Introduction
A month ago, Vibhu, the founder of DRiP, the top free NFT distribution application on Solana, made a statement that triggered widespread discussion:
Solana will have and needs to have Layer 2 and Rollup.
He expresses this sentiment because DRiP is losing about $20,000 in value every week as $SOL prices and network congestion rise. Solana’s increased online activity has had two impacts:
Pros: Enhanced liquidity, increased capital and trading volume (thanks to composability)
Disadvantages: rising infrastructure costs, poor user experience, network congestion
However, DRiP primarily uses Solana as the infrastructure to distribute millions of NFTs from artists to thousands of wallets every week, without much need for high composability. Solana’s TVL growth and capital inflows have had little impact on DRiP, and instead are mainly plagued by high infrastructure costs.
Vibhu pointed out: "Composability brings diminishing returns." He also mentioned that Solana application developers have privately discussed their need for Rollups because these Rollups can increase transaction throughput and reduce competition for block space. ,lower costs. Additionally, there is greater control over the economic value generated by the business.
Image source: BlockBeats
Solana has experienced multiple congestion events over the past few months, from the $JUP airdrop to $ORE mining and peak memecoin trading. While some believe Firedancer can solve these problems, the reality is that the timeline is unclear and there is currently no way to expand functionality more than 10x. Despite this, Solana remains the only one of all the major battle-tested chains that remains monolithic.
Should Solana remain a monolithic chain or become modular?
Will Solana evolve into sharded Layer 2 and Layer 3 solutions like Ethereum?
What is the current status of Solana’s application chain and Rollup?
To answer these questions and put together a summary, this article will explore the possibilities and discuss the pros and cons of each project. This article will not go into technical details, but will discuss various methods of extending functions and provide an overview from a market-oriented and practical application perspective. All insights, no nonsense, just tons of exclusives.
In short, we will discuss the following issues:
Solana and network congestion issues
Make Solana modular
Solana application chain - with examples
Solana Layer2 and Rollup - with examples
Infrastructure supporting Rollup and Application Chain
Image source: BlockBeats
Problems with Solana and the need for modularization
First let’s discuss the current problem: Due to the surge in airdrops and memecoin transaction volume, the Solana network has been very congested recently (most of which has been resolved now), resulting in high ping times, high transaction failure rates, and increased network fees. Despite this, Solana has maintained a transaction processing capacity of 1-2 thousand transactions per second, exceeding all EVM chains combined. It can be said that this is a good problem facing the blockchain, and it also tests Solana’s monolithic chain theory.
The Solana Foundation recently published a blog urging projects to take immediate actions to improve network performance, including:
Implement priority fees: Avoiding delayed or lost transactions is critical.
Optimize program compute unit (CU) usage: use only necessary resources.
Implement equity-weighted Quality of Service (QoS): Allow applications to prioritize user transactions.
However, these measures can only improve the transaction completion rate to a certain extent and cannot guarantee a smooth transaction experience. One solution to this problem is the highly anticipated New Transaction Scheduler, scheduled to be introduced in version 1.18 at the end of April. The new scheduler will exist alongside the current scheduler but will not be enabled by default, allowing validators to monitor the performance of the new scheduler and easily switch back to the old scheduler if issues arise. The new scheduler is designed to fill blocks more efficiently and affordably, improving on the inefficiencies of the old scheduler.
Read this article to learn more about the new scheduler.
Anza, a forked entity of Solana Labs, has been working to address network congestion issues that have been identified as related to the behavior of the QUIC implementation and Agave's (Solana Labs) validator client's handling of high volumes of requests.
Source: BlockBeats post link
Although modularization proponents strongly advocate Solana's "modularization roadmap," Solana Labs/Anza, the core maintainers of the Solana protocol, are still focused on optimizing the throughput and latency issues of the base layer. Potential improvements include:
Improved fee market and increased base fee (currently set at 5,000 Lamports or 0.000005 SOL).
Implement exponential growth of account write lock fees, which gradually increases fees to curb spam.
Optimize CU budget requests through penalty mechanisms.
Improve the overall network architecture.
