Should You Sell Your Solana?

GM! This is Milk Road PRO, lighting up your email inbox each Saturday with a report that helps you invest successfully in crypto. 💰

Today, we're diving into Solana—yup, the blockchain that's been declared more finished than a Thanksgiving turkey. 💀

Maybe you’ve seen those viral charts on X suggesting that 75% of transactions on Solana fail?

Or that Base is now doing more TPS (transactions per second) than Solana? ⚡

Not to mention, $SOL took a 42% nosedive from its local top on March 18th. 📉

Because of the continuous issues that Solana has faced over the years, many are starting to ask themselves: 

Interestingly, one of the first ever PRO reports we wrote was called “Is Solana Dead?” from back in January 2023, where we made the case for its comeback, when $SOL was sitting around $8. 👀

We’ve written numerous times about Solana since then and even put a call out to our community to buy $SOL in October of last year when $SOL was around $30.

Going against the negative narrative on Solana has proven time and time again to be the right move. We think no differently this time around either. 

In fact, we think Crypto Twitter couldn’t have this more wrong and are only hoping that $SOL will have a bigger pullback to create a better buying opportunity.

It appears many have forgotten or missed the fact that Solana is processing more transactions than the top 15 chains… combined! 🤯

This chart may appear misleading because it's not showing the scale. But if you look at the numbers, Solana processed over 2.4 billion transactions in Q1 2024, far outpacing Tron, which handled 446 million.

In today’s PRO report we are going to cover:

Let’s get after it! 👇

P.S. - We’re hosting an AMA next week — scroll to the bottom for more info. 👀 

WHY SOLANA’S ISSUES AREN’T AS BAD AS THEY APPEAR 👍

Solana has experienced several significant outages. 

The network suffered multiple major disruptions throughout 2022, particularly in January, April, May, June, September, and October.

More recently, there were disruptions in February 2023 and again in February 2024, almost exactly a year later.

Major outages on a live blockchain with millions of users and billions of capital is completely unacceptable.

The Solana team knows that and has been working tirelessly to fix those problems. Progress is happening very quickly on these issues.

However, Solana is struggling with an issue that no other blockchain has… processing BILLIONS of transactions per month!

Solana is in a league of its own when it comes to transaction volume; no other chain comes close.

Even if you add up Ethereum and all its L2s—represented by the black line—you'll see they total around 400 million transactions per month. 

While Ethereum and its ecosystem are performing remarkably well, Solana's numbers are simply on another level.

If we look at the TPS—a common way to measure the performance of a blockchain—Solana is processing more than 850 TPS, far outstripping Ethereum and all its L2s combined, which manage just over 150 TPS.

Ok, but 75% of these transactions fail, so who cares, right? 🤷

Let’s talk about this situation for a second. Without getting too technical, we’re going to give a simplified explanation as to what’s going on with these failed transactions, just so you have some context around this issue.

From a user perspective, when they make a transaction on Solana, there are 3 outcomes that can occur:

1/ Transaction is executed successfully.

2/ Transaction is executed but fails—gas is paid, but nothing else happens.

3/ Dropped transaction—the txn never appears on the chain, and no gas is paid.

#1 is straightforward.

#2 occurs when transaction conditions aren't met, such as when a mint is sold out or price slippage exceeds set limits. This isn't a blockchain failure, just an invalid transaction.

This is where the 75% of failed transactions chart above comes from, but it's not why most users complain about failed transactions (more on that in a second).

In this scenario, only about 8% of these 75% failed transactions are by actual users—the rest are failed transactions from arbitrage bots. 

You see, Solana has such cheap fees that it’s a profitable business model for bots to spam the chain with thousands of transactions per day, in an attempt to earn profit for an arbitrage. 

What may cost these bots hundreds of dollars a day in failed transaction fees, could earn them hundreds of thousands of dollars if one trade goes through.

In this case, Solana operates exactly as intended at the execution or consensus levels of the blockchain, and the 75% failure rate shown in the chart is actually misleading.

Of course, improvements in the fee structure can be made here to prevent this, but that’s for another discussion.

#3, where transactions are dropped and never even reach the chain, is the real issue troubling users today, and it's not included in that 75% of failed transactions.

What’s happening here is that Solana recently upgraded to QUIC as its network layer (the messaging layer that connects the user transactions to the blockchain). 

This new architecture was upgraded to help prevent Solana from halting when it’s congested (the problem mentioned above).

The issue is that this upgrade is still buggy and was poorly implemented, which happens when you need to make big technological changes at lightning speed to keep a blockchain running.

Don’t forget, Solana is technically still in beta!

As a result, the chain is working as usual but the bugs are causing issues in sending the transaction message to the blockchain to execute it.

These transactions fail not because of a Solana issue (they never actually reach the Solana blockchain), but because of an issue in the messaging layer, QUIC (a technology designed by Google, interestingly enough).

The good news is that Solana developers are and have been well aware of these issues and deployed a patch just a few days ago. 

Looking at the long-term, teams such as Firedancer (by Jump) are overhauling much of the Solana codebase, aiming to fundamentally resolve these issues.

Don’t get this wrong, there is plenty of work to be done to improve the Solana blockchain, but these issues are nowhere near the level that influencers are telling you on Crypto Twitter and Youtube. 

Solana is by far the most highly performant blockchain right now, with plenty of upgrades on the way to take it to another level.

THE BULL CASE FOR SOLANA 🐂