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Why Stripe Is Building On Solana | Weekly Roundup

By Lightspeed

Published on 2024-05-03

Discover why Stripe is integrating Solana for crypto payments, how MEV capture on Solana is surpassing Ethereum, and the latest on Firedancer, airdrops, and the need for more real-world crypto applications.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Stripe's Groundbreaking Integration with Solana

In a significant move for the cryptocurrency industry, Stripe, one of the world's largest payment processors, has announced a major integration with Solana for crypto payments. This development marks a pivotal moment for Solana, showcasing its growing prominence in the blockchain space and its potential for real-world adoption.

The announcement came during a 40-minute presentation where Stripe unveiled its vision for transactions instantly settling on-chain. What caught the attention of many was a live demo conducted on the Solana blockchain, a bold move considering the recent network congestion issues Solana had faced. The demo, performed flawlessly, demonstrated Stripe's confidence in Solana's capabilities and its potential for handling high-volume, fast-settling transactions.

This integration is particularly noteworthy given Solana's recent history. As one of the hosts pointed out, "Rewinds like just a year ago, people just thought, okay, Solana's dead, like totally dead chain. Everybody left, the developers are leaving 75 developers, whatnot. And then now perhaps the biggest payments company on Earth, along with Visa at least, is live demoing a new crypto integration for the entire industry using Solana."

The Significance of Stripe's Choice

Stripe's decision to use Solana for their live demo is a strong vote of confidence in the blockchain's capabilities. While Stripe's crypto integration also supports Ethereum and Polygon, the choice to showcase Solana suggests that it may offer advantages in terms of transaction speed and confirmation times.

This move by Stripe is not an isolated incident but part of a larger trend of major financial institutions and payment processors embracing Solana. As one of the hosts noted, "There's kind of a theme here, right? Like there's for Visa, first, expand to Solana with their pilot. MasterCard actually did the same, which kind of went under the radar a little bit. Stripe is now doing the same. Shopify had already done that as well, Shopify Pay."

The concentration of payments talent and expertise on Solana is becoming increasingly evident. The blockchain seems to be attracting professionals who understand payments "inside and out both from like a consumer level, but also an enterprise level." This influx of expertise could be a significant factor in Solana's growing adoption in the payments sector.

Solana's Unique Position in the Payments Landscape

Solana's architecture as a "global state machine" appears to be particularly well-suited for global payments. Traditional payment systems often operate as isolated "islands" with different systems within them, leading to inefficiencies and complexities in cross-border transactions. Solana's integrated approach could potentially offer a more streamlined solution for global payments.

As one of the hosts explained, "I think, I mean, it kind of just confirms my personal thesis that integrated all ones, especially ones like Solana with which have shown kind of results in production have our kind of the right solutions for payments."

The Challenges of Blockchain Integration for Payments

While the potential benefits of blockchain integration for payments are significant, it's important to note that the process is not without challenges. Payments, especially on a global scale, involve numerous regulatory and legal hurdles. As one host pointed out, "Payments generally take longer to really start flourishing just because there's a lot of hurdles in terms of legal and regulatory adoption."

However, Solana's technical readiness for payments seems to be well-established. The blockchain's ability to handle high transaction volumes with low latency makes it an attractive option for payment processors looking to leverage blockchain technology.

MEV on Solana: A New Frontier

Moving beyond Stripe's integration, the podcast delved into the topic of Maximal Extractable Value (MEV) on Solana. MEV refers to the profit that can be extracted from reordering, inserting, or censoring transactions within a block. Traditionally, Ethereum has been the dominant player in MEV capture, but recent data suggests that Solana is quickly catching up and even surpassing Ethereum in this area.

One of the hosts revealed, "Solana of the last two weeks has actually flipped Ethereum and MEV, specifically that is being returned to validators." This shift is significant, as it indicates a growing economic activity on Solana and potentially a more profitable environment for validators.

Understanding MEV and Its Implications

MEV is a complex and often controversial topic in the blockchain space. While some view it as a necessary part of blockchain economics, others see it as potentially exploitative. The hosts discussed the various perspectives on MEV, with one stating, "MEV is just a thing that exists that you can't really avoid in block building."

The ideal scenario, according to one of the experts cited, is for MEV to become "super transparent, accessible, and democratized." This approach could minimize the negative externalities often associated with MEV while still allowing for its economic benefits.

Gito's Role in Solana's MEV Landscape

A significant player in Solana's MEV ecosystem is Gito, which has been "crushing it" according to the hosts. Gito's block engine has been instrumental in capturing and distributing MEV to validators on Solana. The success of Gito and the growing MEV capture on Solana could have significant implications for the blockchain's economics and validator incentives.

