Solana’s whitepaper outlines the coin as “a new blockchain architecture based on Proof of History (PoH) – a proof for verifying order and passage of time between events. PoH is used to encode trustless passage of time into a ledger – an append only data structure. When used alongside a consensus algorithm such as Proof of Work (PoW) or Proof of Stake (PoS), PoH can reduce messaging overhead in a Byzantine Fault Tolerant replicated state machine, resulting in sub-second finality times.” The whitepaper continues on to propose two algorithms that leverage the time-keeping properties of the PoH: a PoS algorithm that can recover from partitions of any size and an efficient streaming Proof of Replication (PoRep). “The combination of PoRep and PoH provides a defense against forgery of the ledger with respect to time (ordering) and storage. The protocol is analyzed on a 1 gbps network, and this paper shows that throughput up to 710k transactions per second is possible with today’s hardware.” Solana is an open source project implementing a new, high-performance, permissionless blockchain. The Solana Foundation is based in Geneva, Switzerland and maintains the open-source project.

Key Solana Definitions

Proof of History (PoH)

A sequence of computation that can provide a way to cryptographically verify the passage of time between two events. PoH is a secure function written so that output cannot be predicted from the input, and must be completely executed to generate the output1.


Equivalent to a capital expense in Proof of Work. A miner buys hardware and electricity and commits it to a single branch in a Proof of Work blockchain. A bond is a coin that the validator commits as collateral while they are validating transactions.


The proposed solution to the nothing at stake problem in Proof of Stake systems. When proof of voting for a different branch is published, that branch can destroy the validator’s bond. This is an economic incentive designed to discourage validators from confirming multiple branches.


A supermajority is ⅔ of the validators weighted by their bonds. A supermajority vote indicates that the network has reached consensus, and at least ⅓ of the network would have had to vote maliciously for this branch to be invalid. This would put the economic cost of an attack at ⅓ of the market cap of the coin.


An off-chain service that acts as a custodian for a user’s private key. It typically serves to validate and sign transactions.



The substance of Solana is protocol, meaning the currency has fixed rules that are programmed and independent of the deliberation of people. Solana’s protocol is explained in more detail throughout the document.

Value (of Solana and SOL)

First, going over the value and return of staking SOL, which is a key part in keeping the Solana network running. The rate of return (aka interest) earned on SOL staked on the network. It is often quoted as an annualized rate (e.g. “the network staking yield is currently 10% per year”). Staking yield can be calculated from the Inflation Schedule along with the fraction of the Total Current Supply that is staked at any given time. The explicit relationship is given by:

Solana formula

Monetary Authority

Part of Solana’s protocol is its inflation schedule (discussed more in the Creation section of the analysis) that determines when and how much SOL is created. Newly created SOL is distributed to users through rewards to Solana Validators. This protocol-based reward system is delivered to validators on top of earnings from transaction fees, which encourages more participation in the network and more rewards: a virtuous cycle. Stakers also get passive rewards of newly created SOL.


The carrier is the SOL, which is Solana’s native token. The SOL can be passed to nodes in a Solana cluster in exchange for running an on-chain program or validating its output. It can be a reward for staking or validating.

Monetary Unit

The unit of measurement is the SOL, which is infinitely divisible to the hundredth place. There is a current circulation of 297,102,542.56 SOL (on September 22nd). The total supply is 504,711,355, which is the amount of coins that have been already created, minus any coins that have been burned.

Transmission System

Validators form the backbone of Solana’s network. Each validator helps make Solana the most censorship resistant and a high-performance blockchain network by processing transactions and participating in consensus.


Solana Institutions

The above figure (from whitepages) shows the transaction flow throughout the network. As shown in the chart, the first step in the flow is users sending messages to the blockchain (transactions are the messages sent by users). These messages are received by the PoH Generator, and this leader orders the transactions, assigns a “State” identifier to the block of transactions, and sends this output to replicator nodes. Replicator nodes (verifiers) then publish their confirmation states, which serve as a vote to confirm the state.


