Solana Blockchain Explained: Understanding the High-Throughput, Low-Cost Network

At its launch, the Solana blockchain was dubbed the “Ethereum Killer; and this framing played a significant role in its rise in ranks in the blockchain arena. In a world long dominated by legacy networks like Bitcoin and Ethereum, plagued with high fees and slow transaction times, Solana promised something different: high transaction processing speeds at a fraction of a cent. 

Launched in 2020 by Anatoly Yakovenko, Solana rapidly became a top-performing network, transitioning from an ambitious whitepaper to an experimental protocol (mainnet beta) to a fully functioning blockchain.

The secret sauce? A novel combination of a Proof-of-Stake (PoS) and a Proof-of-History (PoH) consensus model, which allows validators to process transactions in parallel rather than sequentially. The outcome is one of the fastest and low-cost smart contract platforms ever built, powering everything from decentralized exchanges (DEXs) and NFT marketplaces to memecoins, games, and payment dApps.

But this performance edge comes with trade-offs – the blockchain has suffered multiple network outages since its launch, raising concerns about reliability and true decentralization.

In this article, we’ll explore exactly what Solana is, how its unique architecture works, why it matters, and the challenges it still faces.

Solana Blockchain Explained: Origins and Development

Solana is an open-source blockchain that offers high throughput and low transaction fees for both developers and users, especially when compared to older networks like Ethereum. Its native token, SOL, currently ranks among the top 10 cryptocurrencies by market capitalization.

In 2017, Anatoly Yakovenko, an ex-Qualcomm engineer, published the Solana whitepaper introducing the PoH concept. Drawing from his prior experience in distributed system designs, Yakovenko realized that a lack of a reliable, automated way to timestamp transactions made legacy blockchains inefficient. This forced validators to constantly check in with one another to confirm blocks, slowing transaction execution.

His solution? PoH – a consensus that serves as a cryptographic clock that records the order of events. It was conceptualized to simplify network synchronicity, a realization that led to an exponentially faster network.

Yakovenko later teamed up with Raj Gokal and Greg Fitzgerald to build Solana Labs, which launched the blockchain in March 2020 as a “mainnet beta”, following a series of testnet releases. 

Solana quickly gained traction and massive adoption during the 2021 DeFi and NFT boom. Developers flocked to the network, SOL’s value surged, and a Solana wallet emerged for every use case and user. These improvements fueled conversations around Solana being an “Ethereum killer.”

Compared to competitors that depend on layer-2 scaling solutions, Solana aims to achieve scalability at the base layer. It relies on a smaller group of fast, powerful computers to maintain the network and process large volumes of transactions.

How Does Solana Work?

Solana uses both PoS and PoH consensus models to achieve its functionality. PoS serves as the security layer, relying on validators who stake their SOL to verify transactions, add new blocks, and maintain the network. The SOL token is also used to settle transaction fees incurred during blockchain interactions. 

PoH, on the other hand, functions as a cryptographic clock, establishing a verifiable record of the sequence of all events.

Proof of Stake and Proof of History consensus algorithms

Blockchains typically require a way for nodes – computers that are part of a network – to agree on the order of transactions. Such a requirement often slows down blockchains, as nodes must consistently cross-validate transactions before immutably recording them.

Solana overcomes this bottleneck using its Proof of History (PoH) model, proposed by Anatoly Yakovenko himself as a pre-consensus algorithm. It’s a decentralized clock for blockchains, verifying the passage of time of each block for historical data accuracy. Simply, PoH maintains a consistent record of all transactions and events in a chronological order.

Using cryptographic timestamps, PoH allows each validator to immediately trust the network’s timeline without requiring constant coordination or communication. This lowers the required coordination among validators, significantly boosting the overall network’s transaction throughput.

While Solana relies on PoH for transaction ordering, final block validation uses a PoS mechanism. This integration allows it to confirm and sequence transactions in parallel, giving it its signature edge of speed and affordability. 

PoS allows validators to stake their SOL to secure the network for the opportunity to earn block rewards. Should the validators act maliciously, the mechanism confiscates their staked SOL through a process called slashing.

