Many have had their doubts after Solana halted on February 6th for over 5 hours, and rightfully so. There should be no reason for a blockchain to halt producing blocks for such an extended period. This was actually Solana’s sixth major outage, but the market seems to react less negatively each time. Personally, what I see here is Solana testing the limits of what is possible in terms of latency and scalability in a decentralized system, which is extremely bullish.
The Solana Thesis
First of all, it's important to differentiate Solana from other blockchains like Ethereum or Bitcoin. Solana is neither a Proof of Stake nor a Proof of Work blockchain, but instead uses a unique approach called Proof of History.
Proof of History
Proof of History is the revolutionary technology that allows Solana to process hundreds of thousands of transactions per second. To simplify, Solana has an internal cryptographic clock that timestamps transactions as they come in, which any validator can validate. This means that, rather than validators having to sequence and validate transactions (similar to Proof of Stake), they only need to validate the state at a certain point in time. This enables them to process transactions much faster and create blocks at a pace unmatched by other blockchains.
Please note that Solana still uses the Proof of Stake algorithm for creating a validator set and securing the blockchain, but employs Proof of History to reach consensus among validators more quickly.
The Tradeoff
Although Proof of History allows Solana to process hundreds of thousands of transactions per second, there is a significant tradeoff. The main tradeoff, as we have seen over six times now, is the architectural complexity of the network. Another potential tradeoff, for some, is the centralization of the network, due to Solana selecting only a few validators for transaction validation (a story for another day).
The complexity of the system leads to potential bugs and issues in the code that can be exploited or occur randomly, and can, and has, caused the outage of the entire blockchain.
From a recent tweet, we can see that the latest outage was actually caused by an issue that had already been solved in the testnet by the developers, but for some reason, the patch had not yet been pushed to the mainnet.
Why So Bullish?
So, we have an architecture that seems susceptible to outages and is not so stable. Why should anyone be bullish?
The reason is simple: What Solana is doing is testing the limits of decentralized systems with innovative technology. Yes, this technology is not stable, but each outage leads to the developers identifying a new bug, which they then permanently patch. This means there will never be an outage caused by the same issue in the past. The question now is, how many issues exist in the code? The smaller that number, the closer Solana is to its final outage. If Solana is actually able to achieve this, they would have accomplished a feat believed to be impossible in blockchain technology, which is truly amazing.