Solana getting “new heart” in biggest upgrade ever

Solana is gearing up for its biggest upgrade ever. 

Last week, community members voted overwhelmingly in favor of Alpenglow (aka SIMD-0326) to implement a new consensus mechanism for the solana blockchain. Of those who participated in the governance process, 98.3% approved the upgrade, 1% voted against, and the remaining abstained, a solana vote tracker shows.

“Changing the consensus mechanism for a live blockchain is like a heart transplant during a marathon (or sprint, in solana’s case),” explained Rafal Klich, a research analyst for institutional staking provider Chorus One. “The chain will have a ‘new heart’ designed to meet the demands of internet capital markets,” Klich said to Sherwood News. 

Kairos Research cofounder Ian Unsworth told Sherwood, “The way I think about Alpenglow is switching out a good engine with an even better, more nimble one.” 

He added, “Taking apart your entire chain’s consensus for the sake of improvement is quite amazing, especially considering the size and activity solana facilitates today.”

Solana’s decentralized exchange trading volume reached about $693 billion in the first half of the year, making it the top network by the metric, outpacing ethereum, bitcoin, tron, and avalanche, per data pulled from blockchain analytics firms Artemis and DefiLlama.

Kairos Research, which runs a solana validator, voted in favor of Alpenglow. Unsworth explained, “We view it as a pragmatic approach to rethinking solana’s consensus, which ultimately results in faster finality and potentially stronger liveness.”

Decreasing transaction finality to 150 milliseconds

The upgrade is expected to reduce the network’s transaction finality, the time when a transaction is recorded on a blockchain and after which it cannot be modified. 

Pre-Alpenglow, a transaction finalizes on the blockchain in about 12.8 seconds, but post-Alpenglow, the time would be cut to 150 milliseconds, putting solana into direct contention with centralized exchanges in terms of speed, said Jon Rotbard, an investor at venture capital firm CoinFund. 

This brings solana “potentially in striking distance of supporting the vision of a chain for executing and settling ‘everything’ on the L1 (payments, trading, capital formation, etc.),” Rotbard argued. 

Alpenglow allows solana to take a step closer to its goal of being an on-chain Nasdaq by introducing a new resilience model that allows the network to maintain operations even if 20% of its validators are malicious and an additional 20% are offline, Klich said. 

“Alpenglow brings consensus latency to a level comparable with Web2 applications while strengthening the system’s security posture, scalability, and economic fairness,” the proposal stated.

Benefiting users

The upgrade is expected to benefit all users, including retail, advanced traders, market makers, and financial applications. With 150-millisecond finality, solana is closer to institutional-grade trading, opening the door for central limit order books and tighter spreads, Chorus One’s Klich predicts. The biggest gain should accrue to various financial applications, though. 

Decentralized finance protocols “become safer, since liquidations and oracle updates can happen in near real time, reducing the risk of bad loans,” Klich continued. “Beyond trading and DeFi, payments may become more viable as near instant finality makes solana more attractive for payment applications.”

Roger Wattenhofer, head of research at solana development firm Anza, told Sherwood, “Pretty much anything that needs a fast finality will be possible with Alpenglow.”

Unsworth noted that end users won’t notice a substantial difference outside of improved reliability. “As a user, you tend to remember when things didn’t work more than they do — so this should just lead to more slightly better, more consistent user experiences,” he added. 

The upgrade comes in the same year that the network’s native cryptocurrency reached an all-time high of $292.

Even though Alpenglow is the blockchain’s most substantial technical change in its history, Unsworth doesn’t think the upgrade will change the way investors underwrite solana as an investment. 

“The larger things to watch that I think will impact price action will be DATs [digital asset treasuries] which have been announced. I know there is an open question around how much of those are in-kind contributions vs. fresh capital which will purchase SOL on the open market,” Unsworth said to Sherwood. 

The second big-ticket item are exchange-traded funds. Even though the only two cryptocurrencies to have ETFs in the US are bitcoin and ethereum, the US Securities and Exchange Commission is currently reviewing several spot solana ETFs. (There’s already a solana ETF in Canada). 

On August 30, Bloomberg Intelligence ETF analyst James Seyffart said a number of updated solana ETF filings were sent to the SEC, including ones from VanEck, Grayscale, Fidelity, CoinShares, and Bitwise.