Today we're going to be diving deep into Solana, a high performance blockchain
platform that I believe has the most potential out of the top 15 currencies
currently on the market What's up everyone my name is Ben, I'm a
former JP Morgan investment banking analyst and welcome to rareliquid the
best channel for tech investing Today's agenda looks like this. First,
I'll be talking about Solana's founding story
then I'll be going into solana's primary innovation Proof of History
I'll then discuss why Solana is a game changer and lastly, I'll explain why I
believe Solana can more than 5X from now Before I get started, I do want to let
you know that a lot of the information and data that you'll see in this video
and future videos will be posted on my
twitter account and also instagram so check those out if you're interested
and I'm also starting a weekly newsletter, so check that out in the
description below for a link Please also remember that I am not a
financial advisor so please treat all content as for education and
entertainment purposes only Alright, let's first start off with the
origins of Solana, which is crucial to understanding how the platform developed
according to Anatoly Yakovenko the idea of Solana came to mind in the fall of
2017 and he was so engrossed with the idea
that he couldn't sleep until 4 AM he also stated that he had two cups of
coffee and a beer that night too so that kind of might have been part of it as
well Anatoly spent the bulk of his
professional career at Qualcomm, Dropbox and mesosphere
where he spent a lot of time designing distributed systems and figuring out how
to get different systems of software and hardware to talk to one another
it was at Qualcomm that Anatoly met two of his other Solana co-founders Greg
Fitzgerald and Stephen Akridge and the three of them spent nearly a
decade working together Greg had an expertise in languages and
compilers and he convinced anatoly to migrate Solana's code base from the C
programming language to Rust and he became the CTO of Solana. Steven
led the GPU backend that constantly beat Nvidia and he demonstrated that massive
amounts of time could be saved through GPUs
leading Anatoly to recruit him to the team in early 2018.
The Solana co-founding team had more than a decade of shared work experience
and a lot of complementary skills in both hardware
and software and I think this is really a key component as to why
Solana has been able to achieve so much so quickly as it has
But anyway to conclude the story the three co-founders started the project
under the name Loom but rebranded to Solana when an
Ethereum based project called Loom Network sprung up Solana was
the name of a beach in San Diego where the three of them would often surf
so the name doesn't really have any more particular significance beyond that
so now that you have that background let's next get into Solana's core
innovation, Proof of history. To understand proof of
history and why it's significant we first have to go
into what's known as Proof of Work which is what Bitcoin made famous and it's
also what Ethereum uses as well For proof of work when person A sends a
transaction to person B through a blockchain, there are hundreds
of computers also known as miners that work to confirm the transaction by
solving tiny math problems and once a number of computers agreed
that a transaction is correct, then the transaction goes through, a
block is produced, and the computers are rewarded with
tokens like Bitcoin or Ethereum This basically is the essence of the
buzzword decentralization you hear so often
because instead of one centralized system like the US treasury that mints
money, a crowd of people are earning money in
the form of tokens through computers There are large mining farms across the
world that have thousands of computers making computations to earn tokens
through proof of work and this has caused many to worry about
all the electricity consumption cryptocurrency mining is resulting in
The bigger problem with proof of work is that it's much too slow with Bitcoin and
Ethereum both struggling to scale beyond 20 transactions per second
and in addition to that average fees per transaction currently sit
at $27 for bitcoin and $13 for ethereum which is just way too high
In his interviews Anatoly states that he views Bitcoin and Ethereum
as more as revolutionary proof of concept
products rather than products that were structured to
serve a worldwide audience. Bitcoin proved that cryptography could be used
to create currencies while Ethereum brought smart contracts to the
world but neither were built with scale in mind
This makes sense because five to ten years ago developers who were creating
Bitcoin and Ethereum and other projects probably really didn't understand how
big the space was going to get and so that's why they pushed more
groundbreaking but relatively minimally viable
products. The development to improve upon proof of work is called proof of stake
and this is what a lot of the newer blockchain technologies and platforms
are currently using today and it's also what Ethereum
is trying to migrate to. In proof of work the miners who are willing to spend more
on energy consumption are selected to confirm the transactions on the
blockchain In proof of stake, miners are called
validators and validators are chosen based on the amount of money they lock
away which is how much they have staked and the more validators have staked
the more likely they will be chosen to confirm transactions and thus earn
tokens This gets rid of the need to consume
massive amounts of energy and it's a much more sophisticated approach that a
lot of cryptocurrencies have migrated to. I'm providing all this background
because this is where Solana comes in Solana still uses proof of stake as its
method of verifying blocks but what Anatoly did
is bring in something called proof of history which is a consensus mechanism
and is really the core at what makes Solana unique the trouble
with decentralized systems is that you have
thousands of computers working together to verify transactions
but they each use their own clocks and don't have a common notion of time
As a result, most blockchain infrastructures require validators to
talk to each other to agree on the time before verifying transactions and
producing the next block This results in notable delays in the
network and is the reason Bitcoin produces blocks only every 10 minutes
and Ethereum every 15 seconds If this is hard to understand imagine
that there is an army of 1,000 soldiers who in this analogy
reach represent a validator each soldier has his own watch and so the time to
each soldier is what he believes the time to be but
the actual time may be off by a few seconds or minutes
This means that if a general wants the soldiers to execute an order at a very
specific time, he needs to get all the soldiers to
agree on the time before that order is fulfilled correctly,