In short, the PoS-PoH combination allows Solana to process thousands of transactions per second with sub-second finality. As a result, it substantially reduces waiting time while equally lowering transaction fees. In short, the hybrid system offers a balance of speed, security, and energy efficiency essential to Solana’s high performance.

Tower BFT and Turbine

The Tower Byzantine Fault Tolerance (BFT) algorithm is an optimized version of Miguel Castro’s and Barbara Liskov’s 1999 publication of Practical BFT. This custom implementation uses PoH as a clock pre-consensus to minimize messaging overhead and latency by ensuring validators know precisely when to vote and confirm blocks. It facilitates deterministic finality, verifying and making transactions immutable in seconds.

On the other hand, Turbine represents Solana’s block propagation protocol. This protocol is required to broadcast blocks to each node in the network.

Turbine contributes to Solana’s high speed by efficiently distributing blocks to validators. It splits each block into smaller pieces, called shreds, and shares them within small groups of validators. Each group then forwards them until the entire network is updated. 

Gulf Stream and Sealevel

While most traditional blockchains use mempools, the waiting room for unconfirmed transactions, Solana uses Gulf Stream – a mechanism that directly forwards transactions to the next block producer. By bypassing the waiting stage, this mechanism enables Solana to reduce congestion and lower confirmation times. It facilitates maintaining an optimal, rapid efficiency by preventing a backlog of unprocessed transactions.

Furthermore, Solana leverages the Sealevel engine to achieve its parallel transaction execution. Unlike Ethereum’s sequential transaction processing, this engine identifies and processes non-conflicting transactions concurrently. 

With transactions declaring their state access up front, the Sealevel engine executes multiple smart contracts across CPU cores simultaneously. This parallel processing lets Solana efficiently handle high workloads from dApps, such as DeXs and blockchain games, without performance loss.

Pipelining, Cloudbreak, and Archivers

Pipelining refers to the process of optimizing transaction processing by breaking it down into sequential stages and assigning each stage to a specialized hardware. By overlapping the transaction processing steps, it significantly reduces the time it takes for a single node to validate a large block of transactions. It also ensures that no part of the system remains idle, using all available hardware resources to their max. Moreover, it allows Solana to scale vertically with hardware improvements.

On the other hand, Cloudbreak is a horizontally scaled database that enables Solana to handle high transaction volumes and achieve scalability without relying on sharding or layer-2 scaling solutions. It allows simultaneous read and write access, which is essential for Solana’s parallel smart contract runtime. In addition, Cloudbreak distributes data across as many Solid State Drives (SSDs) as are available, allowing performance to scale with the hardware capacity.

Another key technology is the Archivers. These are essentially lightweight nodes responsible for the decentralized, long-term storage of the blockchain’s historical ledger data. Archivers are an essential part of Solana’s strategy for handling the petabytes of data created by its high transaction speed without burdening its validators. 

Benefits of the Solana Blockchain

There are a few key benefits of using the Solana blockchain, both as a developer and an end-user.

• Reduced Latency and Overhead – Solana’s Proof of History consensus acts as a cryptographic clock, creating a verifiable, sequential record of events on the blockchain. This timestamping allows validators to process and order transactions without real-time communication and coordination, reducing latency and overhead.
• Low transaction costs – Even during high network activities, Solana’s transaction fees tend to be significantly lower compared to its competitors’. As one of the most cost-effective blockchains, its average transaction fees are consistently under $0.001.
• Scalability and speed – The blockchain is synonymous with its high transaction throughput, reaching a theoretical 65,000 TPS in optimal conditions, but in practice, the actual TPS ranges from 2,000 to 4,000 TPS, including validator votes. This throughput is especially essential for real-time applications like blockchain games and high-frequency trading platforms.
• Parallel processing – Solana’s Sealevel runtime facilitates the simultaneous execution of non-overlapping transactions and smart contracts. This capability allows the network to drastically increase throughput, reducing waiting times.
• Periodic Upgrades – Solana continually refines its stability and performance through ongoing upgrades. Key upgrades include the QUIC protocol for better transaction handling and the Firedance validator client, which contributes to greater decentralization and fault tolerance.

