GCR Sustainability Rating: Does Solana live up to the hype from a green perspective?

Updated: Apr 3


Solana is considered the new shooting star in the crypto scene. Does the "fastest blockchain in the world" shine in the sustainable arena, too? Here is our take.


At Green Crypto Research, we have made it our mission to evaluate the sustainability of cryptocurrencies holistically - similar to industry standards for stocks, real estate, or bonds. In line with our recent reports on Bitcoin, Ethereum, and Cardano, we evaluated Solana according to our ESG rating system. The coin receives the highest possible rating (A) for its impact on the planet, social responsibility, and governing guidelines. Read on to find out why.


Check out the details in our factsheet:


GCR_Sustainability_Rating_Solana_2021-11
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How environmentally friendly is Solana?

In one word: very. This becomes evident in the low overall energy consumption to run the Smart Contract Platform. With an estimated 0.0000012 terawatt-hours per year, Solana even undercuts Cardano ADA (0.006). The same applies to the consumption per transaction.[1] In its first Energy Use Report, the Solana Foundation explains that one transaction takes less energy than two Google searches and 24 times less energy than charging your phone.


The future strategy of any blockchain, platform and cryptocurrency must include carbon neutrality to enable long-term sustainable investments.

Considering climate neutrality as a long-term end goal, we not only look at current emissions, but also future efforts for further optimization. In November 2021, the Solana Foundation has vowed to introduce a program to help make its validator network carbon neutral and offset the footprint of the ecosystem. Solana thus proves that ecology is a high priority in its further development and expansion, rounding out its profile as a green cryptocurrency and securing the highest possible score of A+ in the environmental category.



How social is Solana?

"Tired of high fees and slow transactions?" the voice-over (which sounds suspiciously like Tom Hiddleston, by the way, or is it just me?) asks us in the Solana intro video, and immediately provides the answer itself: "So are we!" Anyone who takes a closer look at the decentralized blockchain quickly realizes that this is more than just a rhetorical advertising message. Solana has made it a point to solve some of the industry’s most pressing issues: speed and scalability for global adoption. [2]


It appears that participation lies at the core of solving these challenges. For one, the web-scale blockchain enables and encourages developers to build decentralized applications (dApps) on its ecosystem thanks to its open-source protocol. Currently, the network hosts about 400 dApps with an upwards tendency.


“Transactions are the fundamental building blocks of Solana: Purchasing an NFT, making a trade, or other activities you can perform using Solana are all transactions.”[3]

Furthermore, Solana allows a wide range of the population to access and participate in the network as well as benefit from it. This goes far beyond open protocols, although they certainly help. Additionally, various developer resources and especially the low cost per transaction of $0.00025 on average enable people from various parts of the world and with different financial backgrounds to engage. Solana also makes it a point to reward its validators with issuances from a global, protocol-defined, inflation rate on top of earnings from transaction fees and offers stake pools as an alternative method of earning staking rewards. As such, SOL holders can earn rewards without having to manage stakes.


“Solana’s crypto-economic system is designed to promote a healthy, long term self-sustaining economy with participant incentives aligned to the security and decentralization of the network.“[4]

Consequently, wealth is relatively well distributed. A little over 70 percent of the network (approx. 5.3 million addresses) hold between 0.001 and 0.01 SOL. The top ten wealthiest accounts own 55 million SOL combined and therefore below 11 percent of the total supply (510 million).


For all these reasons, Solana is considered a socially acceptable cryptocurrency and receives a score of A- in this category.


How well is Solana managed?

Solana is well diversified with 1,200 active validators to ensure a satisfactory power balance, 19 of which are necessary to control more than 33 percent of the total stake together. The small set grants a high censorship resistance, meaning a strong ability to withstand disruptions or attacks.


For the overall score in governance, we additionally take into account the security efforts of the Solana Foundation and award Solana with an A-.


It should be noted, however, that the network and native crypto are still officially in beta. Since the inception of its mainnet in 2020, Solana has not experienced any security breaches, but they will have yet to prove themselves over time against attacks and vulnerabilities. Due to the lack of empirical values, the safety aspect must be viewed with certain reservations, which have also factored into the allocation of the points accordingly.


Bottom Line

Solana is convincing across the board with its ongoing performance and forward-looking plans in environmental questions, a profoundly social basic orientation, and well-structured governance. The coin receives the highest grade A in the GCR Sustainability Rating and thus joins the league of the most sustainable cryptocurrencies at present.


[1] Solana's calculations are consistent with ours and thus verified by GCR’s energy consumption model.

[2] What is the Solana ecosystem and how is it fueling SOL’s stratospheric rise?: https://forkast.news/what-is-solana-ecosystem-behind-sols-rise/

[3] Solana’s Energy Use Report - November 2021: https://solana.com/news/solana-energy-usage-report-november-2021

[4] Solana Documentation: https://docs.solana.com/economics_overview


Please note that we regularly review and update our ratings. It is therefore possible that the scores mentioned in the blog post no longer correspond to the current rating. You can find an up-to-date overview of all ratings at any time at greencryptoresearch.com/ratings.

 


What is the GCR Sustainability Rating?

The GCR Sustainability Rating is the first ESG rating tailored to cryptocurrencies and adjusted accordingly. It reflects the holistic assessment of a cryptocurrency and is composed of three individual scores:



The GCR Sustainable Rating is a relative ranking, meaning that the best cryptocurrency in each category receives an A rating, while the worst receives a D rating. The overall rating ("GCRS rating") is based on three individual ESG categories. An average score is calculated for each category. The overall rating corresponds to the worst ESG score so that failures in a single category cannot be compensated for by good scores in the other two. Thus, if a cryptocurrency is judged not to be environmentally sustainable, it cannot make up for the poor rating with adequate social standards or good governance.



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