What is Solana?

Solana is a smart-contract platform, Solana, made by Anatoly Yakovenko and other co-founders in March 2020. It is headquartered in Geneva, a city located in Switzerland. It was designed to be faster and carry more transactions per second by using a combination of the Proof-of-History and Proof-of-Stake consensus algorithms. The result of this is extraordinarily fast processing times. Ordinary blockchains like Ethereum and Bitcoin can only manage an average of 15 transactions per second, however, Anatoly’s Loom, later renamed Solana, can scale 50,000 – 65,000 TPS (transactions per second)!

As it is ultra-fast, Solana also states to have solved the blockchain trilemma, and in doing so, it may be on the brink of achieving a major milestone in the evolution of blockchains. We will explain about that later in the article.

About Solana

Anatoly began the project and initially implemented it in the C programming language and was later convinced by Greg Fitzgerald, a colleague of his at Qualcomm Incorporated, to remake his project, this time, however, using Rust.

Anatoly Yakovenko, Greg Fitzgerald and another colleague of theirs, Stephen Akridge, along with 3 others co-founded his project, at the time named Loom.

Later, due to a confusion between Loom and the emerging project Loom Network, based on Ethereum, Loom was renamed to Solana, the place where the former Qualcomm colleagues lived.

What is SOL

SOL is the native token of the Solana Ecosystem and can be used to pay fees in the Solana network. The symbol for SOL is ◎. The SOL token plays a similar role in Solana just like any other (i.e XTZ on the Tezos network or ADA on Cardano). From the total amount of the initially minted SOL tokens, ≈ 38% were allocated as community tokens. ≈ 35.4% was designated to locked investors. ≈ 12.5% was reserved by the founders. ≈ another 12.5% was held by the Solana Foundation. Finally, the remaining 1.6% was sold at auction.

The Solana protocol and SOL token were released to the public in 2020. SOL can be used for many things such as running a verifier node, to earn staking rewards, for PoS voting for governance of the network, to transmit value on the Solana network etc. In addition to those, SOL is also used as fees for Solana transactions. The average fees charged is 0.000005 ◎. 489 million SOL tokens are released in circulation. In that, already 272,637,427.58 SOL have entered the market. Every day, around $392,260,435 worth of SOL gets traded.

The Blockchain Trilemma explained

What is the blockchain trilemma? Well, for beginners, let’s look at what a trilemma is – A trilemma is a situation where we have to make a choice from three equal choices. The Blockchain Trilemma was regarded by the founder of Ethereum, Vitalik Buterin. It claims that a blockchain can have any choice of characteristics out of three but not all of them. These characteristics are –

Scalability
Security
Decentralization

Scalability

Scalability is a major component of blockchains. It refers to the ability of the blockchain to proliferate the TPS (transactions per second) in a blockchain network and uplift the optimization of the blockchain.

Decentralization

In a decentralized service, several authorities rather than a single one have control over the service. No one organisation can determine the value of these coins, which keeps it safe and secure. In a centralized service, however, a single party has control of the service.

Security

EOS’s blockchain has high scalability and is also decentralized. So, due to the blockchain trilemma, EOS is not as secure as other cryptos.

Solana’s Solution

Solana used a combination of Proof-of-History and Proof-of-Stake consensus algorithms to speed up transaction times and solve the Blockchain Trilemma. Solana claims to have high scalability, heightened security and also provides decentralization. So, let’s have a look at Solana’s antidote for the trilemma, Proof-of-History.

Proof-of-History in simple words

Proof-of-History is a consensus algorithm developed by Solana. A major problem in blockchains is for everyone to agree on the time in which a transaction was made and is ready to evaluate. A blockchain is nothing without order, a blockchain in a different order is a different blockchain. And for it to be in order, you can use timestamps. But if every node has to agree on that time and they cannot trust a third party source. If the time is agreed through finding the majority, it would take too long. Instead, Solana believes the solution for this problem is to prove that something has happened at a specific time, between two events. For example, imagine you take a picture of yourself watching a movie released on 4th January 2021, and post it to your friend, who receives the post a day later, say 5th January 2021. Then, your friend can conclude that you took the picture after 4th January and before 5th January.