Solana’s Use Cases

The SOL token

SOL is the network’s native cryptocurrency and plays a significant role in the network’s operations and governance. The key applications of the SOL token include:

• Network fees – Covers fees required for transactions and smart contract executions.
• Staking – Holders can stake their SOL by delegating it to validators to secure the network and earn rewards.
• Governance – Holders can participate in voting on network proposals and upgrades.
• Ecosystem interactions – Facilitates interactions with dApps across the Solana ecosystem, including DeFi protocols, NFTs, and gaming.

Solana Program Library (SPL)

The native token itself is created using the Solana Program Library (SPL), a collection of pre-built programs or smart contracts that allow developers to create their own custom tokens. The SPL token program typically defines the standards for creating and managing tokens on the blockchain.

Similar to Ethereum’s ERC standards, the SPL offers reusable, pre-coded components. These components simplify common tasks like minting tokens, managing governance, and maintaining on-chain records. Most Solana-based tokens and DeFi protocols are built using this standard.

Ecosystem 

Solana’s architectural design addresses the scalability challenges earlier blockchains faced, allowing it to power a robust ecosystem of DeFi applications, NFTs, gaming, and payment systems.

• DeFi – DeFi protocols, such as Raydium, Orca, and Mango Markets, leverage Solana’s parallel smart contract execution to deliver real-time trading, rapid swaps, yield farming, and lending services with minimal slippage. Solana’s efficiency contributes to its DeFi’s steady growth, with total value locked (TVL) of $15.18 billion as of this writing.
• Stablecoins and institutional adoption – Solana’s high throughput, low fees, growing liquidity, and token extensions have attracted major stablecoin issuers and payment companies. Visa and Western Union, for instance, use Solana for stablecoin settlement and issuance. Payment processors like BitPay let merchants accept USDC and USDT on the Solana platform. Major stablecoins on the network include USDC, USDT, and PYUSD, among others.
• NFTs – The blockchain offers a robust on-chain infrastructure for creating and managing NFTs. It supports innovations such as compressed NFTs (cNFTs) and executable NFTs, which enable lower costs and broader use cases. These digital assets are actively traded across marketplaces like Magic Eden, Tensor Trade, Solanart, and OpenSea.
• Blockchain gaming – High speed, extremely low fees, and a robust set of developer tools address the key challenges early blockchain games faced, making real-time, engaging experiences more feasible. GameFi projects like SonicX, a tap-to-earn (T2E) game, use the Solana Virtual Machine (SVM) to offer straightforward onboarding and social features. Star Atlas, a blockchain game originally built on the Solana blockchain, is in the process of transitioning to a dedicated SVM to improve scalability, performance, and control over its in-game economy.
• Memecoins and cultural activities – Solana’s meme coin economy is a significant and vibrant part of its ecosystem. Its environment fosters high-frequency, speculative trading and community engagement, generating significant transaction fees for validators and driving on-chain activities. This economy is driven by platforms like pump.fun, which simplifies launching tokens at minimal costs while removing coding experience requirements.
• Developer adoption – Developers are drawn to Solana by its high performance, maturing ecosystem, improved tooling, and growing real-world use cases in payments and asset tokenization. Chainspect reported that Solana currently has the most active developers across all blockchains in 2025.

Solana’s Tokenomics

A cryptocurrency’s tokenomics refers to the analysis of the fundamental factors that influence its value and utility. Such factors include its creation, supply, distribution, crypto burning, and incentivisation mechanisms. 

Solana’s economic model is no different, geared towards supporting the network’s growth and sustainability. Its unique approach to tokenomics encompasses factors such as token supply, token distribution and allocation, staking rewards, validator economics, token utility, token burning, and inflationary model.

To explain, Solana operates without a fixed supply limit, distinguishing it from Bitcoin’s 21 million hard cap. It currently has approximately 615 million SOL in total supply, with around 560 million tokens in active circulation. This uncapped approach supports the network’s economic model, which balances growth incentives with mechanisms designed to maintain scarcity.

The network follows a disinflationary schedule that was initially set at 8% annual inflation rate. This rate decreases by 15% each epoch-year, eventually settling at a long-term floor of 1.5%. The current inflation rate sits at approximately 4.145%. New SOL tokens primarily reward validators and delegators who secure the network through staking—a critical function that currently locks up around 65% of the total supply in either traditional or liquid staking protocols.

