Why Solana Won't Work

[realpauleverton]

The Solana cryptocurrency has been hyped quite a bit recently (e.g. https://www.notboring.co/p/solana-summer) and has gained a lot in value. But it's fundamentally flawed. I'll explain:

People are like “Solana is the new NASDAQ because transactions are cheap!”. But NASDAQ is worth $31 billion. Solana is worth $22 billion right now and it’s not even 0.1% of NASDAQ’s activity.

More importantly, the token economics don't work. Since there are stablecoins and the network is composable you don’t need SOL to buy anything, you can use USD*. SOL is just fee collection and fees are small. So very little value and high risk that validating the network isn’t economical.

Happy to see if I'm missing something but seems to me that Solana fundamentally can't work.

[rafiki6]

Ignoring the value of the tokens which are all over inflated right now due to crypto bull market and strong correlation between tokens and popular cryptocurrencies like BTC/ETH, I'm not entirely sure Solana is directly comparable to NASDAQ. NASDAQ is a stock exchange. Solana is a blockchain, for which one application might be an exchange. Solana is competing for mindshare with other blockchains at this point such as Ethereum.

[meiraleal]

Yes you are missing something, a contract also pays rent and this rent is paid in SOL. That is one of the reasons for cheap transactions, part of the cost goes to the contract owners.

[realpauleverton → meiraleal]

That's just another way of saying more expensive transactions. Rent must be cheap or it's not economical. Total fees, inclusive of rent, are low. That's the Solana pitch.

[meiraleal → realpauleverton]

Yes, Solana transactions are not as cheap as people talk about (someone is paying more to deploy a contract there than to ethereum/bsc/polygon). But still is a interesting tokenomics that pushes SOL prices up benefiting the long term holders.

[realpauleverton]

I also wonder how this can be solved in other cryptos. In Ethereum the current solution is really high fees, which don't scale. Layer 2 is not composable and current solutions aren't decentralized.

[randomopining → realpauleverton]

What do you mean by Layer 2 isn't composable?

My basic understanding after looking at this stuff off and on for a few months is:

1. Centralization and cost of transaction are inversely correlated.

2. Layer 2/3/4 can take care of smaller transaction where we don't care that it is globally immutable. (Nobody cares if your pack of gum purchase is known global... at least on a lower level local chain that you trust or care about)

And yes, all the "competitors" to Ethereum are all centralized voodoo... so besides scams who cares.