What is Solana?
|— Among new generation blockchains, Solana is tackling key issues of slow network speeds, high transaction costs, and security concerns.
— In doing so, Solana has built a consensus mechanism called Proof of History (PoH.)
— The network combines its benchmark PoH with the more traditional PoS (Proof of Stake) protocol to achieve its network’s overall goals
—Impressively, its native token, SOL, is among the Top 15 coins on the crypto charts
Deep down a crypto rabbit hole and Solana caught your attention? We’ve got you covered. Learn what is Solana.
Why do we need Solana?
Blockchain tech is evolving at a rapid pace. While many of us are still trying to catch on to it, and crypto in general, some really smart people are doing some really innovative things to push blockchain to its full potential.
When you’re chatting with friends about crypto, it’s very likely you’ll bring up Bitcoin and Ethereum, and that’s really no surprise. Ethereum is the most widely used blockchain network for DeFi (decentralized finance) projects and NFTs because it pioneered smart contracts and dApps.
The problem is – because of its popularity, the network has become riddled with critical issues. Not only is it extremely expensive to interact with, but its entire ecosystem is sluggish. Ethereum can’t handle the number of transactions that are in queue to be verified, since it is only capable of executing around 15 TPS (transaction per second.)
The good news is, there are several alternatives to Ethereum that have introduced upgraded blockchain solutions that appeal to both individuals and enterprises. Solana is one of the pivotal networks that are tackling Ethereum, bringing blockchain use-cases to new heights. Among the several use-cases that Solana is impacting, are DeFi, dApps (decentralized applications), NFTs, digital ownership, and global commerce.
Solana: a backstory
Founded in 2017, Solana’s aim from the get-go was to tackle Ethereum’s problems head-on.
The Solana team zeroed-in on Ethereum’s “triple threat” (high costs, low speeds, and security concerns) eager to create a blockchain network that could shift transaction times into turbo mode. Next, addressing the remaining issues, the team worked to ensure it could offer people uncompromised security together with much more affordable transaction fees.
Thus, a new verification protocol was introduced to the tech world: PoH, or “Proof of History.” Thanks to PoH, Solana’s blockchain is capable of running 50,000 TPS (transactions per second), while Ethereum at its current state (before ETH 2.0), as mentioned earlier, can only take on between 15-45 TPS.
That’s a heck of a difference.
How does Solana work?
Built with speed, security, and affordability in mind, Solana’s network combines the PoS (Proof of Stake) consensus algorithm with its trademark PoH system.
Many networks, including Bitcoin and Ethereum, approve the most rewarding (most expensive) transactions faster than the smaller ones. That’s because they are still using the old-school PoW (Proof of Work) consensus algorithm which lets miners choose the most lucrative transactions first.
In contrast, PoH is built like a stopwatch. Think about runners in a sprint race, each of them receiving a final timestamp at the exact moment they cross the finish line. That’s how PoH works – it records all transactions in real-time, which in turn leads to them being processed in order rather than miners prioritizing the big ones first.
The even greater reward is that this system speeds up the entire network because it also incorporates PoS. Don’t let that throw you off too much, all it means is that when you combine PoH with PoS, it takes much less time to confirm the order of transactions. When the two work together, selecting the next validator for a block is much easier. Nodes need less time to validate the order of transactions, meaning the network chooses a new validator much faster.
Finally, Solana’s network consumes far less energy than PoW blockchains like Bitcoin’s, because it consolidates transaction approvals into groups of nodes rather than each node running on its own computer, like in PoW. In turn, the network offers very competitive transaction fees, currently less than $0.01 per transaction. In contrast, Bitcoin’s average is around $20.
SOL token: a rising star
Solana is powered by its native token, SOL. If you hold SOL, you can stake Solana tokens within the network, a staple of PoS blockchains.
And if you happen to use a compatible Solana wallet, you can stake your tokens with validators who process the network’s transactions, giving you passive income every time you are part of a successful validation.
What all of this means for the network as a whole is that all participants have the network’s best intentions in mind, incentivized by lucrative reward pools, therefore discouraging bad actors.
SOL is, at press time, #15 on the crypto charts, reporting a 6000% surge in price since last year around this time. That’s a pretty big deal for a new project, so it’s important to examine why this is happening.
The Solana project is geared towards online businesses, letting merchants all over the world transact seamlessly with crypto payments while receiving full payment settlements almost immediately. Many of us don’t realize that when we buy things online, it takes days, even weeks for online merchants to actually get their funds settled.
Since SOL has such an impressive underlying use case, it’s no wonder the Solana price is holding steady in the crypto charts.
Solana has been supercharging SOL thanks to recent big-time partnerships. Among the largest of those is Kin, the native token of Kik chat, hand-picking Solana’s network because of its low fees, high speed, and iron-clad security. Kin recently moved to the Solana blockchain, bringing with it some 60 million individual wallet holders.
Solana is one of the newer blockchain projects, but it has no doubt provided the benefits it stands behind: speed, security, and scalability. As much as it has been garnering high-profile partnerships, it’s important to remember that the network is still in its growing stages.
Future use cases for the network are promising; since it offers promise for the mass adoption of crypto payments thanks to its core utilities, SOL and its underlying blockchain could change the way we pay for things very soon.
Imagine all the ways Solana could fuel our personal shopping experiences. In the future, we could transact on top of Solana’s blockchain without even knowing it. On the flip side, until we see just how many businesses integrate with Solana, we won’t know whether the network’s benefits can truly make a dent in the crypto industry.
Ultimately, Solana has all the properties of a competitive blockchain, and together with its token, SOL, it is very likely to change the way all of us buy and sell pretty much anything tangible.