Even if these vertical scaling,single chain, improvements are effective, we cannot rule out the,possibility of Solana adopting horizontal scaling, Rollup,. The reality is that Solana can combine these two features - it can serve as an excellent Rollup base layer, with ultra-low latency block times (~400ms), significantly improving the performance of Rollup, such as enabling fast sequencer soft confirmation. On top of that, Solana has a history of implementing changes quickly, which may make it more efficient than Ethereum as a base layer for Rollup.
Update: Anza has rolled out patches to help alleviate ongoing network congestion issues and will be further enhanced in v1.18.
Image source: BlockBeats
Make Solana modular
Solana’s modular development plan has been launched. As Anza DevRel’s post shows, the Solana validator and SVM (the execution environment that handles transactions and smart contracts/programs) are tightly coupled and maintained by Anza. However, the validator client and SVM runtime will be separated in the coming months. This separation will help create "Solana application chains".
For Rollup, optimizing Solana's data availability (DA) or blob layer may be done at a later stage.
Image source: Anza DevRel
Anza engineer Joe C also revealed plans to modularize the SVM, where the transaction processing pipeline will be stripped out of the validator and put into the SVM. This will enable developers to run implementations of SVM independently of any validator.
A standalone SVM will be a family of completely independent modules. Any SVM implementation can drive these modules through well-defined interfaces, further reducing the barriers to SVM-compliant projects and significantly reducing the overhead required to build custom solutions. Teams can implement only the modules they are interested in while leveraging established implementations, such as those from Agave or Firedancer.
In short, Solana will become more plug-and-play, making Solana application chains and rollups easier to implement.
Image source: BlockBeats
Generally speaking, this can go in two directions: Layer2 (or Rollup) and application chain. Below we will introduce them one by one.
Image source: BlockBeats
Solana application chain
Also known as SVM forks, these are essentially forks of the Solana chain designed for specific applications. Pyth was the first Solana application chain, but when Maker founder Rune proposed developing a Maker application chain for governance based on the Solana (SVM) code library, the concept really attracted attention. Rune chose SVM because of its strong developer community and technical advantages over other VMs, aiming to fork the most performant chain to better meet consumer needs. Although not yet implemented, this move has sparked widespread discussion about the Solana application chain.
Generally speaking, it can be divided into two categories:
No permissions are required – anyone can join the network, similar to the current Solana mainnet.
Licensed - "Solana Licensed Environments (SPEs)" packaged by the Solana Foundation for institutions, allowing entities to build and maintain their own chain instances, supported by SVM.
Image source: BlockBeats
Pyth - OG Solana application chain:
Python once accounted for 10-20% of all transactions on the Solana mainnet. However, it didn't require any composability, so they simply forked Solana's codebase. This allows them to take advantage of Solana’s fast 400 millisecond block times for high-frequency price updates. Python is the first network to adopt SVM as its application chain.
The Pythnet Application Chain is a proof-of-authority fork of the Solana mainnet and serves as the computing base layer for processing and aggregating data provided by the Pyth Data Publishing Network.
Why is Python migrating?
It does not require high composability, especially for non-Solana applications, and is therefore immune to mainnet congestion.
It requires a permissioned environment to publish data.
Reduce infrastructure costs by internalizing expenses that would previously have been leaked to the base layer, which is Solana.
Cube Exchange is another example, a hybrid CEX deployed as a sovereign SVM chain with a fully offline order book and settlement on its SVM chain.
Image source: BlockBeats
Solana application chain example
Perp DEXs: Perp DEXs like Hyperliquid can run as standalone Layer1 networks. In addition, for trading applications, it is possible to customize the number of transactions per block, or implement conditional logic, such as integrating the execution of stop-loss orders directly into Layer1, ensuring that it is enforced as a state transition, or introducing application-specific atomic logic .
AI and DePIN: These can have a controlled list of service providers, such as Pyth. For example, Akash operates as a computing marketplace through the Cosmos application chain.
Governance application chains: MakerDAO’s interest in SVM application chains validates this point, and sovereign governance application chains can be very attractive. Crypto governance is still evolving, and having dedicated chain forks can be a useful coordination mechanism.
Future enterprise application chains: Potential applications include funds such as BlackRock or payment systems such as Visa or CBDC.
Game Application Chain: A casino gaming project running on Solana is considering its application chain.
