Gear Shift: Introduction
As Solana continues to innovate and shift gears in this current macroeconomic environment, we must determine what lies in store for Solana’s future. Technological innovations on the interoperability frontier, such as Neon EVM, seem poised to turbocharge development on Solana’s blockchain.
Need For Speed The Neon Gleam: What is Neon EVM?
Neon EVM, now called Neon, is an Ethereum Virtual Machine on Solana, which brings the benefits of Solana’s scalability to Ethereum smart contracts. More technically, Neon is a smart contract created using Rust on the Solana network that allows “Ethereum-like transactions” to be processed on Solana with Ethereum rulesets.
Neon allows some of the best features and advantages facilitated by Solana’s technology stack and markets to be brought over to the Ethereum ecosystem. For example, Neon allows Ethereum assets, transactions, and smart contracts to be executed in parallel, capitalizing upon Solana’s parallelization technologies such as Sealevel.
Tint My Ride: How does Neon work?
Neon is a tech stack consisting of different components. It simulates Ethereum on Solana and is subject to governance by the NEON token holders. Neon dApps can be deployed on the Neon EVM base layer. Neon operators transact these smart contracts using the Neon proxy on the EVM. Transactions with the Ethereum ruleset are parceled into Solana transactions using Neon Proxy. These smart contract transactions are then sent to the Neon and executed in parallel.
Neon Proxy requires Neon Proxy operators, which are server nodes that package Ethereum transactions into Solana and execute them. Neon Proxy’s main job is to function as an intermediary layer to allow Neon dApps to move over to the EVM with any code alterations.
Neon pass is a token wrapping protocol developed to wrap and unwrap assets. The assets unwrapping will be between Solana and Neon and this is how liquidity is facilitated. Neon pass allows you to transfer tokens between Solana and Neon.
Neon has a NEON token, a SPL (Solana Program Library) token minted on the Solana blockchain. NEON serves two functions, it is a governance token and is used for gas fees.
Nitrous Applied: What Does Neon Facilitate?
In a nutshell, Noen brings Solana’s capabilities, scalability and liquidity to Ethereum’s smart contracts. Neon facilitates the following:
- Gas fees of 0.000015 SOL
- Stable and reliable 4,500 Transactions Per Second (TPS)
- Sub-second transaction finality
- Parallel transaction processing due to Solana’s Sealevel technology
- Unlocks new liquidity and markets for Ethereum dApps
- Increases dApp scalability due to the features above
It is important to stress that Neon’s functionalities only exist because of Solana’s 8 core innovations. Without the 8 core innovations, many of the advantages of Neon wouldn’t exist in its current form.
Solana Developer Growth
Before we talk about the importance of Neon for Solana and the larger implications for the Solana ecosystem. We first need to understand why having an Ethereum compatibility layer on Solana is even desirable. One of the main reasons it’s important is that irrespective of the issues with the Ethereum network, it is still the most used and developed on smart contracts platform and is the current web3 incumbent in terms of developers, user base etc.
Solana has the 4th largest developer ecosystem, according to Electric Capital’s 2021 report. It also had one of the largest gains in overall developers, with a whooping x4.9 growth rate in 2021. The report further explains that Solana is “growing faster than Ethereum did at similar points in its history”. What does this point to, and what does this mean? It means that if Solana continues to grow, it should also utilize other top developers in the web3 pool, which will likely be a consequence from the mainnet of Neon. Perhaps a trickle at first, and then the flood gate will eventually open.
2 Fast 2 Furious: Long-term Implications For Solana’s Future
Although Neon has many advantages, it is likely that these advantages will possibly catalyze other massive advantages for the long-term benefit of Solana. Many of the likely advantages for the Solana ecosystem will be outlined below.
A likely consequence of Neon’s mainnet beta is that some portion of current Ethereum developers will transfer their skills to enable Solana compatibility. Many other chains such as Avalanche with its C-Chain are already EVM compatible and this has allowed Avalanche to bring in a percentage of developers and capture market share that may otherwise have gone to Ethereum. A similar process is likely to occur on Ethereum. Many advantages are conferred to developers by using Neon such as:
- Neon is compatible with Ethereum tools such as Truffle and Remix
- Native Solidity and Vyper language compatibility
- Brings non-compatible coding languages to Solana
- Extends Solana developer’s potential language choice
- Allow Developers to port existing ETH dApps over to Solana, should they so want
- No reconfiguration or alterations required to deploy smart contracts
Super-charged Scalability & Turbo-charged dApps
To address some of the congestion issues with Ethereum, some amount of dApps will port over via Neon or be created straight on Neon. The decreased transaction cost, high TPS, and parallel smart contract execution functionality will enable dApps to turbo-charge their scalability as their real-world utility increases. Some ETH dApps are stifled by the high gas fees on Ethereum and their unpredictable fluctuations make it less likely for newcomers to use their dApp.
Smart Contract Interoperability Between Two Of The Biggest Layer 1s
Despite outlining above that Solana will take some level of developers away from Ethereum, it will paradoxically also strengthen the ties between the biggest Layer 1s by making Ethereum smart contracts have dual ecosystem utility. Furthermore, it will be mutually beneficial for the Ethereum ecosystem as it brings a level of scalability and interoperability to Ethereum’s dApps that they will not have on the Ethereum main-chain, thus scaling Ethereum dApps. It will also unlock liquidity from SPL tokens to Ethereum dApps allowing SPL tokens to reside on Solidity contracts within the Solana network. And this is essential as multi-market liquidity becomes the standard for DeFi platforms. It also creates a multi-chain future and streamlines the creation of multi-chain dApps between Ethereum and Solana.
Increased Network Effects And Growing User Base
Solana’s network effects are poised to increase while new levels of experimentation in DAOs, DeFi, NFTs, and more continue to flourish.
The remixing and creation of existing dApp such as Ethereum DeFi platforms will expand and strengthen Solana’s user base, giving the users a wider variety of potential applications.
Additionally, it will open up the doors to remixing and using highly innovative smart contracts that might be confined to Ethereum, in this way some level of parity in terms of innovation is achieved. More innovative dApps means more users and more users equates to stronger network effects overall for the Solana ecosystem. Developers can easily fork dApps such as MakerDAO and now run them on Solana with new features.
Racing Toward The Victory Line: Solana’s Future
Irrespective of price action and macro-economic conditions of the current market, it is reasonable to expect that Solana keeps growing in the background, despite the tendency for developers to decrease during a bear market, over the long run projects like Neon will likely bring across extremely talented Ethereum developers and that developers on the Solana will continue to increase in the long-run.
Solana’s vision is to be the principal network that has the scalability and the dApps for the next billion users and Neon is surely in line with this vision. So as Neon’s mainnet dawns near, Solana’s vision of a billion-user-future moves closer.