CGV Research | Why Solana May Become the iOS of the Encrypted World?

CGV Research | Why Solana May Become the iOS of the Encrypted World?

If you have an iPhone and happen to be a fan or active participant of Solana’s systems and apps, you may feel a sense of deja vu when you use them separately at many moments.

Do Solana and iOS have a lot in common? It just seems like a hunch. However, after analyzing and comparing the two carefully from the historical and current perspectives, I got an astonishing finding: the previous intuition may be incredibly close to some type of truth. Moreover, a bold prediction came to my mind: one day in the future, Solana may become the iOS in the encrypted world.

In my view, although iOS and Solana belong to the Internet and encrypted worlds, respectively, they share the same logic of the first principle that supports their development.(The following conclusions were jointly organized by CGV FOF research team.)

Firstly, the ultimate user experience.

User experience, as the core competitiveness of a product, has been mentioned repeatedly. Due to Apple’s relentless efforts for the ultimate user experience, iOS seems to be always smoother than Android.

Virtual keyboard was not created by iPhone. Microsoft, Palm, and other smartphone manufacturers have tried to promote smartphones with the full touch screen, but iPhone overcame the technical difficulties in capacitive touch screen, multi-touch, improving the screen touch experience to an untouchable level.

For instance, iOS gives first priority for screen response, and it responds to Touch—Media—Service—Core architecture in order. Simply put, when the user touches the screen, the system will first handle the screen display (Touch); while the priority response level of Android is Application—Framework—Library—Kernel architecture, and display-related graphics and image processing (Library) are only in the third level. There are a host of similar factors, which directly cause a huge difference in user experience between iOS and Android.

Similarly, although Solana is not the first underlying public chain, it has attracted an increasing number of crypto developers and users by providing extremely high TPS and low transaction fees, breaking through the biggest development constraint that most public chains face in the same period.

Performance comparison between Solana and other mainstream public chains

Data source: RareLiquid

For instance, Solana can deal with over 50,000 transactions per second while maintaining a block time of 400 milliseconds, and improve the TPS based on Moore’s Law, thus providing a good “predictability” of TPS scaling. Additionally, Solana’s low transaction fees are impressive, that is, estimated $10 for 1 million transactions.

Among them, Solana’s core consensus mechanism is “Proof of History (PoH)”, which aims to solve the time problem in a distributed network that lacks a single reliable time source. By using a verifiable delay function, PoH allows each node to generate timestamps locally via SHA256 calculations, which improves overall network efficiency by eliminating the need to broadcast timestamps across the time network.

The user experience of public chains can be reflected by the number of crypto wallets and the frequency of use. Take Phantom, one of the most popular wallets on Solana, as an example, it almost integrates all the features of the Solana ecosystem, including token swaps, collection of NFTs and collectibles, connection to hardware wallets, anti-monitoring, Web3.0 support, and the obtainment of incomes through pledging SOL.

Solana Phantom & Ethereum Metamask monthly active users

Data source: Grayscale Building Blocks

Relying on the excellent one-stop experience, Phantom has become the preferred wallet for the users of Solana, with the monthly active users exceeding 1.2 million. During the two months from August to October 2021, the users of Solana on Phantom increased by 5 times.

Secondly, excellent UI design.

The user interface (UI), as a human-computer interaction window for offering various functions required by users, determines whether the software or product is intuitive for users to operate.

iOS has a tight system for platform UI design specifications. From buttons to icon styles, and from image size to resolution, they all require special customization. In this way, it not only unifies the styles of various programs but also helps users to get accustomed to the way of using iOS software. Nowadays, the rounded rectangular design, with only one button on the front and the rest completely covered by a glass panel, has become the iconic design of the iPhone.

The project team should pay attention to UI design whether in the field of Internet, blockchain, or encryption. Besides, a “user-oriented” UI design will make the product more popular and sell better. Dr. Nielsen, an expert in human-computer interaction, claimed that usability is a prerequisite for survival in the field of the Internet. If a website is difficult to use, then users will immediately abandon it.

Some people say that when they buy tokens, they only look at the logo of the project. Though just a joke, it illustrates the importance of the visual design of the project. The logo of Solana reveals that its team that pays attention to details and has good aesthetic skills.

The logo color of Solana is a gradient from green to purple. Similar colors can be found in nature, such as the aurora borealis, mysterious and elegant. In addition, many cyberpunk-themed sci-fi movies often use purple, green, and blue in their images, reflecting the prospects of Solana’s innovative blockchain technology development.

Solana ecosystem (DeFi fields)

Data source: Solanians

Many Solana projects, at first glance, seem to be designed by the same designer, with a very consistent experience in terms of color matching, interface design, and interaction design. The interface is intuitive, concise, and easy to operate. Users can easily operate Solana without much training, as they can understand the functions on the interface at a glance after using the software.

According to CGV FOF, On a well-known Solana IDO platform, the UI performance of a project is given a high assessment priority when reviewing the project. It seems that Solana improves users’ acceptance of Solana from the top down through its incubation and support of projects with outstanding UI.