Validators commit bonds, or coins, as collateral while they are validating transactions. Bonds are equivalent to a capital expense in PoW. A bonding transaction takes an amount of coin and moves it to a bonding account under the user’s identity. Coins in the bonding account cannot be spent and have to remain in the account until the user removes them. The user can only

remove stale coins that have timed out. Bonds are valid after a super majority of the current stakeholders have confirmed the sequence.


Solana also creates new tokens based on a “dis-inflationary inflation schedule,” wherein the SOL issuance rate decreases periodically after starting at its highest value. Meanwhile, Solana claims that the supply will eventually stabilize at a “predetermined long-term inflation rate.” Some key terms related to the creation of SOL and its inflation schedule are below:

  • Initial Inflation Rate [%]: The starting Inflation Rate for when inflation is first enabled. Token issuance rate can only decrease from this point.
  • Dis-inflation Rate [%]: The rate at which the Inflation Rate is reduced.
  • Long-term Inflation Rate [%]: The stable, long-term Inflation Rate to be expected.


The protocol burns a portion of the transaction fees it collects to keep the SOL supply limited against its 500,000,000 SOL issuance. In early September, Solana teased an “Ignition Event” that many people speculated as being related to burning; however, Ignition was a hackathon event and no burning happened.

Additional Information


Solana has a vast amount of communication channels, all of which can be found on the “Community” tab of their website. Channels of communication include Telegram, Twitter, YouTube, VK, Weibo, Discord, GritHub, Meetings and Write-ups. Below is a summary of their community and how active it is (as of October 21, 2021):

Channel of Communication Number of Followers/Users
Telegram >85,032 members
Twitter >758,200 followers
YouTube >18,100 subscribers
VK >1,871 followers
Weibo >2,000 subscribers
Discord ~44,556 members
GritHub >4,539 stars
Reddit >32,791 subscribers

In order for Solana to continue to thrive and out work other similar projects, like Polkadot and Binance Smart Chain (BSC), the community will need to continue to grow in order to create greater network effects than other projects. Here is how Solana stands in current (October 21) community size:

Communication Channel Solana # of Users Polkadot # of Users BSC # of Users
Telegram >85,032 members >36,9598 members >69,028 members
Twitter >758,200 followers >744,700 followers >1.3M followers
YouTube >37,900 subscribers >34,900 subscribers >87,000 subscribers
GritHub >4,539 stars >4,400 stars >1,300 stars
Reddit ~73,300 members ~57,300 members ~10,300 members

Solana outperforms Polkadot in all six major communication channels used by cryptocurrency projects and outperforms BSC in a majority of these channels. Further analysis on growth of each of Solana’s channels compared to that of other projects will be continually monitored.


Orca is a decentralized crypto exchange (DEX) that was built on the Solana blockchain. Orca announced $18 million in fresh funding led by Polychain, Placeholder, and Three Arrows Capital on September 22, 2021. In early September, 2021, blockchain streaming platform Audius announced they were partnering with Solana to create NFT integration on the platform. The integration will occur through Phantom, Solana’s multi-chain wallet and browser extension. The new features will be available to Audius’ silver tier profiles, accounts holding more than 100 of the platform’s native AUDIO tokens.

FTX and Alameda Research Partnership

FTX and Alameda partnered to create Serum, a new high-speed, non-custodial DEX that’s built on Solana. Serum is a complete, non-custodial decentralized exchange running on an on-chain central limit order book (CLOB) on Solana’s mainnet. Serum aims to resolve the traditional problems of DeFi: high gas costs, slow transactions, centralization, low capital efficiency, and liquidity segmentation. Serum is permissionless and seeks to decentralize the entire DeFi stack.

Team Experience

Key employees, Founder & CEO Anatoly Yakovenko, Co-Founder Eric Williams, Co-Founder Stephen Akridge, Co-Founder & CTO Greg Fitzgerald, Co-Founder & COO Raj Gokal, VP of Operations Matt Taylor, Chief Scientists Eric Williams, and their contact information are listed on Solana’s page on CrunchBase. The Solana Podcast is hosted by CEO and Founder Anatoly Yakovenko. Here he brings on guests, discusses Solana and other projects, and communicates with the community in a new way.