Modifications to Solana's fork: Similar to the optimized EVM (parallelization) provided by Monad or Sei, someone could build a more optimized version of Solana. This trend is likely to become more prevalent in the coming years as the Solana mainnet begins to explore new design architectures.
Imagine the Solana Application Chain Stack
While setting up app chains may be relatively simple, ensuring connectivity between all app chains is critical to interoperability. Taking inspiration from the Avalanche subnet, connecting through native Avalanche Warp Messaging and Cosmos application chains, connecting through IBC, Solana can also create a native messaging architecture to connect these application chains.
Source: BlockBeats post link
An intermediary software platform like Cosmos-SDK can be built to provide a one-stop service for creating application chains with built-in support for oracles such as Pyth or Switchboard, remote procedure calls, RPC such as Helius, and messaging connections such as , Wormhole and other functions.
Polygon's AggLayer provides an innovative solution that allows developers to connect different Layer1 or Layer2 into AggLayer to achieve the aggregation of cross-chain ZK proofs.
What is the positive impact of Application Chain on the Solana ecosystem?
Application chains do not pay fees in $SOL or use $SOL as a transaction fee token, so they do not directly contribute value to $SOL unless $SOL is re-staking for economic security purposes, but their benefit to the SVM ecosystem is Obvious. Just like the network effect of EVM, more SVM forks and application chains will strengthen the network effect of SVM. This logic also applies even if Eclipse, as a Layer 2 extension of SVM on Ethereum, competes with the Solana mainnet.
Solana Layer2
Solana Layer2, or Rollup, is a logically independent chain that publishes data to its main chain's Data Availability (DA) layer and reuses the main chain's consensus mechanism. They can also use other DA layers like Celestia, but this is no longer a true Rollup. The term "RollApp" is often used for application-specific rollups (which most Solana applications are exploring).
Will Solana’s Rollup be like Ethereum?
Obviously not. For Solana, Rollup will be mostly abstracted for end users. From an ideological point of view, Ethereum's Rollup is top-down, that is, the Ethereum Foundation and leaders decided that the best way to expand functionality was through Rollup, and then began to support various Layer2 after the CryptoKitties incident. At Solana, demand comes from the bottom up, from application developers with significant user adoption. Therefore, most current roll-up plays are marketing plays, more driven by discourse than by user needs. This is a significant difference that could lead to a different future for Rollup than Ethereum.
Is compression equivalent to Rollup?
Layer2 augments the functional base layer blockchain (Layer1) by executing transactions on Layer2, batching transaction data, and compressing them. The compressed data is then sent to Layer1 and used for fraud proof (Optimistic Rollup) or validity proof (ZK Rollup). This certification process is called "settlement." Similarly, compression offloads transactions from the mainnet, reducing contention for base layer state. It is worth noting that Grass Layer2 will utilize state compression for its rollup.
Rollup landscape on Solana:
There are currently two Rollapps-like projects running:
GetCode
It’s a payments app with a micropayments SDK that allows anyone to make and accept payments instantly and use a Rollup-like structure for their app. It creates intents for all transactions and uses a Rollup-like sequencer to settle on Solana every N intervals.
Image source: BlockBeats
This can be achieved using a Rollup-like structure:
Flexibility: Intents can represent a variety of future activities, not just payment transactions. Additionally, Solana as a chain can be replaced if necessary.
Immediateness and Privacy: Due to the soft finality of the sequencer, payments are instant even during Solana congestion. While transactions are visible on-chain, the exact amount and intent remain obscure, ensuring user privacy.
Short-lived Rollup for MagicBlocks
MagicBlocks is a Web3 gaming infrastructure developed with Ephermal Rollup specifically for gaming. It uses SVM's account structure to split the game state into clusters. The state is then temporarily transferred to a secondary layer or "Ephermal Rollup", a configurable dedicated layer. Ephemeral Rollup runs as a dedicated SVM runtime or Rollup to process transactions at higher throughput.
Image source: BlockBeats
This can be achieved using a Rollup-like structure:
Dedicated runtime customizations, including gasless transactions, faster block times, and integrated timing mechanisms, such as integrated transaction scheduling systems like Clockwork, cost nothing to run.
Developers can deploy programs to a base layer, such as Solana, rather than on a separate chain or rollup. Ephemeral rollups do not fragment the existing ecosystem, allowing for accelerating target operations without creating an isolated environment. This means all existing Solana infrastructure can be leveraged.
