A Deep Dive into Neon: Scaling Ethereum dApps on Solana

Earlier this month, we announced the Neon Community Sale on CoinList, taking place on June 8th, 2023 at 17:00 UTC.

Neon EVM is an Ethereum Virtual Machine on Solana that allows developers to scale Ethereum dApps by using Solana as the settlement layer, thus opening up Solana’s user base to Ethereum dApps.

This week, we sat down with the Neon EVM team to learn more about the real world problems they solve, their target audience, use cases, token utility, and thoughts on the future prospects of the Ethereum and Solana ecosystems.

Let’s dive in.

1. What is Neon EVM and what problems does it solve?

The Neon EVM protocol offers a solution to two significant challenges that Ethereum dApps face - namely transactional and ecosystem access challenges.

Problem 1: Transactional challenges

Under the current protocol, Ethereum’s throughput is limited, with a recorded maximum of 58 TPS at the time of writing, and sidechains such as Polygon recording a maximum of 470 TPS. Furthermore, as the network gets busier, gas prices increase as transaction senders attempt to outbid each other. This causes transactions to be very slow and expensive, making Ethereum unviable for certain types of dApps.

In contrast, Solana is designed to support the massive scaling of decentralized applications, with 5,184 TPS as its maximum recorded live throughput on Mainnet. Solana provides:

• Transaction parallelization technology that optimizes resources, ensuring horizontal scalability across CPUs and SSDs;
• An optimized mempool system that speeds up throughput.

Among Solana’s innovations is its Proof-of-Stake consensus system that’s reinforced via a Proof-of-History protocol.

“Sure, but if I want faster and cheaper, I can just use a Rollup or sidechain, right?”

An Ethereum-native solution to low throughput and high gas fees is L2 scaling. L2 scaling technologies take transactions off the L1 Ethereum Mainnet and submit them in bundles. Thus far, the preferred family of L2 scaling solutions, Rollups, have indeed effectively reduced gas fees. However, while reports claim that the reductions are up to 100x, the reductions are in practice in the region of 10x.

So, yes, you could use a Rollup or sidechain; however, Solana outcompetes such L2 solutions. For example, at the time of writing, the average transaction fee for sending ETH on the Ethereum network was ~$2. In the same period, the L2 ecosystem ranged from $0.5–0.1, i.e. 4–20x savings. By comparison, Solana’s average transaction fees are ~0.00001 SOL ($0.0002) per transaction, i.e. 10,000x savings. Initial tests of Neon EVM demonstrate that the protocol translates these optimizations in practice, as shown by load testing.

Problem 2: Ecosystem access challenges

Because the Ethereum and Solana blockchains are completely different in design and structure, there has never been a meaningful solution that allows Ethereum dApp developers to take advantage of the transactional innovations offered by Solana.

So, just as mobile app developers once had to develop for Android and iOS to access both markets, Ethereum dApp developers have had to custom develop new versions of their dApps to access other L1 ecosystems. As many Ethereum dApp builders are only familiar with the Solidity programming language and tooling native to Ethereum, many don’t have the ability to easily adapt their dApps to comply with Solana’s different technical and transactional requirements.

Neon EVM protocol changes this. Neon EVM brings dApp developers a robust cross-L1 blockchain development solution, allowing them to bring their dApps from Ethereum to Solana with minimal reconfiguration of the codebase. This opens up Solana’s user base to Ethereum dApps.

2. What are the use cases of Neon EVM?

Once the low transaction costs and fast settlement speeds become apparent to the builder community, we anticipate that we will see the deployment of dApps for which these properties are critical.

We also predict that those dApps that have enjoyed success in the Ethereum ecosystem will wish to test the response of the Solana community to their value propositions. Already, popular dApps such as Uniswap, AAV, Curve, Saddle Finance, have successfully been deployed on devnet with minimal reconfiguration of the codebase.

And this is only the beginning; we have partnered with innovators across the spectrum and expect to launch with several active DEXs, such as Moraswap, Sobal (a balancer-friendly fork for custom curves), Onomy, and Powerpool. Similarly, there are several DeFi services that will be ready at launch, such as LeverFi’s leveraged trading dApp, borrowing and lending solutions from Midas Capital and Yin Finance, launchpads from Poolz and DxSale, cross-chain swaps from Elk Finance, and not to mention GhostNFT that will be releasing an NFT collection on Neon EVM.

3. What is the utility of NEON?

The Neon EVM economy is fee-based. The Neon token, NEON, is an SPL utility token with 2 functions:

• Payment of fees​: The Neon EVM Operator accepts payment from the user in NEON tokens to pay the fees required for transaction execution.
• Governance​: Owners of NEON may engage in the Neon DAO governance activities.

4. How can I start using the Neon EVM?

Neon EVM is already deployed as a closed beta on Solana Mainnet. To understand more about how to use Neon EVM, see the documentation on Neon Foundation’s website. For a high-level overview of the technical architecture and features of Neon EVM, the whitepaper is available at NeonEVM.org/whitepaper.pdf.
To execute Neon transactions, it is necessary to pay the Operator in NEON. The challenge is that the NEON token is an SPL token that is used to pay for fees in an EVM-compatible system. To achieve this, the SPL token is transferred to Neon EVM using NeonPass. NeonPass is available as a UI tool and programmatically from the NeonPass npm package.

5. What are your thoughts on the future prospects of the Ethereum and Solana ecosystems?

A common characterization of the Web3 community is to view them as divided into one of two camps: Ethereum vs. Solana. The zeitgeist debates one surviving over the other. We don’t hold with this narrative. In fact, Neon EVM believes that both L1s have an important role to play and that they fit different requirements. For example, in Solana, storage and smart contract logic are separate, and Solana does not keep a historical record of the data beyond 2 days. Whereas in EVMs, the accounts store all the data. This difference can influence the use cases for each chain; we need both ecosystems. This is why we assert that both ecosystems will continue to thrive.

We do acknowledge the genuine divides that are emerging in the Ethereum community (i.e., optimistic vs. ZK Rollup supporters). Neon EVM offers a balance to such a division by providing a third path.

Ethereum has much to gain from access to the Solana community and vice versa. Solana has an incredibly active community. Consider recently that just one meme token on Solana conducted more transactions than Ethereum in the same three-day period. Solana also continues to see growth in both NFT and gaming applications.

We believe that the Ethereum and Solana ecosystems and communities complement each other: the high throughput, low gas fees, and vibrant and growing ecosystem of Solana combined with Ethereum’s large and experienced community — that’s the synergy that Neon EVM offers.

6. What is the governance model for the Neon EVM, and how will future decisions be determined to inform its development?

Neon DAO is the key partner of the Neon Foundation, the body responsible for promoting the development, growth, and adoption of Neon EVM and its ecosystem. Neon DAO operates as a decentralized Neon EVM governance layer using an SPL governance program. It exists as a series of contracts deployed on Solana and receives fees for its services. DAO community participants, i.e. NEON holders utilize a web interface to raise, and vote on, proposals that impact the Neon EVM using an SPL governance program with add-ins.

Neon DAO will vote on, take decisions, and form recommendations on the design and function of Neon EVM. This includes issues related to setting up Neon EVM parameters and agreeing on redesign and updates to the Neon EVM Program.

7. What is the best way to get involved with the Neon community?

You can find us on Twitter and join Neon’s very active Discord community to meet some of our long-term and loyal community builders. If you are interested in learning more about the Neon Protocol, head over to learn more at NeonEVM.org.

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