To counterbalance inflationary pressures, Solana implements a fee-burning mechanism. A fraction of every transaction fee (approximately 50%) is permanently destroyed, while validators retain the remainder as block rewards. This creates deflationary pressure that intensifies with network activity. During periods of high transaction volume, fee burns can offset a substantial portion of new token issuance, though they’ve historically remained below the inflation rate.

The initial token distribution allocated resources across multiple stakeholder groups: 16.23% went to seed sales, 12.92% to founding sales, 12.79% to team members, and 10.46% to the Solana Foundation. The remaining tokens were distributed through public and private sales or remain subject to vesting schedules. This distribution has sparked concerns about decentralization, though the gradual unlocking of vested tokens has increased circulating supply accessibility over time.

Recent community discussions, such as SIMD-0411, have centered on potentially reforming the inflation model. Proposals include shifting to a purely fee-based validator compensation system or implementing more aggressive fee-burning mechanisms—changes that could transform SOL into a deflationary asset. 

What Challenges Does Solana Currently Face?

Solana holds a clear competitive edge over rival blockchains due to its high throughput, low costs, and overall efficiency. However, this competitive advantage does not come without its challenges. 

Some of the long-standing concerns include:

Network outages and downtime

Solana has experienced multiple network outages, mostly caused by client-side bugs, validator misconfigurations/coordination issues, and transaction spam overloading the network. Such incidents lead to either partial or prolonged network downtime, raising concerns about the network’s reliability and resilience under heavy transaction loads.

In December 2020, an unidentified defect in Turbine, the block propagation mechanism, triggered a flaw in Solana’s block repair and code processing. The disruption occurred when a validator sent two different blocks for the same slot, which propagated across two partitions, causing a third partition to detect the resulting inconsistency. The downtime lasted for approximately six hours.

It experienced another major network stall in September 2021, 12 minutes after the Grape Protocol launched its IDO on a crowdfunding platform. The network was quickly overwhelmed by a surge of bot transactions, which acted as a distributed denial-of-service (DDoS) attack. The transaction spam exceeded the network’s processing capacity, causing it to stop producing rooted slots. The network went completely offline for 17 hours.

It also suffered a partial outage in January 2022 due to high congestion, an eight-hour downtime in April/May 2022 due to transaction spam, a four-and-a-half-hour downtime in June 2022 due to a runtime bug, and several other instances.

Centralization concerns

Validator centralization is another significant challenge the network faces. With fewer validators than other major networks, it risks overreliance on a small subset of validators. The high validator requirements that the network enforces limit decentralization, necessitating a certain degree of centralization. 

This concentration can potentially slow network recovery or increase vulnerability to censorship during periods of network stress. Its community, however, is focused on strategies to increase validator involvement, which is essential for maintaining strong security as the network continues to scale.

Regulatory scrutiny

In July 2022, an investor filed a class-action lawsuit against Solana Labs, alleging that Solana is an unregistered security. The investor alleges that the blockchain fails to meet the definition of “decentralization” because nearly half of its supply is retained by the individuals closely associated with the project. 

The U.S. Securities and Exchange Commission (SEC) also sued Coinbase in June 2023, claiming that Solana, along with 12 other cryptocurrencies that the platform offered, met the criteria of a security under the Howey Test. The suit alleged that by offering these tokens, Coinbase was illegally evading necessary disclosure requirements.

The commission also considers factors like the potential for market manipulation when evaluating whether to approve a Solana ETF, a review process necessary for investor protection.

Market volatility

Similar to other cryptocurrencies, SOL tokens are subject to price fluctuations. A combination of past network outages, wider fluctuations in the crypto market, and external macroeconomic factors contributes to Solana’s significant market volatility. 

Solana’s inherent unpredictability can result in sudden price swings. This can potentially complicate investors’ strategic investment and undermine user confidence, causing them to turn to more stable platforms.