This approach helps create a highly scalable system that can launch Rollups on demand and scale automatically horizontally to accommodate users executing millions of transactions without the typical trade-offs of traditional Layer 2. While MagicBlock is focused on gaming, this approach can also be applied to other industries, such as payments.
Upcoming Solana Rollup:
Grass: Grass is a DePIN project focused on solving the data needs of artificial intelligence through verification-based scraping technology. The project captures AI training data through Grass nodes on the Internet, and stores the data on the blockchain by validators. It also accurately records the source of the data and the node that executed the capture, and rewards accordingly.
Given that Grass needs to handle up to 1 million network requests per second, this is unrealistic for the Solana mainnet. Therefore, the project plans to use zero-knowledge proof technology to verify the data set and settle it in batches on Solana’s Layer1.
The Grass team is also considering introducing state compression technology from other clusters and performing data anchoring on the beta version of the Solana mainnet. This innovation will make Grass a foundational platform, supporting a wide range of applications that can only be built on top of it
Note that projects building platforms and infrastructure generally have higher market valuations, and Grass is about to launch its token.
Zeta: One of the earliest perpetual contract exchanges on Solana, which has a perpetual order book entirely on-chain, is currently planning to migrate its trade matching process off-chain using Solana’s Rollup technology.
The use of Rollup technology in perpetual contract exchanges has obvious advantages because it greatly improves the user's trading experience. Ask those who have traded on platforms like Hyperliquid or Aevo with perpetual contracts exchanges on Solana, which require users to sign each transaction, a wallet pop-up, and a wait of about 10 to 20 seconds. In addition, perpetual contract transactions do not require simultaneous execution and can be highly integrated with other parts of the DeFi ecosystem, especially in terms of transaction matching.
Image source: BlockBeats
Interestingly, Armani, co-founder of Backpack, also said at X that they are now focusing on Layer2 solutions.
Source: BlockBeats
Sonic is developing a modular SVM chain called Hypergrid that allows game developers to deploy their own chains on the Solana platform. At the same time, there are also Ethereum Rollup projects based on SVM technology, such as Eclipse and NitroVM, which use SVM as their execution engine. In the Solana ecosystem, Neon serves as an EVM-compatible Layer 2 solution. In addition, some innovative projects such as Molecule, an SVM Layer 2 for Bitcoin, are still in the early conception stage.
The Sovereign SDK provides a node.js-like architecture specifically for building Rollups. Users can submit their Rust code and the platform can turn it into an Optimistic Rollup or ZK Rollup that supports deployment on any blockchain. These Rust codes can be custom application logic or any virtual machine implementation.
Some arguments about Rollup
Rollup = consistent with $SOL
“ETH-Aligned,” or “ETH Bag Biases,” has become a popular internet meme.
Why are Layer 2 and Restaking/EigenLayer becoming the hottest topics?
This is because they add to the “moneyness” of Ethereum, which is used as a core asset everywhere.
The same principle applies to Solana. The Solana community will support any solution that increases their $SOL holdings – it’s that simple. As the Solana ecosystem expands its functionality, the once-overlooked “currency” of $SOL will become important. Remember, most rollups are "marketing devices" anyway, and since the market still values infrastructure over applications, they offer better accumulation of token value.
Rollup will feel like an extension of Solana
In addition to the security benefits of inheriting security from the base layer, easy access to Solana consumers and assets will be a significant advantage. As Jon Charbonneau pointed out, Ethereum’s Rollups like Base, Optimism, and Arbitrum feel more like extensions of Ethereum. Users keep the same wallet and address, the native gas token is a single standard version of Ethereum, Ethereum dominates DeFi, all trading pairs are in Ethereum, social apps price NFTs and pay creators in Ethereum For example, friend.tech, and Layer2 deposits are instant and so on.
Likewise, this will happen with Solana. Learning from Ethereum, most Solana Rollapps will not make users feel like they are using a separate chain, for example, Getcode.
