What is Solana, and how does it work?


What is Solana?

Solana is a highly functional open source project that implements a new, high-speed, permissionless layer 1 blockchain.

Created in 2017 by Anatoly Yakovenko, a former Qualcomm executive, Solana aims to scale performance beyond what popular blockchains typically achieve while keeping costs low. Solana implements an innovative hybrid consensus model that combines a unique Proof-of-History (PoH) algorithm with the ultra-fast sync engine, which is a Proof-of-Stake (PoS) version. Because of this, the Solana network can theoretically process more than 710,000 transactions per second (TPS) without the need for scaling solutions.

Solana’s third-generation blockchain architecture is designed to facilitate smart contracts and decentralized application (DApp) creation. The project supports a number of decentralized finance (DeFi) platforms, as well as non-fungible token (NFT) markets.

Solana blockchain was implemented during 2017 initial coin offering (ICO) boom. The project’s internal testnet was launched in 2018, followed by multiple testnet phases leading up to the eventual official launch of the mainnet in 2020.

What makes Solana unique?

Solana’s ambitious design aims to solve the blockchain trilemmaa concept proposed by the creator of Ethereum Vitalik Buterin, in its unique form. This trilemma describes a set of three main challenges that developers face when building blockchains: decentralization, security, and scalability.

It is widely believed that blockchains are built in such a way as to force developers to sacrifice one of the aspects in favor of the other two, since they can only provide two of the three benefits at any given time.

The Solana blockchain platform has proposed a hybrid consensus mechanism that compromises decentralization to maximize speed. The innovative combination of PoS and PoH makes Solana a unique project in the blockchain industry.

Generally, blockchains have a higher scalability, depending on the number of transactions per second they can support, the more and the better they scale. However, in decentralized blockchains, time discrepancies and higher performance slow them down, meaning more nodes verifying transactions and timestamps take more time.

In a nutshell, Solana’s design solves this problem by choosing a lead node based on the PoS mechanism that sequences messages between nodes. Therefore, the Solana network benefits, reducing workload resulting in higher performance even without a centralized and accurate time source.

Additionally, Solana creates a chain of transactions by encoding the output of one transaction and using it as input to the next transaction. This transaction history gives name to Solana’s main consensus mechanism: PoH, a concept that allows greater scalability of the protocol which, in turn, enhances usability.

How does Solara work?

The core component of the Solana protocol is proof of history, a sequence of calculations that provides a digital record confirming that an event has occurred on the network at any time. It can be presented as a cryptographic clock that timestamps every transaction on the network, along with a data structure that can be a simple addition.

PoH is based on PoS using the Tower Byzantine Fault Tolerance (BFT), an optimized version of the handy Byzantine Fault Tolerance (pBFT) protocol. Solana uses it to reach a consensus. Tower BFT keeps the network safe and running and acts as an additional tool to validate transactions.

Furthermore, PoH can be thought of as a high-frequency verifiable delay function (VDF), a triple function (set, evaluate, verify) to produce a single, reliable output. VDF maintains order in the network by showing that block producers have waited long enough for the network to move forward.

Solana uses a 256-bit Secure Hash Algorithm (SHA-256), a set of proprietary cryptographic functions that generate a 256-bit value. The network periodically samples the SHA-256 number and hashes, providing real-time data according to the set of hashes included in the central processing units.

Solana validators can use this hash sequence to record a specific piece of data that was created prior to the generation of a specific hash index. The timestamp for transactions is created after this particular data is inserted. To achieve a large amount of TPS and block creation time, all nodes on the network must have cryptographic clocks to keep track of events rather than waiting for other validators to verify transactions.

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The Solana (SOL) tab

Solana cryptocurrency is SUN. It is Solana’s native and utility token that provides a means of transferring value as well as the security of the blockchain through staking. SOL launched in March 2020 and has striven to become one of the top 10 cryptocurrencies entering the space by total market capitalization.

The SOL token operation scheme is similar to that used in the Ethereum blockchain. Although they work in a similar way, Solana token holders stake the token to validate transactions through the PoS consensus mechanism. Additionally, the Solana token is used to receive rewards and pay transaction fees, while SOL also allows users to participate in governance.

Related: Proof-of-Stake vs. Proof-of-Work: The Differences Explained

Answering the question of how many Solana coins there are, there will be more than 500 million tokens in circulation and the current total supply of Solana will exceed 511 million tokens – the circulating supply of Solana is just over half. About 60% of SOL tokens are controlled by the Solana founders and the Solana Foundation, with only 38% reserved for the community.

If you want to know where to buy Solana, SOL tokens can be purchased from most exchanges. The main cryptocurrency exchanges to trade on Solana are Binance, Coinbase, KuCoin, Huobi, FTX and others.

Solana against Ethereum

Solana has received many accolades for its speed and performance and has even been cited as a legitimate competitor to crypto industry leaders like Ethereum.

So how is Solana different from Ethereum and can it be considered as a potential Ethereum killer?

In terms of processing speed, Solana can challenge the dominant smart contract platform as it is reportedly capable of speeds of over 50,000 TPS. Solana uses different consensus algorithms to avoid slow confirmation of transactions. This feature makes Solana one of the fastest blockchains in the industry to compete with other industries outside of the crypto space.

Compared to this huge number, the current low-scalability Ethereum work test The model can only handle 15 TPS. Therefore, Solana is thousands of times faster than Ethereum. Another advantage of Solana is the extreme profitability of the network, since the project implements new tokenomics for lower fees.

Related: What is Web 3.0: A Beginner’s Guide to the Decentralized Internet of the Future

Also, it is worth noting that the Solana blockchain, although it implements one of the PoS variations, is more environmentally friendly and sustainable. This contrasts with Ethereum, whose current PoW model requires the use of enormous computational power.

However, everyone in the crypto community is looking forward to Ethereum’s upgrade to PoS. A new type of Ethereum, which is being diligently developed, will consist of an execution layer (previously known as Ethereum 1.0) and a consensus layer (previously Ethereum 2.0). It could greatly increase performance, improve scalability, reduce transaction fees, and stop unsustainable power consumption.

The disadvantages of Solana

If you are still wondering if Solana is a good investment and if you should buy it, the answer is still up to you. Despite the visible advantages, Solana has its disadvantages like any existing crypto project.

First of all, although the Solana blockchain can compete with high-end blockchain projects, it is still vulnerable to centralization as there are not many blockchain validators. Anyone in the network can become a Solana validator, but doing so is still difficult because it requires a lot of computing resources.

Along with this, the protocol still labels itself as a beta version of the mainnet, which does not negate the possible presence of bugs and glitches.

Despite these issues, Solana remains one of the largest ecosystems in the crypto industry and appears to be on the right path of growth.