Thirteen years ago, there was only one public blockchain on Earth. The pseudonymous Satoshi Nakamoto launched the Bitcoin network on January 3rd, 2009, and from that day forward, the world was given a genuinely new and unique asset class.
Moreover, disruptive technologies were born out of BTC’s launch, and these technologies would prove to have more use cases than supporting the existence of a cryptocurrency as time wore on.
Six years after Bitcoin’s launch, in 2015, a group of programmers decided to take the evolution of blockchain technology a step further than it had gone before, and they created a decentralized “world computer” that anyone could use.
Ethereum allowed users to build decentralized applications (dApps) on its network, and one of the most popular use cases for dApps became decentralized finance (DeFi).
At the tail end of 2021, six years after the launch of Ethereum, there are now dozens of decentralized networks that support DeFi dApps. One could say DeFi’s users and developers are spoiled for choice, but for Hubble, there was only one blockchain that made any sense for us to build on.
Hubble’s Project Lead and Rust programming wiz Marius Ciubotariu is quoted as saying, “When I saw how Solana is parallelizing transactions, it reminded me of Rust’s memory model, and I couldn’t believe why other chains haven’t gone for this approach as well. In retrospect, it’s blindingly obvious that this is the best way to scale a parallel system.”
According to Marius, “There’s currently no other blockchain like Solana. It’s the best tool we have for creating a new financial system that everyone can join.”
In this article, we’ll explain why Hubble chose to launch its DeFi services on Solana.
We’ll cover some key points in the history of DeFi that are important for building a context around why we chose Solana as our home network, and we’ll be identifying several pain points for DeFi that Solana directly addresses.
We’ll also explain why we believe the technology that makes Solana the world’s fastest blockchain has the best chance of bringing Hubble and DeFi to the world.
DeFi Quickly Developed Into a Financial Powerhouse
The exact origins of DeFi can be debated for hours. Some have claimed that the birth of DeFi is traced back to the genesis of BTC, the world’s first decentralized crypto asset. Other sources assert that MakerDAO gave DeFi its first “significant use.”
All claims aside, DeFi first came to prominence during a massive growth spurt during the summer of 2020. Before the middle of that year, the total value locked (TVL) in DeFi smart contracts measured less than $1 billion, but around the cusp of May and June, the phenomena known as DeFi Summer carried DeFi’s TVL through the billion-dollar ceiling.
At this time, nearly all of DeFi was conducted on Ethereum (about 95% of DeFi transactions by some estimates). By the end of the year, DeFi’s TVL had risen to around $20 billion with $270 billion in transaction volume recorded mostly on just one network.
DeFi’s growth was rapid in pace and enormous in scope, but Ethereum’s DeFi community was soon plagued by issues stemming from network congestion and Ethereum’s inability to scale. It seemed like DeFi on Ethereum had become a victim of its own popularity.
Many users found failed transactions especially frustrating, because the ETH used to pay for a failed transaction was lost for good, and more ETH than ever was necessary to process a simple transaction.
Scalability Issues Urged the DeFi Community Elsewhere
The undesirable effects of Ethereum’s congestion were further exacerbated by bots racing to outbid one another for miners’ priority. Furthermore, miners weren’t helping the situation as they siphoned an estimated $314 million from the DeFi community at the beginning of 2021 through a practice called Miner Extracted Value (MEV).
High fees, slow speeds, and counter-productive mining practices made it clear to many users that Ethereum was no longer a network that could support broad and democratic participation in DeFi. Ethereum was no longer the “world’s computer” but a computer that only the very wealthy could use.
Consequently, the DeFi community began branching out onto other blockchains. DeFi protocols on other networks began seeing more traffic from wallets with Ethereum addresses, and as user traffic began to grow, the number of DeFi protocols began to grow on different networks.
Today, the DeFi landscape has transformed into a community that participates in protocols built across multiple chains, and DeFi’s TVL is tracing a line towards the $300 billion mark at the time of writing. As a multi-chain DeFi ecosystem accommodates more and more projects and users, Ethereum now holds less than 70% of DeFi’s TVL.
