Why Build DeFi on Solana?

Part 1: Advantages of Solana

Solana holds several advantages over the other Layer-1 protocols. Let us look into each of them in detail.

i. Transaction Cost

The transaction cost of Ethereum has impeded the adoption of DeFi by users. As we all know, if a user wants to continuously obtain fee income by adjusting their range of liquidity provision on Uniswap V3, he must bear gas fees which may affect his income margins, especially during periods of high network traffic. When Gas sits around 30 Gwei, a transaction cost that provides liquidity is around $60 (assuming the price of Ether is $3000).

Source: explorer.solana.com

ii. Long-term Scalability Support

The intuitive improvement that scalability brings to users is the decrease in transaction fees and the increase in transaction confirmation speed. For an underlying chain network, scalability means that it can support more applications and higher frequency applications.

iii. Network Value

Solana simply carries a higher capacity. Why is this important? As an ecosystem accommodate more projects in general, we can expect the potential volume of each DeFi project to scale as well.

iv. Decentralization

Decentralization brings a credible foundation to DeFi. Currently, ethernodes.org records 3982 Ethereum nodes (excluding unsynced nodes), and the number of consensus nodes displayed on Solana website is 969. The number of nodes does not fully represent the degree of decentralization, but the number of nodes reaches this level, which already has the trust foundation required by most DeFi, and the number of consensus nodes on Solana is also increasing rapidly. In the spirit of decentralization, Francium has chosen to go with Solana.

Part 2: Parallel Programming Model of Solana

Solana introduces a programming model that is different from the EVM compatible blockchains, which realizes stateless transaction execution and improves the parallel processing capabilities of transactions greatly. The EVM-compatible blockchains can be regarded as a single-threaded operating system, transactions can only be processed serially one by one, but cannot be processed parallel. In the Solana, execution logic of transactions is completely decoupled from the storage of data state, and the transaction execution process is stateless. The execution logic(Program on Solana) of the transaction is placed in the executable account, while the data state exists in separate accounts. Each transaction is accompanied by the account that needs to be read and written for this execution. , This batch of transactions can be processed by Solana in parallel, which greatly improves the parallel processing capabilities of transactions, as long as the accounts in the transactions do not conflict with each other.

Part 3: Solana DeFi Ecosystem Potential

After a rapid development period, Solana DeFi ecosystem has grown to a certain extent including AMM DEX, CLOB DEX, AMM for stables, Decentralized Stablecoin, Oracle, Lending protocol, derivatives, launchpad, yield farming, and asset management, etc. It also brings the potential of DeFi combination on Solana.

Source: Solanians
  • Serum, which is positioned at the ecosystem level, is also a CLOB DEX;
  • Raydium, DEX that integrates the order book and AMM liquidity;
  • Bonfida, as Serum front-end, including modules such as bot trading strategies, APIs, and naming system;
  • Pyth, the oracle that provides the price of both traditional financial assets and the price of crypto assets.

Verdict: Is Solana REALLY the best?

No doubt, DeFi on Solana still has the possibility of development and room to improve. For example, the scale of the Rust language ecosystem, the user experience that needs to be improved, and even the acceptance and value empowerment of $SOL in the ecosystem needs to be improved. But in essence, these problems can be solved. What exactly gives developers confidence in the long-termism of the ecosystem core and promoters, the practical and disenchanting style, and a bigger vision not just to compete with Ethereum: To build the scale of a centralized Wall Street.

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Francium

Francium

Francium is a leveraged yield farming protocol that supports diverse yield strategies. Discord: http://discord.gg/francium