Summary
Solana is an integrated open-source blockchain aimed at synchronizing global information at the speed of light. The network focuses on fast transactions and high throughput to encourage widespread use of cryptocurrency and blockchain. Solana is optimized for latency and throughput, aiming to achieve this through the new timestamp mechanism 'Proof of History (PoH)', the block propagation protocol Turbine, and features such as parallel transaction processing.
Since its launch in March 2020, the mainnet has undergone multiple upgrades to further enhance the network's performance and adaptability, including QUIC, proof-of-stake weighted quality of service (QoS), and a local fee market.
With historical records (PoH) and parallel transactions, the Solana network, while built on a decentralized and permissionless global blockchain, performs comparably to centralized systems. Users can pay fees and interact with smart contracts using the network's native token SOL. Another innovation of the network is token extensions. This is a rich set of built-in functions native to token programs, allowing for complex operations such as confidential transfers.
Introduction
Scalability is one of the most pressing challenges facing blockchain technology today. As these networks evolve, their transaction speeds and confirmation times are often limited. Since Solana is built on a new architecture, it can break these limits without compromising security or decentralization.
The Solana blockchain was founded by Anatoly Yakovenko of Solana Labs in 2017 and has since become one of the most widely used blockchains in the world. Solana employs multiple innovations such as PoH and parallelization, with a transaction processing capability (TPS) of tens of thousands per second for a high-efficiency global state machine.
How does Solana work?
Solana is a third-generation proof of stake (PoS) blockchain. This blockchain achieves high throughput, fast transactions, and low fees through several unique innovative technologies:
Parallelization: The ability to process multiple transactions at any given time.
Proof of History (PoH): A method to verify time without traditional timestamps.
Tower Byzantine Fault Tolerance — a PoH optimized version of practical BFT.
Turbine: A block propagation protocol that keeps the network in sync.
Gulf Stream — a no-mempool transaction forwarding protocol.
Solana Virtual Machine: A parallel smart contract runtime system.
These features contribute to the network's high performance, with block times reaching 400 milliseconds and TPS reaching tens of thousands. For reference, Bitcoin's block time is about 10 minutes, while Ethereum's block time is about 15 seconds.
SOL holders can stake their tokens, making them part of the blockchain's PoS consensus mechanism. With a compatible cryptocurrency wallet, you can stake your tokens with validators processing network transactions. Successful validators will then share rewards with the stakers of the relevant tokens. This reward mechanism incentivizes validators and delegators to prioritize the interests of the network in their actions.
As of January 2024, Solana has 2,145 validators with a Nakamoto coefficient of 31.
Proof of History
For cryptocurrencies, tracking transaction order is a critical task. To achieve this, Bitcoin bundles transactions into blocks with a single timestamp added. Each node must consistently validate these blocks with other nodes. However, this process results in long confirmation times for blocks across the network. Solana employs a new method — Proof of History (PoH).
Events and transactions on Solana are hashed using the SHA256 hash function, which produces a unique and extremely difficult-to-predict output from a given input. Solana uses the output of the transaction as the input for the next hash calculation. At this point, the transaction order is inherently built into the hash output.
This hashing process creates a long, continuous chain of hashed transactions. This allows validators to join transactions in blocks with a clear, verifiable order without needing traditional timestamps.
Hash calculations also take time, allowing validators to easily verify the total duration experienced. By sorting transactions in the hash chain, the amount of information processed and transmitted by validators in each block is reduced. Using the hash calculation version of the latest transaction status can significantly shorten block confirmation times.
Historical proof is not a consensus mechanism, but a method to shorten the time required to confirm transaction order. When used in conjunction with proof of stake, it becomes much easier to select the next validator for a block. The time required for nodes to validate transaction order is significantly reduced, allowing the network to more quickly select new validators.
Low cost
Solana's fees are extremely low, averaging $0.00025 per transaction. The low fees greatly reduce the barrier to entry for Web3, as fuel costs on other chains significantly increase the cost of a single purchase.
Energy efficiency
Because Solana's nodes take less time and resources to validate transactions, and do not require mining like proof of work (PoW) networks, it has become one of the most energy-efficient blockchains.
The Solana Foundation is a non-profit organization dedicated to protecting and supporting the Solana network, regularly publishing third-party audits of Solana's energy consumption impact and comparisons of Solana with other blockchain projects and average household energy consumption. The latest report released in 2023 shows a 25% reduction in energy consumption per transaction, from 0.879 kilojoules to 0.658 kilojoules.
What is Solana (SOL)?
SOL is the native utility token of Solana, which the Solana network destroys as part of its deflationary model. Users need to pay transaction fees in SOL when transferring or interacting with smart contracts. SOL holders can also become validators of the network. Like Ethereum, Solana supports developers in building smart contracts and creating projects based on blockchain.
SOL uses the SPL protocol; SPL is the token standard of the Solana blockchain, similar to ERC20 in Ethereum. SOL tokens have two main use cases:
1. Pay transaction fees incurred when using the network or smart contracts.
Serve as a stake token as part of the proof of stake consensus mechanism.
Decentralized applications (DApps) built on Solana have created new use cases for SOL and other tokens constructed using the SPL standard.
Solana ecosystem
Since the launch of the mainnet beta in 2020, the Solana ecosystem has seen tremendous growth. As of January 2024, there are over 2,500 developers participating in Solana projects, with more than 1 million active wallets on the Solana network.
Traditional economic giants have announced their entry into Solana. This includes Discord (users can link their Solana wallets to their personal profiles) and ASICS (users can use the Solana Pay payment system to purchase limited edition shoe designs).
Solana has become the preferred network for multiple Web3 use cases due to its fast transactions and high throughput.
Decentralized Physical Infrastructure Network (DePIN): Real-world networks using token rewards, such as the decentralized mapping protocol Hivemapper, have become possible due to their ability to process transactions at extremely fast speeds.
Next-generation NFTs: The Solana ecosystem is implementing a new non-fungible token system, fully leveraging the network's scalability to create new use cases. Executable NFTs (xNFT) from Coral are NFTs that can launch programs, enabling a complete stack of networks and applications to exist within a wallet. Compressed NFTs (cNFT) use Merkle trees to significantly reduce the cost of storing data on-chain, lowering the cost of minting one million NFTs from millions of dollars to hundreds of dollars.
Payment systems: The Solana Pay protocol powers a seamless, permissionless payment structure ecosystem, enabling businesses to complete payments in seconds.
Games and entertainment: Processing massive transactions with minimal latency opens up Web3 use cases for gaming, entertainment, and metaverse functionalities.
DeFi: Solana's high throughput and low fees provide a viable foundation for creating automated market makers and decentralized trading platforms.
How will Solana develop in the future?
The Solana Foundation's Breakpoint 2023 conference introduced some upcoming projects in the coming months and even years, including:
Firedancer: Jump Crypto is developing new open-source software for the Solana core, including a second validator client. As of November, this client can achieve a TPS of up to 1.2 million in a test environment. This move will further expand Solana's throughput.
Token extensions: A new token program launching in 2024. With this program, developers can add various new features, such as confidential transfers and whitelisting permitted recipients, without writing additional code.
Conclusion
Since its emergence in the blockchain space in 2020, Solana has gradually grown into a powerful, sustainable ecosystem, now a popular choice for projects and users, with the potential for further development.
Further reading
What is Proof of Stake (PoS)?
What is Solana (SOL)?
Three popular crypto bridges and how they work