The Firedancer Client and Its Potential Impact

The podcast also touched on the development of Firedancer, a new client for Solana being built by Jump Crypto. Firedancer is expected to significantly improve Solana's performance and reliability, potentially addressing some of the network issues that have plagued the blockchain in the past.

One of the hosts raised an interesting question about the potential competitive advantage that Jump Crypto might gain from developing Firedancer, particularly in the realm of MEV. However, it was noted that Jump Crypto has "extremely strict legal and regulatory compliance," which would likely prevent any misuse of this position.

The Future of Solana Clients

The discussion around Firedancer led to a broader conversation about the future of Solana clients. Unlike Ethereum, which emphasizes client diversity, Solana seems to be taking a different approach. As one host put it, "Solana doesn't believe in like the, or at least from what I've seen, I don't, it doesn't seem like this community believes in kind of the DEI approach of client diversity of like, everybody must get their fair share."

Instead, the Solana community appears to favor a more competitive approach where the best-performing client becomes the dominant one. This philosophy could drive rapid innovation and improvement in Solana's infrastructure.

Airdrops and Token Launches in the Solana Ecosystem

The podcast also covered recent token launches and airdrops in the Solana ecosystem, specifically mentioning Kamino and Drift. These launches represent a significant milestone for the Solana ecosystem, as they mark the transition of some of the blockchain's "blue chip" projects to having liquid tokens.

The hosts expressed excitement about these developments, with one stating, "We're finally starting to see some of these blue chips, Solana projects become liquid, which kind of begs the question is like, you know, what's going to happen with a bit of a wealth effect taking place in the Solana ecosystem?"

The Challenges of Token Launches

While token launches can be exciting for users and potentially beneficial for projects, they also come with challenges. The hosts discussed some of the issues surrounding token launches, including the potential for creating tokens with high fully diluted valuations (FDV) but low circulating supply, which can lead to price volatility and user disappointment.

They also touched on the complexities of launching tokens in different regulatory environments, particularly highlighting the difficulties faced by projects trying to launch tokens in the United States.

The Need for Clear Communication in Token Launches

One of the key points emphasized in the discussion was the importance of clear communication during token launches. The hosts criticized the trend of complicated point systems and unclear eligibility criteria for airdrops, suggesting that projects should strive for more straightforward and transparent approaches.

As one host put it, "I really like it because you're giving well, in the case of Kamino and Drift, those are like protocols that people use. So they have like good user bases."

The EigenLayer Token Launch

The podcast also delved into the recent token launch of EigenLayer, a restaking protocol on Ethereum. The hosts had mixed feelings about the launch, praising some aspects of its approach while criticizing others.

One positive aspect noted was EigenLayer's attempt to address the issue of low-float, high-FDV tokens by implementing a phased airdrop approach. However, the hosts also pointed out several "red flags," including unclear communication about eligibility and concerns about the vesting schedule.

The Broader Implications of Token Launches

The discussion around token launches led to broader reflections on the state of the crypto industry. The hosts expressed concern about the trend of projects using token incentives to artificially boost usage metrics, rather than focusing on building products that solve real problems.

As one host put it, "This meta of, you know, paying people or promising to pay people so that they pretend to use your shit so that you then grow or you have inflated metrics, which you then raise off of, is just like kind of this weird version of leverage that makes this like capital, financial capital and social capital."

The Need for Real-World Applications in Crypto

A recurring theme throughout the podcast was the need for more real-world applications in the crypto space. The hosts expressed frustration with the focus on infrastructure and financial primitives, arguing that the industry needs to shift towards building products that solve tangible problems for users.

One host emphasized this point, stating, "I would say to anybody who's ever interested in building anything, please just look at an ecosystem, identify the gaps, be curious about them, and then build something to solve those problems."

The Potential of Social Applications in Crypto

In discussing potential areas for real-world crypto applications, the hosts highlighted social applications as a promising direction. They pointed to projects like Farcaster and Friend.tech as examples of crypto-native social platforms that are gaining traction with users.

As one host noted, "I think social apps personally are going to be what's more important going forward. And like Farcaster doesn't even really need to use a blockchain. Right. They kind of just use like optimism, I think, for like a registry of like identities and stuff, it seems."

The Future of Solana and the Broader Crypto Ecosystem

Throughout the podcast, the hosts painted a picture of Solana as a blockchain that is rapidly maturing and gaining adoption in key areas like payments and MEV capture. The integration with major players like Stripe, coupled with the growing ecosystem of projects and the development of new clients like Firedancer, suggests a bright future for Solana.

However, the hosts also emphasized the need for the broader crypto ecosystem, including Solana, to focus more on building applications that solve real-world problems and less on financial engineering and infrastructure for its own sake.

