In brief
- Solana is a blockchain with similar functions to Ethereum.
- Smart contracts on the network allow for DeFi applications.
- Those DeFi applications are attracting more money than ever.
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Ethereum competitor Solana's name roughly translates to sunshine. And, boy, is the blockchain heating up right now.
The Solana network passed $2 billion in total value locked for the first time today, according to stat tracker DeFi Llama. Total value locked, or TVL, refers to how many crypto assets are tied up in decentralized finance (DeFi) protocols on the network.
DeFi protocols make it possible to make a whole range of financial transactions—take out loans, earn interest, swap assets—all while using automated "smart contracts" instead of human intermediaries. Though DeFi originated on Ethereum, where nearly $110 billion is locked into protocols such as Aave, Compound, and Uniswap, it has since spread to other networks, the biggest competitor being Binance Smart Chain ($17 billion in TVL).
Solana has likewise been making a play to woo DeFi developers and users over from Ethereum, which at times has struggled to quickly and inexpensively handle an uptick in transactions caused by, first, growing demand for DeFi applications, and later, surging interest in NFTs, blockchain-based deeds to digital and/or real collectibles. The team behind the upstart proof-of-stake network says Solana is already what Ethereum wants to become with Eth 2.0—a fast, scalable network where transaction fees are measured in pennies, not dollars.
Its mission has been complicated somewhat by the emergence of Polygon, a network built atop Ethereum that helps to relieve some of that pressure. Per DeFi Llama, over $5.4 billion in assets are locked on the network; in fact, there is more money locked into DeFi lending protocol Aave via Polygon alone than total TVL on Solana.
Yet Solana is accelerating, as it literally and figuratively apes Ethereum. When the NFT collection Degenerate Ape Academy sold out this week and racked up $5.9 million in trading volume, it helped propel the SOL coin into the top 10 by market cap. SOL's price has blossomed 70% in the last week, reaching an all-time high of $74.08 this morning, according to CoinGecko. That has had a knock-on effect on TVL—DeFi protocols such as Raydium (think of it as Solana’s version of Uniswap) use SOL, not USD or ETH, as an onramp into their crypto ecosystem.
Other so-called Ethereum killers have surged before only to retreat in price and/or user numbers, among them Internet Computer and EOS. Solana is enjoying the sunshine. It just doesn't want to get too close to the sun.