What Is Solana?
Solana (SOL) is a decentralized, high-speed blockchain that can handle thousands of transactions per second while being secure. No one has yet achieved all three characteristics (a.k.a. the blockchain trilemma), but Solana thinks its proprietary technology can.
Solana was founded in 2017 by Anatoly Yakovenko to compete with Ethereum in the layer one blockchain market. Ethereum developers use Solidity, a little-known yet difficult-to-learn programming language. Aside from the small pool of Solidity programmers, Ethereum's transaction consensus is based on a sluggish and inefficient proof of work algorithm.
Solana uses Rust to write smart contracts instead of Solidity or another specialist language. In a recent study of software developers, 90% of respondents claimed they currently use or have used Rust in the past. Solana now has access to a large pool of developers already familiar with the blockchain's native language.
Furthermore, rather than adopting proof of work, as Ethereum and Bitcoin do, Solana's developers chose proof of stake consensus with proof of history transaction ordering. The latter is a Solana innovation that allows the company's network to process up to 50,000 transactions per second.
In other words, Solana is a lightning-fast cryptocurrency and one of Ethereum's most significant competitors. Things start to get intriguing behind the hood, so let's look at how Solana works and what the popular SOL token is all about.
So, what exactly is Solana?
Solana is a censorship-resistant, fast, secure blockchain that provides the open infrastructure needed for worldwide adoption.
Solana is a layer one blockchain network that aims to grow up to billions of users daily. Consider the importance of Solana's mission in the context of Visa. People swipe Visa cards at such a rapid rate worldwide that several thousand transactions happen every second.
On the other hand, Visa is centralized and only does one thing: handle transactions. On the other hand, Solana intends to go beyond Visa's capabilities by employing a decentralized network that can also host apps on the Web3, a new sort of internet.
Until now, no blockchain has been able to solve the blockchain trilemma. Scalability, security, and decentralization are all aspects of the trilemma. Unless you're Solana, you usually have to give up one of those attributes to get the other two.
Solana employs a combination of proof of stake consensus and proof of history to solve the blockchain trilemma. Because Solana scales its performance up to 50,000 TPS, the main innovation here is proof of history. So, let's look at how it works in more detail.
Solana's method of scalability is based on proof of history.
To grasp the Solana evidence of history, you don't need to read a lot of technical material. It's a clock for Solana that organizes transactions depending on timestamps, to put it simply.
Blockchains had difficulty settling on when an event occurred before Solana devised proof of history. Because decentralized systems can't refer to third-party sources of information without jeopardizing the blockchain's integrity, this is the case. Most blockchains deal with this by broadcasting the message in question around the network until most nodes approve it. The message was then broadcast over the entire network.
You're right if you think that sounds like a lot of effort with a lot of lag time. As a result, it's no surprise that blockchains that use this technique to organize transactions are extremely slow. Ethereum, for example, can only process about 15 transactions per second.
By simply having the timestamp registered with each event trustworthy in and of itself, Solana avoids the convoluted approach of structuring transactions. We can save a lot of time and process transactions faster if we can all agree ahead of time that X event occurred at Y time.
Proof of history hashes events using SHA 256 encryption, neatly organizing them for validators who add them to blocks. Validators spend less time validating due to removing the work of arranging transactions from their hands, making the entire network more efficient. Keep in mind that efficiency equals speed.
Solana can execute 50,000 transactions per second thanks to proof of history, making it the world's fastest layer one blockchain. However, it's important to note that proof of history comes before proof of stake consensus. All PoH does is organize transactions before consensus, reducing the amount of time and effort required.
Solana's key feature is proof of history, so the designers constructed the entire game around it. It's simple to see why: Solana processes 25 blocks when it takes Facebook's Diem to analyze one block.
The best features of Solana
Solana won't be able to reach its design aims unless it can combine proof of history with other new technology achievements. The Solana team has also created eight essential breakthroughs, but let's focus on the three best features of Solana.
Solana attributes the solution to the blockchain scaling trilemma to a technology component called Turbine. Solana propagates blocks to the network in packets rather than sending complete blocks to the network, 128 MB in size.