Current Funding

Solana has had 6 rounds of funding totaling $335.8M. The lead investors of Solana include Multicoin Capital, Polychain, and Andreessen Horowitz. Other non-lead investors include Memetic Capital, L1 Digital, Jump Trading, Collab+Currency, CoinShares, CoinFund, Sino Global Capital, and Rockaway Blockchain.

MonkeyBall, Solana’s gaming platform, recently (as of October 21, 2021) received $3 million of funding from investors such as Solana Capital, Republic, NFX, iAngels, Longhash, CMS, Jump Capital, Youbi, Morningstar Ventures, Banter Capital, Ascentive Assets, MarketAcross, Node Capital, ZBS Capital, Metaversal, Collider, BFF and 6th Man Ventures. Monkey Ball is a Solana-based play-to-earn soccer game. Players can earn tokens by winning, hosting matches, or even cheering other matches. The release offers a rich gaming experience and is being developed on Unity, making it cross-platform with Desktop and Mobile.

Current Risks/Red Flags and Mitigants

There are two main red flags identified by us at Altlift. First, there is no mention of the team on Solana’s main page. This is a red flag because it is hard to trust a project that you cannot find the members who created it. However much this is a red flag can be easily mitigated by including names, experience and contact information. Altlift was able to find some information about founders and other team members, but from a third party site. Second, the company doesn’t mention any risks they foresee for their project in the whitepapers or in subsequent documents. Not mentioning risks means thinking there are no risks, which is potentially reckless. At least mentioning risks the team foresees and how they plan on mitigating them is needed to show that they are looking forward and anticipating potentially harmful events.

September Outage

On September 14th, the Solana network went offline for ~17 hours. In this span, no funds were lost and the network was fully functional after going back online. This issue is one of centralization. According to the Solana Foundation brief that came out after the outage, the cause of the outage was “a denial of service attack” due to the network being flooded with transactions from Grape Protocol launching their IDO on Raydium. Many validators crashed, slowing down the network and eventually stalling it. Solana claims to be a decentralized network, but a massive failure like this should be averted in a decentralized system. There can also be a range of decentralization, and although Solana may be categorized as decentralized, it relies heavily on a central point of control. The brief states that the slowdown started when the “forwarder queue” was flooded, which “caused the memory used by this queue to grow without limits.” Heavy reliance on the forwarder queue is dangerous because that makes Solana less decentralized than other systems. This can be mitigated by making it easier to gain more validators (current cost to become a validator is high due to hardware needed to run high throughput transactions), limit the amount of “resource heavy” blocks that can be validated at a time, or change the current process that Solana Foundation is the only entity developing core nodes on the blockchain.

Reality of Solana’s Decentralization

Despite Solana’s lower decentralization in the area’s listed above, it is more decentralized than Bitcoin and Ethereum in terms of top validator control. By this, it means how many validators could theoretically collude and attack the network if they wanted, measured by the “Nakamoto Coefficient.” According to Solana Beach, Solana has a Nakamoto Coefficient of 19, compared to Bitcoin’s NC of 5 and Ethereum’s NC of 3. This is a positive for Solana in terms of the degree of its decentralization. While this is positive, another risk to its decentralization is the amount of tokens held by insiders. About 50% of Solana is estimated to be held with insiders, compared to about 15% of Ethereum and 17% of Cardano being held by their insiders. This is an issue because it shows that Solana may not have the reach and community it markets itself to have. However, the Solana community is ever growing, and is growing at a rate that is fast than many other similar projects. Altlift will continue to monitor the growth of the Solana community, because growth could lead to more decentralization through more validators, through a lower percentage of SOL tokens being held by insiders, and more entities collaborating with Solana Foundation in developing core nodes on the blockchain.


Overall, Solana has solid fundamentals and a large amount of funding and backers. Solana also has a strong community throughout many channels, and Altlift will continue to monitor the growth of those communities but they have a couple risks and red flags that could be easily mitigated through more communication and transparency from the team members behind the project. Solana’s largest red flag is it’s lack of decentralization contrary to what the marketing of Solana may say.