Crypto Startup Solana Raises $314 Million to Develop Faster Blockchain

In a nod to the engineering roots of Solana’s founders, the precise amount raised in the funding round was $314,159,265—the mathematical constant pi multiplied by $100 million and rounded to the nearest dollar.

The transaction was structured as a purchase of Solana’s SOL digital tokens rather than a traditional purchase of equity shares.

Solana, whose founding team came together in 2017, launched a blockchain network that supporters say is faster and more energy-efficient than the Ethereum or bitcoin blockchains, which can seize up during periods of heavy transaction volumes.

A blockchain is a distributed piece of software running on multiple computers, potentially all over the world, that allows people to trade cryptocurrencies without any centralized authority overseeing the process.

The earliest blockchains, like the one behind bitcoin, are just used to store and transmit digital money. But Ethereum and other newer blockchains can support a variety of other applications, from games where users swap virtual kittens to peer-to-peer lending networks.

Such decentralized applications set the stage for DeFi, which refers to crypto ventures that replicate functions of traditional finance—such as banking, insurance and exchanges—on the blockchain. Over the past year, crypto investors have poured tens of billions of dollars into DeFi projects, which typically allow them to earn interest on their digital-currency holdings.

For wider adoption, though, DeFi may need a better blockchain—and that is where Solana hopes to make it big. Many DeFi ventures use Ethereum, which has suffered bouts of network congestion this year, resulting in slow settlement times and high fees. Ethereum currently handles 13 transactions a second, according to data provider Blockchair.com.

By comparison, Solana says it can process more than 50,000 transactions a second, a capacity that could increase further, as new hardware is added. That ability to scale up could make Solana competitive with more established financial firms:

Visa Inc.,

for instance, says it can handle more than 65,000 transactions a second.

“Solana has the most ambitious tech road map of any blockchain, and they’ve been making impressive progress on it,” said

Sam Bankman-Fried,

chief executive of Alameda Research, a crypto-trading firm that invested in Solana’s new funding round. “It’s a blockchain that has the potential to support a DeFi ecosystem with world-scale activity.”

Solana also says it uses less electricity than Ethereum or bitcoin, a potential advantage, given mounting concerns in recent months over the energy use of cryptocurrencies.

Still, there’s no guarantee that Solana will succeed. A number of other “Ethereum killers” have also launched high-capacity blockchains. Ethereum also has a huge head start, with about $59 billion in assets deposited as collateral in DeFi projects based on the Ethereum blockchain, according to the website DeFi Pulse. By comparison, Solana-based DeFi projects have about $1 billion. The speed and energy efficiency of Ethereum are also expected to improve significantly with a long-planned upgrade that could launch as soon as this year.

Solana’s CEO is

Anatoly Yakovenko,

a former engineer with chip maker

Qualcomm Inc.

He co-founded Solana along with two other ex-Qualcomm engineers and

Raj Gokal,

an entrepreneur who previously worked in the digital-health sector.

The total, fully diluted market capitalization of SOL tokens—a potential measure of the valuation of Solana’s network—is around $20 billion at current prices. Investors that bought such tokens in the latest funding round are betting that their value will appreciate, as more users adopt Solana’s blockchain for various applications.

Before the new funding round, Solana had raised about $21.8 million, according to Crunchbase. Other investors in the new round include crypto-focused investment firm Multicoin Capital and Jump Trading, a Chicago-based high-frequency trading firm active in crypto and traditional markets.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com