The 128 MB block is split into 2,000 64 KB packets by a leading validator, then sends the packets to 2,000 separate validators. After swapping the packet with a small set of validators known as a neighborhood, each receiving validator passes its data to the next neighborhood.
Because little packets are retransmitted rather than huge ones, demand on Solana's bandwidth stays low, allowing block data to reach 40,000 validators in under 200 milliseconds.
In Ethereum and Bitcoin networks, mem pools are the number of unconfirmed transactions waiting to be processed. The burden on validators grows as the quantity of network activity grows. That's why, during token sales, NFT events, and high-volume decentralized exchange trading, mempool queues expand enormously.
Solana solves the unprocessed transaction mempool problem by allowing validators to handle mempool queues of up to 100,000 transactions. Solana processes 50,000 transactions per second, 100K txs in the mempool clear in under two seconds.
Running smart contracts is time-consuming for first-generation smart contract platforms like Ethereum and EOS. Both platforms can operate a single, smart contract at a time due to their current architecture.
Consider Web3 as a blockchain-based platform. Numerous people are exploring various applications, dealing with decentralized finance, playing blockchain games, and minting NFTs. Smart contracts must run in the background during certain times, but many of them will be consigned to mempool queues.
Sealevel, Solana's answer to single-threaded runtimes' slowness, is a runtime that allows thousands of smart contracts to run in parallel. The obvious significant benefit is that transactions can process and execute simultaneously, bringing Solana up to internet-scale functionality.
Ethereum vs. Solana
Along with Polkadot, Dfinity, Cardano, and the upstart Near Protocol, Solana is one of Ethereum's key competitors. While there are some similarities between Ethereum and Solana, the contrasts are more pronounced.
Solana has a transaction throughput of 50,000 transactions per second, whereas Ethereum has a limit of roughly 15.
Both networks employ native tokens ETH and SOL to pay transaction fees. However, Solana fees are far lower at $0.00001.
Ethereum is the undisputed leader in DeFi, with a total market cap of $80 billion. Solana has a DeFi TVL of $1.5 billion.
In terms of acceptance, Ethereum easily outperforms Solana. Daily Ethereum consumption has reached all-time highs thanks to NFTs and DeFi.
Solana has a considerably more energy-efficient proof of stake algorithm than Ethereum, which uses an energy-intensive proof of work process.
As you can see from the chart above, Solana outperforms Ethereum in terms of transaction speeds, costs, and long-term sustainability. However, Ethereum's first-mover advantage is paying off handsomely.
Ethereum was established in 2015, giving it a several-year head start on Solana. This has aided Ethereum in accumulating the great majority of DeFi value, and it also explains why NFTs are now available on the platform.
That isn't to say that Solana won't catch up to Ethereum in the DeFi and NFT industries, all of which are critical to adoption, but the platform still has a long way to go. Solana recently raised $314 million to help pave the way to parity with Ethereum, enough to fund its ecosystem for years to come.
Solana SOL token explained.
SOL is the Solana blockchain network's native cryptocurrency token. SOL is described as a utility token because it is utilized for various purposes within the Solana ecosystem. Payments and Solana staking are the two most common applications for SOL.
To pay for transactions, use SOL.
In the same way that ETH is used for Ethereum, SOL tokens are used to pay for Solana transactions. You pay a gas cost in SOL every time you utilize an application, send a payment, or otherwise engage with Solana smart contracts.
To earn rewards, stake SOL.
Solana is a proof-of-stake network where validators must stake SOL tokens to validate transactions. On the other hand, most people will choose to delegate their stake to a validator while still reaping the rewards of staking.
SOL tokens can be staked using an FTX Exchange wallet or a SolFlare wallet with a hardware wallet.
SOL is deflationary because of token burn.
Most mediums of exchange assets, including cryptocurrency tokens, are prone to inflation. Over time, more tokens are added to the circulating supply. Some tokens have predetermined reserves, while others do not - it all relies on the token's economics.
Solana incorporates a mechanism fittingly dubbed dis-inflation to prevent token inflation and restrict the SOL supply to the point of deflation. Each transaction charge is deducted 50% from the supply, permanently lowering the amount of SOL in circulation.
The goal is to raise SOL token scarcity, making it a smart long-term investment and a compelling proposal for would-be validators.