Solana’s Future Development and Roadmap

Solana’s development roadmap focuses on scaling beyond 100,000 TPS, improving energy efficiency, and interoperability. Its upcoming upgrades are designed to solidify Solana’s status as a leading platform for high-throughput, low-cost dApps.

Some of the key planned upgrades and technical developments include:

• Firedancer – A validator client built by Jump crypto, intended to improve network resilience and process over a million TPS. While the complete Firedance client is not yet fully on the mainnet, Frankendancer, a hybrid version, was launched on the mainnet in September 2024. Its projected mainnet rollout timeline is not yet specified.
• Alpenglow – An upgrade slated to replace the network’s current consensus mechanism for faster finality. The redesign is expected to reduce transaction finality time to under 150 milliseconds by eliminating validator gossip. Its rollout is anticipated for Q1 2026.
• Hydra upgrade – A planned upgrade to introduce sharding-like state partitioning to increase parallelism and transaction throughput. It aims to improve Solana’s capacity to process a large volume of transactions, making it more scalable for dApps.
• Application-Controlled Execution (ACE) – A proposal to allow smart contracts to directly control the ordering and settlement of trades, letting applications define sequencing rules. 
• Zero-knowledge rollups (ZK rollups) – The roadmap includes the integration of ZK rollups to facilitate private transactions and optimize data compression, reducing the cost of token creation.

How To Get Started on Solana

You can get started with Solana as follows:

1. Set up a wallet – Pick the best Solana wallet, a wallet that best aligns with your needs. With a wallet like Ledger, you get the convenience of a software wallet (via Ledger Wallet) combined with the superior security of managing your private keys through the signer.
2. Acquire some SOL – You can easily onramp and offramp SOL directly from your Ledger Wallet. Once you buy Solana, you can interact with dApps, invest in DeFi, or even mint your own custom SPL tokens.
3. Perform your first transaction or write programs – As a user, you can perform various actions including sending your Solana, staking it, or using it to participate in the Solana ecosystem.

Conclusion

Even with its combined speed, cost efficiency, and decentralization, Solana isn’t a perfect blockchain. No blockchain is. But its innovative hybrid mechanism of PoH and PoS model and growing ecosystem of DeFi, NFTs, and gaming makes it a formidable contender in the blockchain space.

Notwithstanding its persistent network issues, Solana’s ambitious roadmap and planned technical developments are anticipated to facilitate significant scaling. These advancements not only aim to solidify Solana’s position as a high-throughput, low-transaction-cost platform but also to effectively mitigate current network issues. Simply, the upcoming upgrade can potentially improve the overall user experience on the blockchain.

Frequently Asked Questions

What makes Solana different from other blockchains?

Solana uses a combination of PoH and PoS consensus models. PoH allows validators to sequence transactions quickly, while PoS enables validators to verify transactions. This hybrid system results in faster transaction times and lower fees compared to most alternative blockchains.

Who founded Solana, and when did it launch?

Anatoly Yakovenko founded Solana, and was later joined by Raj Gokal. The mainnet beta launched in March 2020.

How many transactions per second can Solana process?

Solana can theoretically handle 65,000+ transactions per second, though actual throughput varies based on network conditions.

What are SOL tokens used for?

SOL is used for paying transaction fees, staking to secure the network, and participating in governance decisions.

How does Solana compare to Ethereum?

Solana offers faster transactions with sub-second finality and lower transaction fees than Ethereum. However, Ethereum boasts a larger ecosystem, more developers, and a longer track record of security.

Is the Solana environment friendly?

Yes, Solana is relatively energy-efficient compared to Proof-of-Work (PoW) networks. It uses significantly less energy per transaction than Bitcoin or pre-merge Ethereum.

Are there risks to using Solana?

Yes—risks include a history of network outages with partial and prolonged downtimes, smart contract vulnerabilities, price volatility, and the inherent risks of cryptocurrency investments.

How can I store SOL securely?

You can delegate (stake) Solana SOL coins through Ledger Wallet™ and easily track your SOL rewards right in Ledger Wallet using the Earn dashboard. Learn more about staking SOL through Ledger here.

How do I stake SOL?

You can stake through wallets like Phantom or Solflare by delegating your SOL to validators. This helps secure the network and earns you staking rewards.