Why Scalability Issues Persist on Other Chains
It can be said that most of the blockchains jockeying for a larger slice of the DeFi pie remain on the same well-worn path that Ethereum pioneered. As a consequence, most of these chains will face the same scalability issues that drove users away from Ethereum in the first place.
One improvement newer blockchains have implemented is moving away from a Proof of Work (PoW) consensus model towards alternative methods like Proof of Stake (PoS). This change increases the scalability of blockchains and nearly negates the burden placed on the environment by the energy-intensive mining process that facilitates PoW.
Even though PoS blockchains can scale at a better rate than the PoW blockchains that preceded them, most of these chains advertise transaction speeds and throughput that are relatively slow compared to Solana. Actually, many of these blockchains are slow when compared to the antiquated systems they’re supposed to replace.
Blockchains are expected to disrupt virtually every industry that depends on connectivity, security, and consistent record keeping. However, that future will most likely go unrealized on networks that have a difficult time outperforming Visa and other incumbents.
Visa’s transactions per second (TPS) outpaces every blockchain but Solana by a wide margin. If blockchains are supposed to exist on the cutting edge of technology, then why are these decentralized networks bested in measures of speed and throughput by Visa’s archaic infrastructure?
Copy-Paste Solidity Projects Hold Back DeFi Progress
Turning to the software that powers a decentralized network, most blockchain projects are designed to be Ethereum Virtual Machine (EVM) compatible. This means that the dApps built on EVM compatible blockchains are coded in Solidity, the programming language Ethereum developed specifically for writing smart contracts.
Now, one of DeFi’s main advantages against traditional finance (TradFi) is that DeFi operates on open and transparent distributed networks. The code that makes up DeFi smart contracts is completely visible to the world, and it can be reviewed by any party.
Transparency is a fantastic attribute for building a trustless financial system where information cannot be hidden from users. On the other hand, this transparency has been abused to the point that developers are copying and pasting code from other DeFi projects instead of spearheading innovation.
One of the biggest players in DeFi may have set a precedent by copying the entirety of another protocol’s code. When this happened, many accused the protocol of stealing, and its business practices were labeled as a vampire attack. Launching a protocol this way left the whole of the DeFi community on edge, wondering if the copycat DEX was going to rugpull.
A year after this DeFi drama unfolded, the copycat project is one of the biggest names in DeFi and has copied and pasted its DEX onto numerous EVM-compatible chains.
The talking points around copying code have changed quite a bit (the term “forking” has become preferable to “stealing” or “copying”), and some will argue that copying battle-tested smart contract code is a safeguard against exploits and hacks.
On the flipside of this argument, DeFi recently witnessed an exodus of liquidity from a dominant lending protocol when rumors spread that its smart contract could suffer from a vulnerability shared with another member of DeFi’s old guard. Over $137 million was stolen by exploiting this vulnerability.
A plethora of security issues has been found in Solidity contracts through the years. With so much copying and pasting across EVM-compatible platforms, it seems like DeFi protocols are setting up their entire DeFi ecosystem for disaster by sharing the same potentially risky codes, and this is a major risk Hubble would rather avoid by building on Solana.
Enormous Advantages Emerge for DeFi on Solana
Solana departed from the majority of the blockchain world by deciding that Solidity wasn’t the best language for building smart contracts on its network. Instead, Solana opted to use a coding language that the programming community voted the most-loved programming language for six years in a row.
There’s a difference between copying code and using a toolbox of resources to save time and energy to focus on other things like smart contract logic. To that point, Rust has an incredibly well-developed toolbox that developers can lean on to make their lives easier, and these tools were developed by programmers at Google, Amazon, and Facebook, all of which use Rust.
Rust has been characterized as a complicated programming language to learn, but the benefits of breaking through Rust’s learning curve far outweigh the effort.
When Marius, the lead developer at Hubble, participated in Solana’s hackathon, Season, he saw a massive amount of potential for running smart contracts in Rust on Solana, and that’s a major reason why he chose to build a DeFi protocol on Solana instead of any other network.
