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Solana is an integrated open-source blockchain designed to synchronize global information at the speed of light. This network provides fast transaction processing and high throughput, facilitating the mass adoption of blockchain technology. Solana reduces latency and optimizes throughput. This is achieved through features such as a new timestamp mechanism called Proof of History (PoH), the Turbine block propagation protocol, and parallel transaction processing.
Since the launch of the mainnet in March 2020, some updates have been implemented to enhance performance and resilience to attacks. These include the implementation of the QUIC protocol, quality of service (QoS) based on staking sum, and fee markets.
Thanks to Proof of History (PoH) and parallel transactions, the Solana network, being an international public decentralized blockchain, can provide performance on par with centralized systems. To pay transaction fees and interact with smart contracts, users can use SOL — the native token of Solana. Another innovation has been token extensions: a wide range of features built into the token program to perform complex tasks like confidential transfers.
Introduction
Insufficient scalability is one of the key challenges of blockchain. The fact is that as they evolve, many networks face limitations in transaction execution and confirmation speed. Since Solana is built on a new architecture, it eliminates these limitations without compromising security or decentralization.
The Solana blockchain, founded in 2017 by Anatoly Yakovenko from Solana Labs, is currently one of the most sought-after blockchains in the world. Solana uses a number of innovations, such as the Proof of History (PoH) method and parallel transaction processing, which allow processing tens of thousands of transactions per second (TPS) in a single global state machine.
How Solana works
Solana is a third-generation blockchain with a Proof of Stake (PoS) consensus algorithm. Solana implements a number of innovative solutions to ensure high throughput, fast transaction processing, and low fees. Among them are the following:
Parallel transaction processing — the ability to process more than one transaction at a given moment.
Proof of History (PoH) — a method of verifying time without the usual timestamps.
Tower BFT (Byzantine Fault Tolerance) — a PoH-optimized version of practical BFT.
Turbine — a block propagation protocol that ensures network synchronization.
Gulf Stream — a transaction forwarding protocol without using a mempool.
Solana's virtual machine — parallel execution of smart contracts.
Thanks to these features, the Solana network is highly performant and can generate blocks in 400 ms, as well as process tens of thousands of transactions per second. For comparison, block creation in the Bitcoin network takes about 10 minutes, and in Ethereum — about 15 seconds.
SOL holders can stake their tokens within the PoS consensus algorithm. A compatible cryptocurrency wallet allows transferring tokens for staking to validators who process the network's transactions. If successful, the validator will pass part of the staking reward to the token holder. Such a reward mechanism encourages validators and delegators to act in the network's interest.
As of January 2024, there are 2145 validators operating in the Solana blockchain, and its Nakamoto coefficient is 31.
Proof of History
Tracking the order of cryptocurrency transactions is an extremely important process. For example, Bitcoin combines transactions into blocks with a single timestamp. Each node must verify these blocks and cross-check the information with other nodes, but this significantly increases the time needed to confirm blocks in the network. Solana, however, solves this task differently by using the Proof of History (PoH) approach.
All events and transactions in Solana are hashed using the SHA256 hash function. It takes input data and produces a unique output that is extremely difficult to predict. Solana uses the output of one transaction as the input for the next hash. Thus, the order of transactions is embedded in the hashed result.
This hashing process creates a long continuous chain of hashed transactions. This forms a clear and verifiable order of transactions that validators add to the block without the need to use a timestamp.
Hashing also takes a certain amount of time to complete, so validators can easily check how much time has already passed. By placing transactions in the hash chain, validators process and transmit less information in each block. Using the hashed version of the last state of transactions significantly reduces block confirmation time.
PoH is not a consensus mechanism, but a way to reduce the time it takes to confirm the order of transactions. Proof of History combined with Proof of Stake significantly simplifies the selection of the next validator for the block. Since nodes require less time to verify the order of transactions, the network can assign a new validator more quickly.
Low fees
Solana charges extremely low fees: the average cost of processing a transaction is $0.00025. Low fees enhance the accessibility of Web3 for users, as high gas fees in other networks significantly increase transaction costs.
Energy efficiency
Since Solana nodes spend less time and resources processing transactions, and mining is not used in the network (unlike PoW networks), Solana has become one of the most energy-efficient blockchains.
The Solana Foundation is a non-profit organization that funds and supports the Solana network. It conducts regular third-party audits of Solana's energy consumption and compares these figures with other blockchain projects and their average household consumption. The latest report from December 2023 indicates a 25% reduction in energy consumption for processing a single transaction (from 0.879 kJ to 0.658 kJ).
What is SOL
SOL is the native utility token of the Solana network, which it burns as part of a deflationary model. SOL can be used to pay transaction fees when making transfers and interacting with smart contracts. SOL holders can also become validators of the network. Like Ethereum, Solana allows developers to create smart contracts and projects based on blockchain.
SOL uses the SPL protocol — a token standard for the Solana blockchain, similar to ERC-20 in Ethereum. The SOL token has two main uses:
Payment of transaction fees when using the network or smart contracts.
Staking tokens within the Proof of Stake consensus mechanism.
Decentralized applications (DApps) built on Solana create new use cases for SOL and other SPL standard tokens.
The Solana ecosystem
Since the launch of the mainnet beta in 2020, the Solana ecosystem has grown significantly. As of January 2024, there are over 2500 developers and more than a million active wallets in the Solana network.
Some economic giants have also announced their integration with Solana. Among them are Discord (which allows linking Solana wallets to user profiles) and ASICS (which used the Solana Pay payment system to sell a limited shoe collection).
Fast transactions and high throughput of Solana also allow the network to be used in Web3 areas such as:
Decentralized Physical Infrastructure Networks (DePIN): the creation of networks with token incentives (such as the decentralized matching protocol Hivemapper) has become possible due to the ability to process transactions at extremely high speeds.
Next-generation NFTs: new standards of non-fungible tokens are emerging in the Solana ecosystem that leverage the scalability of the network to create new use cases. Executable NFTs (xNFT) from Coral are NFTs that can run a program, allowing the creation of stacks of sites and applications that exist solely in the wallet. Compressed NFTs (cNFT) use Merkle trees to reduce the costs of on-chain data storage, resulting in the cost of creating one million NFTs being reduced from millions to a few hundred dollars.
Payments: the Solana Pay protocol provides a public and convenient ecosystem for payment structures that allows businesses to make payments in seconds.
Games and entertainment: processing large transactions with minimal delays enables the use of Web3 for developing games, entertainment, and metaverse projects.
DeFi: the high throughput and low fees of Solana allow for the creation of automated market makers, decentralized exchanges, and other solutions.
The future of Solana
At the Breakpoint conference organized by the Solana Foundation in 2023, several projects were presented that are expected to launch in the coming months and years. Among them:
Firedancer: Jump Crypto is developing new open-source software for Solana. It will include a second client-validator with a transaction processing speed of 1.2 million TPS (metrics in the test environment in November). This will allow Solana to further increase its throughput.
Token extensions: a new token program launched in 2024 allows developers to add features such as confidential transfers and whitelisting of recipients without additional coding.
In conclusion
Solana, which emerged in the blockchain space in 2020, continues to evolve into a reliable and sustainable ecosystem. This network is currently popular among both projects and users, and may continue to grow in the future.
Recommended literature
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