Solana’s Network Inefficiencies and Spam: The Bad News and The Good News
While the Solana Network experiences extreme growing pains, the problems are well-known and documented, and solutions are on the way. Nonetheless, we believe that in order to navigate the short term, it is worth understanding Solana’s network inefficiencies and potential solutions. Looking even further, much like how Ethereum research has informed Solana research, these problems will be relevant as more high-performance Layer-1s come online.
Given the state of the network, its issues, and potential solutions, we do not see the appetite to add additional risk here until meaningful progress is made. In the short term, we expect Solana activity to fall as some users migrate to Ethereum’s rollups or other high-performance chains. Plus, this quarter we are expecting more airdrops from Solana DeFi, presenting an opportune period of time for the market to absorb new supply. In the medium term, risks depend on the timing and efficacy of the solutions.
Lastly, there are positive developments in other ecosystems, such as the BTC halving later this month, tailwinds for Ethereum DeFi, and growing attention and activity in the Cosmos, Sui, and Aptos ecosystems. That said, “a rising tide lifts all boats” should not be overlooked. All in all, in the long term, we think the market will eventually look past these idiosyncratic headwinds, and believe SOL is still a top candidate for outperformance throughout this cycle.
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