Solana will see more "RollApps" than "Rollup"
Solana doesn't have scaling issues like Ethereum where the mainnet becomes difficult to use due to high gas fees, it is highly optimized. However, some applications that require dedicated block space will create their Rollups. While a universal Rollup on Solana doesn't make sense to me, financially it does make sense for the project. For example, Base users generated $2 million in revenue for Coinbase in just one day! Incentives for builders lean heavily toward Layer 2. However, as observed, every EVM Rollup seems to be a regular Rollup, and many projects like Linea, Scroll or zkSync have become ghost chains with only farmers making a few transactions for token airdrops.
Additionally, I feel like a universal Layer2 on Solana could lead to the same old problems as Ethereum, namely centralized rollup, congestion, and liquidity fragmentation.
Why do some apps want to migrate to RollApps, AppChain?
Each application will initially launch on the Solana mainnet because hosting more applications on shared infrastructure significantly reduces complexity for developers and users. However, as these applications grow, they may seek to:
Value capture. It's more challenging to internalize value on a shared Solana layer that's not just designed for one application. MEV capture could be another profitable option for DEXs.
Dedicated block space.
Customizability in applications. For example, in terms of privacy, Getcode uses a sequencer to provide its users with private payments, market fee experiments, encrypted memory pools that minimize MEV, and customized order books.
However, not all applications will want to start their own rollup, especially those that do not reach a certain escape velocity, e.g., sufficient TVL, users, transaction volume. Launching your own chain today involves painful and unnecessary trade-offs, complexity, cost, worse user experience, liquidity fragmentation, etc. Most applications, especially those in the early stages, are unable to generate incremental gains. Justify these trade-offs. Solana remains the heart and soul of SVM development, so many new applications will likely be deployed.
For app builders
Solana mainnet or app chain or rollup completely depends on different situations. If there is no strong need for composability with other applications, it is completely reasonable to put some different components off-chain, whether it is application chain or Rollup. Users don't even need to know that they are using Rollup or AppChain. Grass, Zeta, and Getcode all abstract any Rollup type infrastructure they use for their consumers.
For applications that require authorization and customization, Token Extension can also meet most needs, such as KYC or transfer logic, while maintaining composability.
Infrastructure that drives Rollup and Application Chain
If Rollapp/Application Chain Theory is expanded, existing infrastructure providers will benefit greatly as they will enter new markets:
Existing Rollup as a Service (RaaS) providers, such as Caldera, can easily enter the SVM market as demand arises. SVM Ethereum rollups like Eclipse and NitroVM are also keeping a close eye on this opportunity. Additionally, Sovereign Labs provides a Sovereign SDK Solana adapter that supports Rollup on Solana (not yet production ready). Helius is another company that is well suited to building infrastructure for Solana Layer 2, as Mert has hinted at multiple times.
Shared sequencers like Rome Protocol and the need for light clients like Tinydancer. Shared sequencers could be interesting for Rollup as they enable activities such as atomic arbitrage, MEV and seamless cross-chain, reducing liquidity fragmentation.
Wallets like Phantom, Backpack, and Solflare. Multi-sig and smart contract wallet infrastructure such as Squads. Squads has always been positioned as "the ultimate smart contract wallet infrastructure layer for Solana and SVM."
Re-staking $SOL: Modularity theory also promotes re-staking, as these Rollup/app chains may require $SOL to share security and be more consistent with Solana. This will lead to increased revenue for early adopters like Cambrian, Picaso and Solayer, Jito via Stakenet and LST like Sanctum, as well as validators.
Finally, can Solana cope with global demand?
Of course not. Realistically, even taking into account Moore's Law, even if hardware devices continue to improve performance, and Solana is optimized for this hardware progress, this is unrealistic. I believe that all less critical transactions, such as DRiP sending NFTs, will eventually be moved to their own chains, while the most valuable transactions will remain on the main chain, where true composability is crucial, Such as spot DEX.
This doesn’t mean Solana is losing the monolithic and composability battle; it will manage better than other chains relying on composability and low latency. Also, Sui, Aptos, Sei, Monad, etc. are no better because we don’t yet know if they stand up to high real user activity.
Unlike Ethereum, the Solana mainnet is not intended to be a “B2B chain”; it has always been and always will be a consumer chain. Building decentralized systems at scale is extremely challenging, and Solana has the greatest potential to become the shared ledger of the world’s most valuable transactions.
Solana needs a soul mate: could AppChain and Rollup be the perfect match?
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Rhythm Blockbeats"
Original article by Yash Agarwal
