What is Solana (SOL)?

Introduction

Scalability is currently one of the most critical challenges in blockchain technology. As these networks evolve, transaction speeds and confirmation times are often limited. Solana aims to break these barriers without compromising security or decentralization.

The Solana blockchain was created by Anatoly Yakovenko of Solana Labs and launched in 2017, utilizing a novel transaction validation method. Bitcoin, Ethereum, and many other projects face issues such as slow transaction times, high fees, and high energy consumption. Solana employs multiple innovative technologies, such as Proof of History and parallelization, achieving thousands of transactions per second (TPS).

How does Solana work?

Solana is a third-generation Proof of Stake (PoS) blockchain that uses various unique innovations to achieve high throughput, fast transactions, and low fees.

Proof of History (PoH): A method to verify time without traditional timestamps.

Parallelization: The ability to process multiple transactions at any given moment.

Practical Byzantine Fault Tolerance — an optimized version of BFT using PoH.

Turbine: A block propagation protocol.

Gulf Stream: A transaction forwarding protocol without mempools.

Sealevel: A parallel smart contract runtime.

Pipelining: An optimized transaction processing unit for validation.

Cloudbreak: A horizontally scalable account database.

These features create a high-performance network with a block time of 400ms, capable of processing thousands of transactions per second. In comparison, Bitcoin’s block time is about 10 minutes, and Ethereum’s is approximately 15 seconds.

SOL holders can stake their tokens to become part of the blockchain’s PoS consensus mechanism. Using compatible crypto wallets, users can stake their tokens to validators who process network transactions. Successful validators share rewards with the stakers. This reward system incentivizes validators and delegators to prioritize network health.

As of December 2022, Solana has 2,034 validators, with a Nakamoto coefficient of 31.

What makes Solana unique?

Solana focuses on reducing fees and enriching transaction methods, preparing for widespread blockchain adoption, and fostering the development of numerous innovative technologies:

Proof of History

For cryptocurrencies, tracking transaction order is crucial. Bitcoin bundles transactions into blocks with a single timestamp. Nodes must verify these blocks consistently, but this process can cause long confirmation times across the network. Solana adopts a new approach — Proof of History (PoH).

All events and transactions on Solana are hashed using SHA256, which produces a unique and highly unpredictable output based on input. Solana then uses the hash output of one transaction as the input for the next hash. The transaction order is embedded within the hash outputs.

This hashing process creates a continuous chain of hashes, allowing verifiers to confirm the order of transactions without traditional timestamps.

Hashing also takes time, enabling validators to easily verify the total elapsed time. By ordering transactions within the hash chain, the amount of information validators need to process and transmit decreases. Using the latest transaction state in hash computations can significantly shorten block confirmation times.

Proof of History is not a consensus mechanism but a method to reduce the time needed to confirm transaction order. When combined with Proof of Stake, selecting the next validator becomes much easier. Nodes verify transaction order more quickly, enabling the network to select new validators faster.

Low Cost

Solana’s transaction fees are extremely low, averaging around $0.00025 per transaction. The low fees greatly lower the barrier to entry for Web3, as other chains’ gas fees significantly increase the cost of individual transactions.

Energy Efficiency

Since Solana validators require less time and resources to verify transactions and do not need mining like Proof of Work (PoW) networks, it has become one of the most energy-efficient blockchains.

The Solana Foundation, a nonprofit dedicated to protecting and supporting the Solana network, regularly publishes third-party audits of Solana’s energy impact and compares it with other blockchain projects and household energy consumption. The latest report released in September 2022 highlights the following energy usage data:

• Single Solana transaction: 508 Joules
• Google search: 1,080 Joules
• Single non-voting Solana transaction: 3,290 Joules
• Ethereum transaction (post-merge estimate): 144,036 Joules
• Charging an iPhone 13: 44,676 Joules
• Running the entire Solana network annually: 4,056,273,936 Joules
• Mining one Bitcoin: 5,005,764,000 Joules
• Average annual energy use of a U.S. household: 38,574,000,000 Joules

What is (SOL)?

SOL is the native utility token of Solana, which is burned as part of a deflationary model. Users pay transaction fees with SOL when transferring tokens or interacting with smart contracts. SOL holders can also become network validators. Like Ethereum, Solana supports developers building smart contracts and projects on the blockchain.

SOL uses the SPL protocol; SPL is the token standard on the Solana blockchain, similar to ERC20 on Ethereum. The main uses of SOL are:

1. Paying transaction fees when using the network or smart contracts.

2. Serving as staking tokens as part of the Proof of Stake consensus mechanism.

Decentralized applications (DApps) built on Solana create new use cases for SOL and other tokens built using the SPL standard.

Solana Ecosystem

Since launching the mainnet beta in 2020, the Solana ecosystem has experienced rapid growth. As of December 2022, there are 21,255 GitHub repositories using Solana, serving 8 million active users.

Traditional economic giants have announced their involvement with Solana, including Discord (users can link their Solana wallets to their profiles) and ASICS (users can purchase limited-edition shoes using Solana Pay).

Thanks to fast transactions and high throughput, Solana has become the preferred network for various Web3 use cases.

NFTs: The rapid trading and low fees have fueled the booming Solana NFT ecosystem. By December 2022, over 150,000 creators had minted more than 22.7 million NFTs on Solana, with support from Meta’s Facebook and Instagram. Notable Solana NFT projects include Degenerate Ape Academy, Okay Bears, and Solana Monkey Business.

Payments: The Solana Pay protocol powers a seamless, permissionless payment ecosystem capable of completing transactions within seconds. In Stripe’s recent fiat-to-crypto exchange project, 11 out of 16 partner projects are built on Solana.

Gaming: As of December 2022, 15 playable blockchain games are live on Solana; by March 2023, this number is expected to reach 37.

Decentralized Finance (DeFi): Due to its fast transaction speeds, Solana has become an ideal platform for DeFi, with over $150 million raised in 2022. Notable projects include community-operated order book platform OpenBook and Jupiter Aggregator.

Decentralized Autonomous Organizations (DAOs): The development of new tools has led to a surge in DAOs on Solana, with 8,489 proposals and 34,484 votes.

Mobile: In June, the first Solana Mobile Stack-powered phone, Saga, was released, positioning Solana at the forefront of mobile-first crypto development. The first batch of Saga devices was delivered to developers in December 2022.

What does the future hold for Solana?

The Solana Foundation’s Breakpoint 2022 conference outlined several upcoming projects, including:

Firedancer: Jump Crypto is developing new open-source core software for Solana, including a second validator client capable of handling 1.2 million TPS in testing environments as of November. This will further increase Solana’s throughput.

Mobile: The Saga device is expected to launch in 2023. Solana Mobile will also launch the Solana DApp Store in January 2023, a free DApp marketplace focused on Web3.

Network Upgrades: Multiple upgrades are underway to improve network performance, including the QUIC protocol, stake-weighted quality of service, and fee markets. Co-founder Anatoly Yakovenko has also shared his vision for future network improvements.

Conclusion

Since its emergence in 2020, Solana has grown into a powerful and sustainable ecosystem, becoming a popular choice for projects and users, with promising future development. ()(