million bitcoin trust to facilitate exchange between bitcoin and U.S. dollars in the country. … Read More
Regulations | Uniswap Labs Under Investigation by SEC: The U.S. Securities and Exchange Commission (SEC) has launched a probe into Uniswap Labs, the company behind decentralized exchange Uniswap. Uniswap is a decentralized exchange protocol underpinning the eponymous Ethereum-based exchange that allows anyone to swap ERC-20 tokens without middlemen. It’s also one of the major players in the decentralized finance (DeFi) ecosystem which seeks to replace centralized middlemen in traditional financial products, such as loans, insurance, and derivatives, with decentralized, non-custodial applications. This investigation comes hot on the heels of the comments from the SEC’s chair Gary Gensler last month when he argued that DeFi projects such as Uniswap could ultimately fall under the purview of regulators. … Read More
Payments | Twitter iOS Beta Update Hints at Future Bitcoin Integration: A new beta function on Twitter iOS allows tips for content creators, lays the groundwork for future bitcoin tips. In the most recent beta update on Twitter iOS, the app introduces support for bitcoin content creator tips. The “Tip Jar” feature, introduced earlier this year, has coding which hints Twitter will roll out a BTC option. Initially, the Tip Jar allowed users the opportunity for Bandcamp, CashApp, Patreon, Paypal, and Venmo extensions on their profiles. In the near future, Bitcoin tips will be a possibility. Additional details from the recent beta suggest that users will be directed through a tutorial. The bitcoin tutorial portrays details on the Bitcoin Lightning Network and various wallets. … Read More
Consumer | MetaMask Growth Shows DeFi Cruising Into Mainstream: As the total value locked in decentralized finance (DeFi) comes close to the $90 billion mark, MetaMask, the most popular wallet used by traders in the DeFi ecosystem, has reported that it has passed the 10 million mark of monthly active users, up from just over 500,000 a year ago.
MetaMask defined a new kind of cryptocurrency wallet, where users don’t just interact with currencies, but with decentralized applications, and we are constantly making these new kinds of applications more safe and accessible to a broader audience. We’re letting users explore new ways of establishing trust on the internet.
- Dan Finlay, Co-founder, MetaMask
Tech | With Buterin Advising, Could Dogecoin Jump to Proof-of-Stake? When the people behind dogecoin, the famous dog-depicting cryptocurrency worth $39 billion, announced last month a reboot of the Doge Foundation with the addition of Ethereum inventor Vitalik Buterin and Tesla representative Jared Birchall as advisers, it got tongues wagging in the crypto space. The inclusion of Buterin and Birchall also suggests a specific future-proofing of the Dogecoin roadmap when it comes to crypto mining. Dogecoin, like bitcoin and the current iteration of ethereum, relies on energy-intensive proof-of-work (PoW) mining. For now, at least. … Read More

The Final Word | NFL to teams: No cryptocurrency, NFT deals for now as league eyes digital market

NFL to teams: No cryptocurrency, NFT deals for now as league eyes digital market. The NFL informed teams last month they could not, for now, sell sponsorships to cryptocurrency trading firms, multiple club sources said. Teams also cannot sell non-fungible tokens (NFTs) as the league develops a strategy in the hot and cold market for sports digital trading cards and art. — Image Credit: The Athletic

The NFL informed teams last month they could not, for now, sell sponsorships to cryptocurrency trading firms, multiple club sources said. Teams also cannot sell non-fungible tokens (NFTs) as the league develops a strategy in the hot and cold market for sports digital trading cards and art.

Clubs are prohibited from selling, or otherwise allowing within club controlled media, advertisements for specific cryptocurrencies, initial coin offerings, other cryptocurrency sales or any other media category as it relates to blockchain, digital asset or as blockchain company, except as outlined in this policy.
- NFL’s crypto guidelines

This is intriguing specially when sports stars are FOMOing into crypto. Just last week, Stephen Curry, the Warriors legend bought his first BAYC ape and just announced that he is getting into the crypto game …

Stephen Curry @StephenCurry30

Just getting started in the crypto game...y'all got any advice??

I suspect, the league is in behind the scenes negotiations with partners to chart a strategy for enabling its own crypto community. We saw a similar thing happen with the MLB last month when they tapped Fanatics (and their NFT platform Candy) to replace Topps as their baseball trading card maker. … Read More

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Solana's Rise, El Salvador's Bitcoin Day and…