Thirdly, strong ecological support.

Based on the second law of thermodynamics, isolated systems have no energy exchange with the environment and always change spontaneously in the direction of increasing disorder (entropy), i.e., the principle of increase of entropy. In view of this phenomenon, Prigogine, winner of The Nobel Prize in chemistry, proposed that the system must be open to transferring from a disordered state to an ordered structure, that is, the system must exchange matter and energy with the outside world.

The opening of the business ecosystem requires core companies to enable partners to have access to their resources and capabilities, attract them to join the ecosystem, and achieve value co-creation through mutual empowerment.

Since its inception, Apple has attached great importance to external empowerment, providing external developers with powerful development kits and allowing them to connect users through the app store, thus giving birth to a large number of popular apps such as Instagram, Snapchat, Uber, and WhatsApp. Compared with other platforms, Apple’s release mechanism for developers’ apps is fairer and more reasonable. The download ranking data on the software store is true and reliable, which has created a good competition system and environment for developers, making developers grasp an accurate understanding of what their users really want.

Solana has also devoted a great deal of effort to ecological construction. Solana has a long-term funding plan to provide excellent projects with a full range of resource support, including targeted funding, VC referrals, technical support, recruitment support, marketing, and legal resources.

Development of Solana and other mainstream public chains for active developers

Data source: Santiment

Take the hackathon for example. In 2021, Solana officially held three global hackathons. The most recent hackathon, with a prize pool of $1 million, over 15,000 registrants, and more than 300 projects submitted by developers across the world, attracted the attention and support of a host of developers and generated a series of quality Solana native apps.

Furthermore, it is worth noting that 90-95% of the hackathon developers expressed their willingness to carry out long-term development on Solana. These talented developers will constantly power the Solana ecosystem.

Fourthly, a charming soul figure.

It may be a bit radical to say that Steve Jobs, the founder of Apple, changed the world, but it is fair to say that he was synonymous with the “spirit of innovation” pursued by the United States and all mankind.

Jobs was a giant standing at the intersection of technology and humanities. His combination of idealism and perfectionism enabled Apple to take a completely different route from the traditional industry.

Take simplicity as an example, Steve Jobs’ love of minimalism and his exposure to Buddhism, “let people directly know their heart without words”, exerted a great impact on Apple’s “no button” design. In addition to pursuing minimalism in product design, Jobs took the initiative to eliminate many product lines and only launched 1-2 products each year, with the best quality.

In my opinion, Jobs was to Apple what Sam Bankman-Fried (SBF) is to Solana. I don’t mean to deny Solana’s incredible team, which is just as respected as Apple’s tens of thousands of talented engineers and development teams.

SBF was placed on Forbes’s list of the richest people in the world 2021

Data source: Forbes

Initially, SBF was a trader and spent his early days at Jane Street, a quantitative giant. He founded Alameda Research (a quantitative trading firm) and FTX (a centralized cryptocurrency exchange) with a team consisting of finance personnel—quantitative analysts, engineers, high-frequency traders. They are seldom concerned with the centralization/decentralization debate and focus on the “large-scale expansion of the blockchain”.

After leaving Jane Street in 2017, SBF took time to think about potential opportunities. He realized that “Cryptocurrency has many characteristics, it may be a very inefficient system, and there is a great demand for liquidity. This is basically: sudden huge demand, very rapid growth.” So, SBF tried to figure out the ultimate solution to these issues. Later, he discovered Solana.

Anatoly Yakovenko, a co-founder of Solana, once described the scene of SBF’s first contact with Solana before it was launched on the mainnet in 2019: During the test, 80 transactions were processed in an average of 4.02 seconds. This result impressed SBF. After communicating with the team and realizing Solana’s huge development potential, SBF immediately decided to establish Serum (a decentralized derivatives exchange) based on the Solana.

In this way, Solana not only won a new application project but also got a perfect encryption spokesperson (just like NBA got James). From that day onwards, Solana was reinvented by SBF.

In January 2021, SBF said on Twitter that, “I’ll buy as much SOL as you have, right now, at $3. Sell me all you want.” Though a joke, it revealed that SBF had high hopes for SOL.

Fifthly, a passionate fan base.

I still remember that in those days, iPhone fans lined up in front of the store all night to buy a new generation of iPhone, hoping to be among the first to own the new iPhone, just as they wished to get tickets to a superstar concert.

The iPhone launched by Apple every year is not only a new product but also a brand-new cultural phenomenon. This is a market effect that no other company is likely to have when launching a new product.

Taking the number of Twitter followers as an example, according to statistics from CGV FOF, Solana has as many as 1.1 million followers, which is not as many as that of Ethereum (1.97 million) but ranks first among other mainstream public chains, Polkadot (1.01 million), Avalanche (450,000), Fantom (270,000), and Near (230,000).

Let’s take a look at the fan token, Solana’s meme coin is Samoyedcoin ($SAMO). It was inspired by Dogecoin, Sam Bankman-Fried (containing the letters S, A, and M), and Solana’s co-founder Anatoly Yakovenko (whose hometown is the birthplace of the Samoyed dog). Nowadays, SAMO has become the mascot and promotion ambassador of the Solana ecosystem, and the peak circulation market value of SAMO’s token exceeded $700 million.