which is basically what is happening in current blockchain infrastructures
With proof of history all computers on the network agree on a universal time
through what's called a SHA-256 sequential hashing verifiable delay
function. Without getting too much into the technical weeds, what you need to
know is that proof of history results in zero delays in the network
and no waiting around for other validators to agree on the time
As a result, while most of the latest proof-of-stake blockchains have block
times of a few seconds Solana is able to achieve block times of
0.4 seconds and this is why proof of history is a giant leap forward
Before moving on to the next part of the video I just wanted to ask if you could
please smash that like button because I spent
the past few days working on this video and it took a ton of energy and time and
it would just really help the Youtube algorithm spread this video to more
people Okay, so now you get it Solana is fast
but why is Solana a game changer one of the primary reasons is Solana's
ability to scale Solana can currently achieve block
times of 0.4 seconds and 65,000 transactions per second
which makes Solana the fastest blockchain infrastructure in the world
What's more is that as internet bandwidth and CPU and GPUs improve
block times and transactions per second can theoretically scale to infinity
with a one gigabyte network supporting about 700,000 transactions per second
and a 10 gigabyte network being able to support 7 million transactions per
second In comparison, visa requires 65,000
transactions per second and the Nasdaq exchange requires 500,000, so Solana can
support databases at any scale. This is an
extremely important development in the crypto space because now
large applications like Facebook or exchanges like the Nasdaq can be built
on a blockchain infrastructure without there being any issues with
performance or enormously high fees A really fair critique of the
cryptocurrency space in my opinion is that valuations are just way too high
versus the amount of adoption that has actually taken place with the
blockchain technologies that are currently in the market
What I believe is that Solana provides the platform for any company to create
applications that can serve worldwide audiences and even create
things like complex exchanges for stock trading and this
wasn't really possible in the past with other platforms due to
performance issues and fees, but this is what Solana can bring and I think it's
really best understood when looking at the competitive landscape
As you can see from this table, Solana currently supports the highest
transactions per second and though Ethereum 2.0, is higher the
upgrade has yet to come and as I mentioned earlier Solana can keep
scaling up as well with better hardware. But more
importantly Solana is miles ahead in block time versus the rest of the field
due to proof of history, and block times will also come down with
time as well with Anatoly on the record saying he envisions messages across
Solana traveling at the speed of light In addition Solana also offers extremely
low transaction costs at $0.00001 meaning that 1 million transactions
would only cost ten dollars and Solana also has more validators than
the rest of the field besides Avalanche Github stars is a bit of a vanity metric
and are similar to Facebook likes, so take it with a grain of salt but
basically even though Solana has only been
around for a few years it has a pretty high number of stars which slightly
demonstrates the interest developers have in the project versus other ones
And lastly, Solana is a complete Layer 1 solution from start to finish meaning
that everything is built on the solana blockchain
versus Ethereum 2.0 and Polkdadot which are two of Solana's biggest competitors
which utilize sharding. All of this is why Sam Bankman
Fried, a prominent figure in the crypto community and founder of the exchange
FTX chose to operate the decentralized
exchanged Serum on Solana after a year of testing out different options
In case you're unfamiliar with it FTX has been growing rapidly over the past
12 months and as a fun fact the exchange recently
paid for the rights to call the Miami Heat Arena
FTX Arena. There are many projects in the Solana ecosystem some of which I'm also
invested in and let me know in the comments below if you'd like me to cover
some of the big ones in a future video Alright so just to sum up everything I
believe that Solana is a game changer because it has a working product that
provides really really low transaction costs and
can scale infinitely in terms of transactions per second,
and all of this is made possible through the paradigm shift that Anatoly and his
team created called proof of history. Okay so next let
me go into why I believe Solana can 5X from today
The logic behind this is very simple and relates to relative valuation but before
I go into the numbers please keep in mind that
the assumption here is that the cryptocurrency market holds up and
even continues to grow if the market tanks as
it can because the market is so volatile then Solana will also go down as well
But if we go back to the data here, we see that many of the competing
blockchains are a few times bigger than Solana in market cap
In particular, I want to focus on Cardano which many people are hyped about but
there is still no working product for Cardano
despite having been founded in 2015. Using simple math, if the market
currently believes Cardano is worth about four times Solana without
a working product, then what is the potential for Solana
whose technology and features far outweigh the rest of the competition
personally I believe that Solana has a stronger platform than Cardano
and so if this is true then Cardano is probably worth less than Solana is
So that's why I believe Solana can 5X its current value today
and potentially even more than that Another catalyst is that Solana is not
even listed on Coinbase right now so once that happens I believe that that
can push the market cap forward even higher especially as more people get to
understand what Solana is and what the technology
brings, and as more developers get onto the platform and start building more
applications All of this is why I believe Solana is
currently really undervalued and so if I had to choose one cryptocurrency out of
the top 15 in the market today, Solana would be my pick. Remember this is
not financial advice but if you want to buy Solana, check out the links to the
exchanges that sell it in the description below
and if you want to also see whenever I buy or sell my cryptos or see my entire
portfolio in general, make sure to check out my Patreon in the
description below as well. Alright so this wraps up the video please like and
subscribe if you found this video helpful, thank
you so much as always for watching and for tuning
in, hope to catch you in the next one peace out