Howdy!

Jack is away again, and I feel like there’s literally no one watching to make sure I don’t go completely off the rails. Like, what if I just dropped a string of F bombs, right here in the opening…can you imagine? What if I was just like…

FORKING! FUNGIBLE! FIAT! FINANCE! FLIPPENING!

Pure, unhinged mayhem. It would never happen, of course — but fuck, that’d be crazy.

Anyways, let’s get into today’s very serious edition of Lightspeed:

Proof-of-history: Secrets of the Solana time machine

Imagine for a moment that you view the world financial system as one big centralized hornswoggle that benefits the few at the expense of the many — perish the thought.

Eventually, you come around to the idea that a fairer system might be possible by decentralizing authority among many independent participants. Instead of a trusted central entity validating transactions, these contributors would run their own nodes, verifying and maintaining the network through distributed consensus.

But here’s the challenge: How do you get thousands of decentralized actors — each highly incentivized to cheat for financial gain — to agree on the validity of each other’s work? If even a small group were to successfully deceive the network, confidence in the system would collapse.

Satoshi Nakamoto’s solution was proof-of-work (PoW), where miners repeatedly hash block data with varying nonce values, aiming to find a solution that meets specific difficulty criteria. The first to succeed gets to propose a new block and earns a reward paid in bitcoin. No one can cheat because every other node quickly verifies or rejects each block before it is added to the chain.

This system has worked pretty well for BTC, which has had some modest success (lol) in establishing itself as a globally recognized, censorship-resistant store of value. However, it’s not without its trade-offs. Bitcoin’s PoW model results in slow transaction speeds and high energy consumption. The network processes just seven transactions per second (TPS) on average, far below modern digital payment systems like Visa.

While layer-2 solutions like the Lightning Network help scale Bitcoin’s capacity, its base layer remains limited. Mining also consumes energy on the scale of entire nations, drawing criticism from environmentalists and regulators alike.

As limitations go, though, none of this has been a dealbreaker. But when Ethereum emerged with the goal of programmability via smart contracts, scaling became a much bigger issue. Executing code onchain is far more computationally intensive than executing simple transactions, and Ethereum’s base layer (before rollups) manages only 15-30 TPS, leading to congestion, high fees and slow confirmations during peak demand.

Enter Solana’s 2017 breakthrough: proof-of-history (PoH).

PoH isn’t a consensus mechanism — it’s a cryptographic timekeeping system. Instead of validators constantly communicating to determine transaction order, PoH pre-establishes a verifiable sequence of events using continuous hashing (SHA-256) to create an immutable timeline of transactions.

Pause. I know this is a lot. The main takeaway here is that PoH theoretically allows Solana to validate 50,000 to 65,000 TPS. That’s a lot more than Bitcoin and Ethereum, y'all. Transactions settle almost instantly, making Solana one of the fastest public L1s.

The network combines PoH with proof-of-stake (PoS) to balance speed, security and decentralization. Unlike traditional PoS networks, which require validators to continuously agree on timestamps, Solana’s blockchain structure inherently encodes transaction order. That lets validators focus purely on verification and security, eliminating a major bottleneck in consensus.

Of course, PoH has its own downsides. 

Its high computational demands require powerful hardware and bandwidth, meaning that only well-funded entities or data centers can efficiently run validators. While Solana’s Nakamoto coefficient (~30-40) is better than some chains, a small number of entities do control the majority of stake. This pretty inarguably undermines the network’s decentralized ethos and makes it way more susceptible to collusion. 

Solana also introduces a different set of security risks due to its extreme speed. Slower blockchains process transactions in a mempool before finalization, providing more time for automated validation and anomaly detection. In contrast, high-speed chains like Solana must mitigate front-running, spam and manipulation at the protocol level rather than relying on mempool-based filtering. Solutions like stake-weighted quality of service (QoS), QUIC networking, and local fee markets have been introduced to mitigate these issues, with mostly positive results.

At the end of the day though, Solana’s proof-of-history represents a radical shift in blockchain validation. By solving speed and scalability challenges without entirely sacrificing decentralization, it proves that blockchains can compete with traditional financial systems, making near-instant, low-cost onchain transactions a reality.

— Jeffrey Albus

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ICYMI — Solanaland stories you may have missed

• SIMD-228, a Solana governance proposal which aimed to introduce a dynamic, market-driven inflation model for SOL tokens, was voted down by validators last night. The drama is very much still ripe on this one. The proposal had sought to adjust token emissions based on staking participation, potentially reducing inflation by up to 80%. Supporters argued it would enhance economic sustainability, while critics, including Solana Foundation President Lily Liu, expressed concerns over its impact on staking yields and network decentralization. The final vote was 43.59% in favor, 27.40% against, 3.27% abstaining. The remaining 25.72% did not participate in the process.

• GMX Solana launched, bringing GMX’s decentralized perpetual trading model to the network. Users can now mint GLV with SOL or USDC to provide liquidity and trade 20+ cryptocurrencies directly from their wallets. The project is comparable to dYdX and Hyperliquid in its offering. However, GMX Solana differentiates itself with Chainlink-powered market data, a trade-to-mint model designed to lower costs, and a global liquidity vault (GLV) to improve liquidity efficiency. Looks like the project is also launching its token mint today, with no pre-allocation or pre-sale (though it isn't entirely clear why a token is needed, from a utility standpoint).

• MoonPay has acquired the Solana-based blockchain payment processor Helio for $175 million — the project's largest acquisition to date. The outcome should see MoonPay integrating Helio's tech, which supports over 6,000 merchants and has processed more than $1.5 billion in transactions, according to the company. Helio's platform facilitates payments in digital assets like BTC, ETH, SOL and USDC, and integrates with popular Web2 platforms such as Shopify and Discord.

• Pump.fun has introduced DMs and group chats for memecoin traders. For some, the move is reminiscent of the early-ish days of crypto, never trading with the BTC-e trollbox far from one's side. (That comparison may not be particularly apt for newer participants in Web3, but if you know, you know.) Pump.fun has recently seen a decline in both new token creation and trading activity, with revenue plunging 94% since January. Over the past 30 days, more than 98% of tokens launched on the platform have failed to surpass a $100,000 market cap.

— Jeffrey Albus