“It just made a lot of sense,” said Marius. “Rust is a secure and efficient programming language that suits DeFi smart contracts really well. If you combine the benefits of Rust with the way Solana’s architecture is designed, then we’re actually looking at the possibility of creating a new kind of financial system the whole world can use .”
Marius continued by saying, “If Google was slow and expensive, nobody would use it. I want to build Hubble into a DeFi protocol that everyone can actually use, not just the people who have the funds to spend on high transaction fees. Solana makes that possible, and it opens doors to new possibilities for DeFi that cannot be achieved when scalability and cost are an issue.”
Solana's Speed and Price Match Global Demand
Rust’s parallelization compliments the parallelization of Solana’s Sealevel, and the speed and throughput of Rust-based smart contracts on Solana are unmatched by anything written in Solidity for EVM compatible blockchains.
Business Insider covered a Rust workshop Marius delivered at Solana’s Breakpoint conference and quoted him as saying, “Solana’s Sealevel runtime knows what accounts will be affected by what transaction, allowing for non-overlapping transactions to execute in parallel. Since most users or contracts are pretty independent of each other, you have a chain that runs thousands of transactions per second without any conflict or threat to safety or performance.”
The safety and performance that coding in Rust ensures is just one of the many reasons why Solana kicks other blockchains’ butts. A total of eight innovations make it possible for Solana’s network to handle the massive amount of traffic necessary for leading DeFi and other blockchain use cases towards mainstream adoption.
By implementing a Proof of History (PoH) consensus mechanism and developing an architecture for smart contracts that can run tens of thousands of contracts in parallel, Solana can advertise speeds of up to 65,000 TPS.
Incredibly, these extreme speeds are also provided at extremely low cost. For example, the reported average cost for finalizing a transaction on Solana racks up to $0.00025. In comparison, Nasdaq reports that it currently costs around $150 to facilitate one transaction to buy an NFT on Ethereum.
Detractors have pointed out that Solana’s network experienced an outage in September when bots drove the network to 400,000 TPS, but this throughput is still amazing, and it’s far beyond Solana’s advertised TPS of 65,000. In the future, it’s estimated that Solana’s TPS will safely rise above 700,000, and Hubble believes these speeds will provide an essential upgrade for DeFi’s bid at mass adoption.
Hubble Explores the DeFi 2.0 Universe on Solana
There are tons of reasons why Hubble chose to develop a protocol on Solana. Many of them were highlighted by Reddit Co-Founder Alexis Ohanian during Solana’s Breakpoint Conference as he explained why he bet big on Solana to lead the development of Web3.
Hubble believes that DeFi has built the momentum it needs to begin breaking into the mainstream. As Web2 gives way to Web3 and more people begin interacting with blockchain technology without realizing it, DeFi should follow suit as it transforms into a financial system for the world.
The term DeFi 2.0 has recently become a popular way to describe a new generation of services within the DeFi community. The phrase is broad enough these days to mean many things, but its definition is clearly shaping up to signal that DeFi is finally seeking innovations that shy away from the practice of generating more and more copy-paste-style projects.
Hubble is working steadily to help shape the future of DeFi 2.0 and beyond. This journey begins by building a DeFi protocol that embraces innovation and aims to make sure users who participate in DeFi are seeing optimal returns.
Hubble begins its first phase of development on Solana by launching a borrowing platform that allows borrowers access to a capital-efficient 90.9% loan-to-value (LTV) on their collateral through minting USDH.
USDH is a Solana-native stablecoin backed by multiple top-tier crypto-assets. It can be minted for a one-time fee of 0.5% against multi-asset deposits in order to pursue the many opportunities DeFi has to offer.
A long but optimistic journey lies ahead for Hubble, Solana, and DeFi. There’s a whole universe of possibilities to explore when DeFi can operate on Solana’s 65,000 TPS and 400 millisecond block times, and the imagination runs wild when thinking about what DeFi will look like once Solana reaches a throughput of 700,000 TPS.