Conclusion: Balancing Innovation and Practicality

As the crypto industry continues to evolve, the conversation highlighted the delicate balance between pushing technological boundaries and creating practical, user-friendly applications. Solana's recent achievements, particularly in the payments sector and MEV capture, demonstrate its potential to bridge the gap between cutting-edge blockchain technology and real-world use cases.

The hosts' call for more focus on solving tangible problems and creating applications that users actually want to use serves as an important reminder for the entire crypto industry. As blockchains like Solana continue to improve their technical capabilities, the next challenge will be to translate these advancements into products and services that can drive widespread adoption and create value beyond the crypto ecosystem itself.

Facts + Figures

  • Stripe, one of the world's largest payment processors, has integrated Solana for crypto payments, alongside Ethereum and Polygon.
  • Stripe conducted a successful live demo of their Solana integration, showcasing the blockchain's speed and reliability.
  • Major financial institutions including Visa, MasterCard, and PayPal are also supporting or exploring Solana integration.
  • Solana has recently surpassed Ethereum in MEV (Maximal Extractable Value) returned to validators over a two-week period.
  • Gito, a key player in Solana's MEV ecosystem, has been instrumental in capturing and distributing MEV to validators.
  • Firedancer, a new Solana client being developed by Jump Crypto, is expected to significantly improve the blockchain's performance.
  • Recent token launches in the Solana ecosystem include Kamino and Drift, marking the transition of "blue chip" projects to having liquid tokens.
  • EigenLayer, a restaking protocol on Ethereum, recently launched its token with a phased airdrop approach to address issues with low-float, high-FDV tokens.
  • The hosts emphasized the need for more real-world applications in crypto, particularly highlighting the potential of social applications.
  • Solana's approach to client development favors performance over diversity, contrary to Ethereum's emphasis on client diversity.

Questions Answered

What is Stripe's new integration with Solana?

Stripe, one of the world's largest payment processors, has integrated Solana for crypto payments. This integration allows Stripe users to receive payments in cryptocurrency, with Solana being one of the supported blockchains alongside Ethereum and Polygon. Stripe demonstrated this integration with a live demo using Solana, showcasing the blockchain's speed and reliability for payment processing.

How does Solana's MEV capture compare to Ethereum's?

According to recent data discussed in the podcast, Solana has actually surpassed Ethereum in MEV (Maximal Extractable Value) returned to validators over a two-week period. This is significant because Ethereum has traditionally been the dominant player in MEV capture. The increase in MEV on Solana indicates growing economic activity on the blockchain and potentially a more profitable environment for validators.

What is Firedancer and how might it impact Solana?

Firedancer is a new client for Solana being developed by Jump Crypto. It is expected to significantly improve Solana's performance and reliability, potentially addressing some of the network issues that have plagued the blockchain in the past. The development of Firedancer represents Solana's approach to client development, which favors performance over diversity, unlike Ethereum's emphasis on client diversity.

What recent token launches have occurred in the Solana ecosystem?

The podcast mentioned two significant token launches in the Solana ecosystem: Kamino and Drift. These launches represent a milestone for Solana, as they mark the transition of some of the blockchain's "blue chip" projects to having liquid tokens. The hosts expressed excitement about these developments and speculated about the potential "wealth effect" they might create in the Solana ecosystem.

What criticisms were raised about current token launch practices?

The hosts criticized several aspects of current token launch practices. They pointed out issues with complicated point systems and unclear eligibility criteria for airdrops. They also highlighted the problem of creating tokens with high fully diluted valuations (FDV) but low circulating supply, which can lead to price volatility and user disappointment. The hosts emphasized the need for clearer communication and more straightforward approaches to token launches.

What is the hosts' view on the need for real-world applications in crypto?

Throughout the podcast, the hosts strongly emphasized the need for more real-world applications in the crypto space. They expressed frustration with the industry's focus on infrastructure and financial primitives, arguing that there needs to be a shift towards building products that solve tangible problems for users. They particularly highlighted social applications as a promising direction for crypto, citing projects like Farcaster and Friend.tech as examples of crypto-native social platforms gaining traction with users.

How does Solana's approach to client development differ from Ethereum's?

Unlike Ethereum, which emphasizes client diversity, Solana seems to be taking a different approach. The Solana community appears to favor a more competitive approach where the best-performing client becomes the dominant one. This philosophy could drive rapid innovation and improvement in Solana's infrastructure, but it also raises questions about centralization and resilience.

What is the significance of major financial institutions supporting Solana?

The podcast highlighted a trend of major financial institutions and payment processors embracing Solana. This includes companies like Visa, MasterCard, Stripe, and PayPal. The hosts noted that this concentration of payments expertise on Solana could be a significant factor in its growing adoption in the payments sector. It also demonstrates Solana's potential for real-world, practical applications in the financial industry.

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