Proof-of-History uses a Verifiable Delay Function. To form a Verifiable Delay Function, you need to perform a particular amount of steps but still make the output remain unique.

The output, previous output and count are recorded. As we discussed earlier, you can prove that something was created sometime if we prove that it was created after a specific event and before an event. Similarly, we can prove that data was created before it was appended (the lower bound of time between the events) and it was created after the previous hash (the upper bound of time between the events).

Then, each node receives a cryptographic clock and the ecosystem can agree on time without trusting any third party sources and can successfully sort the blocks in the right order.

This algorithm makes the Solana blockchain scalable, decentralized and secure without having to sacrifice any of these vital components. The Proof-of-Stake algorithm is also used by Solana to act as a supervisor and confirm and validate the blocks produced by the Proof-of-History consensus algorithm.

Solana Cluster and Leaders

The Solana Cluster is a group of the people who validate and confirm your transactions. A Cluster can always only have one leader. This may seem like it’s centralized, but if the nodes in the Cluster notice any suspicious activity from the leader, they can elect a new leader. The leaders rotate at fixed intervals of time which are called slots and the order of slots are called a leader schedule. The leaders can only timestamp, sign and validate the transactions during the slot they were assigned to so that the members know that their leader has signed it. If you make a transaction, and a member of the Solana Cluster receives it, then he will send it to the leader of the Cluster. Also, say the leader sends 100 transactions to 10 nodes. Then, the transactions break down to multiple batches of 10 transactions. After that, without making multiple copies of the transactions, the nodes collect the batches, and the original set of transactions would be remade.

This is a key feature of Solana as it can optimize the speed of the blockchain with only one leader (who changes regularly) with really fast hardware.

Facilitating DApp development

Solana, as it supports smart contracts, can assist the building of DApp development. Although a lot of blockchains and cryptocurrency ecosystems supports smart contracts, what distinguishes Solana from all these other enterprises and makes it unique is that, being incredibly fast, it can also boost the optimization of the DApps and DEXes (Decentralized EXchanges) made with Solana. Along with having extraordinarily fast processing times, the fees for transactions are also very cheap, an average of only $0.00001 per transaction. Solana is designed in such a way that it can support massively scaling decentralized applications (dapps).

Two of the largest stablecoins in the cryptocurrency ecosystem, Tether and USDC, have also migrated to Solana. Some of Solana’s most popular dApps currently are:

Oxygen
Arweave
O3Swap

The Web-Scale Blockchain

Solana launched the world’s first Web-Scale decentralized network as it completed its $20 million raise. Solana announced this as soon as the Series A round that was led by Multicoin Capital, with also from Distributed Global, Blocktower Capital, Foundation Capital etc finished.

Practical Byzantine Fault Tolerance-based (PBFT) Proof of Stake (PoS)’s like Tendermint support only 1,000 TPS. Solana, the PBFT-like PoS blockchain, supports way more than 50,000 transactions in one second which makes it the quickest performant blockchain. So Solana offers the best TPS and most notes. Bitcoin or Ethereum may be the best but they are Proof of Work systems that only allow something about 10 transactions per second (TPS).

Where can you purchase Solana

Solana is destined for a great future and as the market is currently down, it might be the best time to buy. Some of the exchanges in which SOL is available for purchasing are :

Binance
Huobi Global
FTX
KuCoin
OKEx
CoinDCX

Conclusion

Solana is really interesting, it seems to have solved the blockchain trilemma and can manage hundreds of thousands of transactions per second on average, compared to a mere 7 TPS by Bitcoin. It really might be the next big thing, but the number 1 crypto is always Bitcoin, at least, until now.

If you want to see the current leaders of Solana and other stats, check out explorer.solana.com and solanabeach.io.

Disclaimer: Digital Wallets News does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.