In the Solana community, you can often feel a completely different atmosphere from any other public chain community. We often see the “fierce quarrel” between ETH diehards and Solana diehards. It is completely different from the peaceful and joyful atmosphere of the Near, Avalanche, and Fantom communities. This may be the price Solana pays for choosing to take a different path from the ETH (EVM).

It may be a stretch to draw an analogy between Solana and iOS from the above dimensions. Some people are still criticizing the recent instability of the Solana network. But in the long run, through network upgrade, expansion of service nodes, and adjustment of incentive mechanism, these issues will become an episode in the development process of Solana.

In fact, Apple’s rise did not happen overnight but was accompanied by several important turning points that established Apple’s status as king.

For example, iPhone 4 was an epoch-making product that made breakthroughs in hardware, software, and design. It was the first cellphone that used the commercial retina screen, completed the dual evolution of cellphone camera hardware and algorithms, featured the most classic shape, and used iPhone self-developed chips…

In cosmology, the big bang, generated by a singularity, gave birth to the universe we are familiar with. The singularity is an important turning point in history. The birth of iPhone4 is a singularity in Apple’s development history, allowing Apple to embark on a rapid development path.

I try to list a few singularities to predict Solana’s vision of becoming the iOS in the encrypted world:

——The number of C-end users exceeds 100 million. On November 7, 2021, the number of active users of Solana’s Phantom wallet amounted to 1 million. It seems like a big leap from 1 million to 100 million. However, the exponential effect of the growth of the encrypted world network will speed up the process considerably. Anatoly Yakovenko, a co-founder of Solana, held a more positive opinion. He has repeatedly stated that with the launch and operation of new technologies, Solana’s next goal is to “attract one billion users.” You know, the number of VISA users worldwide exceeded 3 billion as early as 2018.

—— Over 80% of the transactions are performed by institutional users. The participation of more institutional users in the encrypted market will attract more capital. The bull market in 2021 is driven by institutions. Many institutions, such as Tesla, Microstrategy, Grayscale, and the ARK founded by Catherine Wood, have entered the encrypted market one after another. SBF deems that the crypto sector driven primarily by potential institutional investment is likely to grow in the next five years. In my opinion, according to the Pareto principle (80/20 rule), if institutional users become the main force of the Solana market, and if their trading volume accounts for more than 80% of the total volume, Solana will usher in a new round of development.

——Over a third of Ethereum projects migrate to Solana. In June of this year, Neon Labs, a cross-chain bridge between Ethereum and Solana, was released. Neon allows anyone to run Ether smart contracts on the Solana blockchain, making it easier for developers to build programs that work on both blockchains. It would be an exciting time if more than one-third of the projects that have been deployed and developed on Ethereum are simultaneously building applications on Solana.

 ——Solana’s total market capitalization reaches 50% of Ethereum’s. SBF reckons that Solana’s unique underlying technology for developing the DeFi protocol will drive a spike in the price of its SOL tokens. He even believes that Solana can surpass Ether as the largest decentralized financial platform. Ethereum’s current market value (about $470 billion) is still nearly eight times that of Solana (about $55 billion). If Solana reaches 50% of Ethereum’s market value, it will be an important milestone in the development of Solana.

The singularities of Solana ecological development (forecast)

Will Solana become the iOS in the encrypted world? Probably nothing.

I very much agree with Kyle Samani, managing partner of Multicoin Capital, “I think we’re going to see two things [Solana and Ethereum] coexist. We have iOS, we have Android. And, today, everyone knows you have to build an iPhone app and an Android app.”

Perhaps, in the near future, Solana and Ethereum may become encrypted world’s iOS and Android, respectively. Fortunately, we are all witnesses and participators of this great change.

Note: This paper is a CGV FOF Research Report and does not constitute any investment suggestions. It is for reference only.

 About CGV FOF: the Master fund from Asia, composed of family funds such as Japan, Korea, Chinese mainland, and Taiwan, and focuses on investing in Crypto Fund and Crypto Studio. CGV FOF is headquartered in Japan and has branches in Singapore and Canada.

References

《Solana Summer》, Not Boring by Packy McCormick, 2021
Solana Summer, Not Boring by Packy McCormick, 2021
《An Introduction to Solana》, Grayscale, 2021
An Introduction to Solana, Grayscale, 2021
《Why Solana is the ’World Computer’ Blockchain Developers Need》, Andrew Hyde, 2019
Why Solana is the “World Computer” Blockchain Developers Need, Andrew Hyde, 2019
《一文读懂以太坊杀手Solana》, OKEx Research, 2020
Understanding the Ethereum Killer Solana by Reading This Article, OKEx Research, 2020
《Digital Assets: Beauty Is Not in the Eye of the Beholder》, Goldman, 2021
Digital Assets: Beauty Is Not in the Eye of the Beholder, Goldman, 2021

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