Summary
Solana is an open-source, end-to-end blockchain that aims to synchronize global information at the speed of light. The network focuses on fast transactions and high throughput in order to encourage mass consumer adoption of blockchain technology. Solana is working to improve latency and throughput. It seeks to achieve this through features such as a new timestamping mechanism called Proof of History (PoH), the Turbine block publishing protocol, and parallel transaction processing.
Since the mainnet launched in March 2020, the network has seen numerous improvements in performance and resilience, thanks to the addition of QUIC, stake-based quality of service (QoS), and local fee markets.
Thanks to Proof of History (PoH) and parallel transactions, the Solana network can rival the performance of centralized systems, all on a decentralized, public, and global blockchain. Users can pay transaction fees and interact with smart contracts using SOL, the network's native token. Other innovations include token extensions, a set of rich functionality natively built into the token software that enables complex behaviors such as confidential transfers.
the introduction
Scalability is one of the biggest challenges facing blockchain technology. While these networks are growing, they often face limitations in terms of transaction speed and confirmation time. Because Solana is built on a new architecture, it addresses these limitations without compromising security or decentralization.
Founded in 2017 by Anatoly Yakovenko of Solana Labs, the Solana blockchain is now one of the most widely used blockchains in the world. Solana utilizes several innovations, such as proof-of-history and parallelism, to efficiently process tens of thousands of transactions per second on a single global machine.
How does Solana work?
Solana is a third-generation Proof of Stake (PoS) blockchain that has implemented a number of unique innovations to facilitate high throughput, fast transactions, and low fees:
Parallelism: The ability to process more than one transaction at any one time.
Proof of Date (PoH): A method of verifying time without the need for a traditional timestamp.
High Byzantine Fault Tolerance (Tower BFT): A PoH-enhanced version of the practical BFT mechanism.
Turbine: A block publishing protocol that keeps the network synchronized.
Gulf Stream: A mempool-less transaction transmission protocol.
Solana Virtual Machine: Parallel Smart Contract Runtimes.
These features make the network highly performant, with block generation times as short as 400 milliseconds and processing thousands of transactions per second. To illustrate the value of these features, Bitcoin's block generation time is approximately 10 minutes, and Ethereum's is approximately 15 seconds.
SOL token holders can stake their tokens as part of the blockchain's Proof of Stake consensus mechanism. Using a compatible cryptocurrency wallet, you can stake your tokens with validators who process network transactions. Successful validators can then share rewards with those who staked their tokens. This reward mechanism incentivizes validators and delegators to work for the network.
As of January 2024, Solana had 2,145 validators and 31 Nakamoto factors.
Proof of history
Tracking the order of transactions is crucial when it comes to cryptocurrencies. Bitcoin accomplishes this by grouping transactions into blocks using a single timestamp, and each node must validate these blocks in consensus with other nodes. However, this process results in a long wait for nodes to confirm a block across the network. Solana uses a different approach called Proof of History (PoH).
Solana events and transactions are hashed using the SHA256 hash function, which takes inputs and produces unique outputs that are extremely difficult to predict. Solana takes the output of one transaction and uses it as input for the next hash, and the order of the transactions is then incorporated into the hashed output.
This hashing process creates a long, sequential chain of hash transactions. This results in a clear, verifiable order of transactions that can be added to the block by a validator, without the need for a traditional timestamp.
The hashing process also requires a specific amount of time to complete, meaning that validators can easily verify the elapsed time. By arranging transactions in a hash sequence, validators process and transmit less information in each block. Using a hashed version of the most recent transaction status significantly reduces block confirmation time.
Proof of history is not a consensus mechanism, but rather a method for reducing the time required to confirm the order of transactions. When combined with proof of stake, selecting the next validator for a block is much easier. Nodes need less time to verify the order of transactions, which means the network selects a new validator faster.
low cost
Solana has very low fees, with the average transaction costing $0.00025. These low fees could help eliminate some of the biggest barriers to Web3, as on-chain transaction fees on other chains can add significant costs to a single transaction.
energy efficiency
Because Solana nodes take less time and fewer resources to validate transactions—and because they don't require mining like Proof of Work (PoW) networks—it has emerged as one of the most energy-efficient blockchains.
The Solana Foundation, the non-profit organization dedicated to securing and supporting the Solana network, regularly publishes third-party audits of Solana's energy impact, its comparison to other blockchain projects, and average individual energy use. The latest report, published in December 2023, indicated a 25% decrease in energy use per transaction, from 0.879 kJ to 0.658 kJ.
What is SOL?
SOL is the Solana network's native utility token, which the network burns as part of its deflationary model. Users need SOL to pay transaction fees when making transfers or interacting with smart contracts, and SOL holders can also become validators on the network. Similar to Ethereum, Solana allows developers to build smart contracts and create blockchain-based projects.
SOL uses the SPL protocol, a token standard on the Solana blockchain and similar to ERC-20 on the Ethereum network. There are two primary use cases for the SOL token:
Pay transaction fees when using the network or smart contracts.
Storing tokens as part of the Proof of Stake consensus mechanism.
Building decentralized applications on the Solana network creates new use cases for SOL tokens and other tokens built using the SPL standard.
Solana system
The Solana ecosystem has seen tremendous growth since the launch of its mainnet beta in 2020. As of January 2024, there are over 2,500 developers working on Solana projects and over 1 million active Solana wallets.
Economic giants have also announced integrations with the Solana network, including Discord (which allowed users to link their profiles to Solana wallets) and ASICS (which used the Solana Pay payment platform to allow consumers to purchase a limited-edition shoe design).
The speed of transaction execution and high throughput have helped make Solana the network of choice for many Web 3 use cases, such as:
Decentralized Physical Infrastructure Networks (DePIN): Real-world networks incentivized by tokens, such as the decentralized mapping protocol Hivemapper, are made possible by the ability to process transactions at extremely high speeds.
Next-Generation NFTs: New NFT standards have emerged in the Solana ecosystem, leveraging the network's scalability to create new uses. Coral's executable NFTs (xNFTs) are NFTs that can launch software, offering the promise of a web suite and applications entirely contained within the wallet. Compressed NFTs (cNFTs) use Merkle trees to dramatically reduce the cost of on-chain data storage, raising the cost of minting one million NFTs from millions to hundreds of dollars.
Payments: Solana Pay helps power an ecosystem of easy, open, public payment solutions that can settle payments in seconds for businesses.
Gaming and Entertainment: Processing large transactions with minimal latency unlocks Web 3 use cases for gaming, entertainment, and the potential of the metaverse.
Decentralized Finance: Solana's high throughput and low fees make it possible to create automated market makers, decentralized trading platforms, and more.
What's the next step?
The Solana Foundation's Breakpoint 2022 conference highlighted a number of projects set to launch in the coming months and years, including:
Firedancer: Jump Crypto is developing new open-source software for the Solana network, including a second validator capable of processing 1.2 million transactions per second in a test environment in November. This should further increase Solana's throughput.
Token Extensions: A new token program launched in 2024 allows developers to add features like confidential transfers and whitelisted authorized recipients without writing additional code.
Concluding thoughts
After Solana emerged on the blockchain scene in 2020, it has continued to grow and evolve into a robust and sustainable blockchain ecosystem. Since its launch, it has become a popular choice for both projects and users, and it appears poised for further growth.
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