In brief
Solana is a blockchain network focused on fast and high-throughput transactions to encourage consumer adoption of cryptocurrency and blockchain. Solana uses many enhancements to improve speed, including a Proof of History (PoH) mechanism and parallel transactions. Users can pay transaction fees and interact with smart contracts with SOL, the network's native cryptocurrency.
Introduce
Scalability is one of the biggest challenges of blockchain technology. As networks grow, they often encounter limitations in transaction speed and confirmation times. Solana is designed to address these limitations without compromising security or decentralization.
Founded in 2017 by Anatoly Yakovenko from Solana Labs, the Solana blockchain applies a new method to verify transactions. While Bitcoin, Ethereum and many other projects suffer from slow transaction times, high fees and high energy consumption. Solana uses several innovations, such as PoH consensus mechanism and parallelization, to efficiently process thousands of transactions per second (TPS).
How does Solana work?
Solana is a third-generation proof-of-stake (PoS) blockchain that has implemented several unique innovations to create high throughput, fast transactions, and low fees:
Proof of History (PoH): A method of verifying time without the need for a conventional timestamp.
Parallelization: The ability to process more than one transaction at any given time.
Byzantine Fault Tolerance Tower (BFT): A practical PoH-optimized version of BFT.
Turbine: A mass transfer protocol.
Gulf Stream: Transaction relay protocol without Mempool.
Sealevel: Time to run smart contracts in parallel.
Pipelining: Transaction processing unit to optimize authentication.
Cloudbreak: Horizontally scalable account database.
These features create a high-performance Solana network with block times of 400ms and the ability to operate thousands of transactions per second (TPS). To make it easier to understand, you can compare this to Bitcoin's block time which is about 10 minutes and Ethereum's which is about 15 seconds.
SOL holders can stake their tokens as part of the blockchain's PoS consensus mechanism. With a compatible cryptocurrency wallet, you can stake your tokens to validators that are processing network transactions. Successful validators will then share a portion of their reward with those who staked the tokens for them. This reward mechanism incentivizes validators and delegators to act for the benefit of the network.
As of December 2022, Solana has 2,034 validators and a Nakamoto coefficient of 31.
What makes Solana unique?
Focused on keeping transactions cheap, diverse, and easy for widespread adoption, Solana has adopted several unique innovations:
Proof of History
Tracking the order of transactions is extremely important in the cryptocurrency sector. Bitcoin does this by wrapping transactions into blocks with a unique timestamp. Each node must validate blocks according to consensus with other nodes. This process significantly increases the waiting time for nodes to validate a block across the network. Solana chose a different approach called Proof of History (PoH).
All Solana events and transactions are hashed using the SHA256 hash function, which takes inputs and produces unique and extremely unpredictable outputs. Solana takes the output of one transaction and uses it as input to the next hash function, so the order of the transactions is now built into the hashed output.
This hashing process creates a long, uninterrupted chain of hashing transactions. This feature creates a clear, verifiable order of transactions - something a validator can add to a block without the need for a conventional timestamp.
Hashing also requires a certain amount of time to complete, meaning the validator can easily verify the elapsed time. By arranging transactions in a hash chain, validators process and transmit less information in each block. Using the hashed version of the latest transaction state significantly reduces the time it takes to confirm a new block.
PoH is not a consensus mechanism but instead, a way to shorten transaction order confirmation time. When combined with proof of stake, choosing the next validator for a block is much easier. Nodes need less time to validate the transaction order, which means the network chooses a new validator faster.
Low price
Solana has extremely low fees, with the average price per transaction being $0.00025. Low fees could remove some of Web3's biggest barriers to entry, as gas fees on other chains can add significant costs to a purchase.
Energy efficiency
Because Solana nodes need less time and fewer resources to validate transactions — and because it does not require mining like networks using Proof-of-Work (PoW) consensus mechanisms — the network has emerged as one of the most energy efficient blockchains.
The Solana Foundation, a non-profit organization dedicated to securing and supporting the Solana network, regularly publishes third-party audits of Solana's energy impact, as well as comparing it to other blockchain projects and their levels. average household usage. According to the most recent report published in September 2022, the energy usage statistics highlighted are as follows:
What is SOL?
SOL is Solana's native utility token, burned by the network as part of a deflationary model. Users need SOL to pay transaction fees when making transfers or interacting with smart contracts. SOL holders can also become validators for the network. Like Ethereum, Solana allows developers to build smart contracts and create blockchain-based projects.
SOL uses the SPL protocol; SPL is the token standard of the Solana blockchain, similar to ERC-20 on Ethereum. The SOL token has two main use cases:
Pay transaction fees incurred when using the network or smart contracts.
Participate in 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
The Solana ecosystem has grown massively since the mainnet beta launch in 2020. As of December 2022, there were 21,255 Github developer repositories using Solana, supporting eight million people active user.
Traditional economy giants have also announced integrations with Solana. Examples include Discord (which allows users to link their profile and the Solana Wallet) and ASICS (which used the Solana Pay payment method to allow customers to purchase a limited edition shoe design).
Fast transactions and high throughput have made Solana a network of choice for many applications in Web3, such as:
NFT: Fast transaction times and low fees have fueled the blooming of a robust NFT ecosystem on Solana. More than 22.7 million NFTs have been minted on Solana by more than 150,000 creators as of December, and Solana NFTs are already supported by Meta, Facebook and Instagram. Some notable Solana NFT projects include Degenerate Ape Academy, Okay Bears, and Solana Monkey Business.
Payments: The Solana Pay protocol has enabled an ecosystem of frictionless, permissionless payment structures that can settle payments in seconds. In the recent announcement of Stripe's fiat-to-cryptocurrency pipeline, 11 of the 16 projects mentioned as launch partners were built on Solana.
Games: As of December, there are currently 15 games live and playable using Solana, and 37 games are expected by March 2023.
DeFi: Fast transaction times make Solana ideal for the decentralized finance (DeFi) sector, and Solana DeFi projects raised over $150 million in 2022. Notable projects include Community-run order books OpenBook and Jupiter Aggregator.
DAO: The new tool has led to a rise in decentralized autonomous organizations (DAOs) on Solana, resulting in 8,489 DAO proposals and 34,484 total votes.
Mobile: With the June launch of Saga, the first mobile phone to use the Solana Mobile Stack, the Solana ecosystem has taken the lead in mobile-first cryptocurrency development. The first Saga devices are delivered to developers in December 2022.
What will happen next?
The 2022 Breakpoint Conference organized by Solana Foundation highlighted a number of projects that need to be implemented in the near future, including:
Firedancer: Jump Crypto is developing new open source Solana core software, including a second validator client that can handle 1.2 million TPS in a test environment as of November. This will expand Solana's throughput further.
Mobile: Saga devices are expected to be available to the public in 2023. Solana Mobile will also launch the Solana DApp Store, a free store for Web3-focused DApps, in January 2023.
Network upgrades: Several upgrades have been made to improve network performance, including QUIC, stake-weighted quality of service, and fee markets. Solana Labs co-founder Anatoly Yakovenko also outlined his vision for how he wants to improve the network.
summary
After appearing in the blockchain field in 2020, Solana continues to develop into a strong, sustainable ecosystem. Since then, Solana has become a popular choice for both projects and users, and it seems the whole ecosystem is ready to grow even more.
