Summary
Solana is an integrated open-source blockchain aimed at synchronizing global information at lightning speed. The network focuses on fast transactions and high throughput to encourage consumers to adopt cryptocurrencies and blockchain on a large scale. Solana is optimized for latency and throughput, striving to achieve this through a novel timestamp mechanism known as 'historical records (PoH)', the block propagation protocol Turbine, and parallel transaction processing.
Since its launch in March 2020, the mainnet has undergone several network upgrades, further enhancing the network's performance and adaptability, including QUIC, proof-weighted quality of service (QoS), and local fee markets.
With historical records (PoH) and parallel transactions, the Solana network, though built on a decentralized, permissionless global blockchain, offers performance comparable to centralized systems. Users can pay fees and interact with smart contracts using the network's native token, SOL. Another innovation of this network is token extensions, a rich set of built-in features for token programs that allow 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 constrained. Since Solana is built on a new architecture, it can break through these limitations without compromising security or decentralization.
The Solana blockchain was founded in 2017 by Anatoly Yakovenko of Solana Labs and has become one of the most widely used blockchains globally. Solana employs several innovations such as PoH and parallelization, achieving a transaction processing speed (TPS) of thousands per second on a single efficient 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.
Historical proof (PoH): A method to verify time without traditional timestamps.
Tower Byzantine Fault Tolerance — an optimized version of practical BFT using PoH.
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 of 400 milliseconds and a transaction processing speed (TPS) of thousands per second. For reference, Bitcoin has a block time of about 10 minutes, while Ethereum has a block time of 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 corresponding token stakers. This reward mechanism incentivizes validators and delegators to act in the network's best interest.
As of January 2024, Solana has 2,145 validators, with a Nakamoto coefficient of 31.
Historical proof
For cryptocurrencies, tracking the order of transactions is a crucial task. To achieve this, Bitcoin bundles transactions into blocks with a single timestamp. Each node must consistently verify these blocks with others. However, this process leads to long confirmation times for blocks across the network. Solana adopts a new approach — historical proof (PoH).
Events and transactions on Solana are hashed using the SHA256 hash function, which generates a unique and difficult-to-predict output from a given input value. Solana then uses the output of the transaction as the input for the next hash operation. At this point, the transaction order is built into the hash output value.
This hashing process creates a continuous chain of hashed transactions. This allows validators to have a clear and verifiable order of transactions to include in blocks without relying on traditional timestamps.
Hash operations also take some time, allowing validators to easily verify the total duration experienced. By sorting the transactions in the hash chain, the amount of information processed and transmitted by validators across blocks has decreased. Using the latest version of hash operations with the current transaction state can significantly shorten block confirmation times.
Historical proof is not a consensus mechanism; it is a method for reducing the time required to confirm transaction order. When combined with proof of stake, selecting the next validator for a block becomes much easier. The time required for nodes to verify transaction order is significantly reduced, allowing the network to more quickly select new validators.
Low cost
Solana 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 have significantly increased the cost of individual purchases.
Energy efficiency
Due to Solana's nodes consuming less time and resources to validate transactions and not requiring 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 kJ to 0.658 kJ.
What is Solana (SOL)?
SOL is Solana's native utility token, which Solana network destroys as part of a deflationary model. When transferring or interacting with smart contracts, users need to pay fees in SOL. SOL holders can also become network validators. 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 for the Solana blockchain, similar to ERC20 in Ethereum. The SOL token has two main use cases:
1. Pay transaction fees incurred when using the network or smart contracts.
Act as a staking 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 built 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 and more than 1 million active wallets on the Solana network.
Traditional economic giants have announced their entry into Solana, including Discord (where users can link their Solana wallets on personal profiles) and ASICS (where users can purchase limited-edition shoe designs using the Solana Pay payment system).
With its fast transactions and high throughput, Solana has become the preferred network for multiple Web3 use cases.
Decentralized Physical Infrastructure Network (DePIN): Real-world networks that use token reward mechanisms, such as the decentralized mapping protocol Hivemapper, which has become possible due to its ability to process transactions at extremely high speeds.
Next-generation NFTs: The Solana ecosystem promotes a new non-fungible token system that leverages the network's scalability to create new use cases. Executable NFTs (xNFT) from Coral are NFTs that can launch programs, enabling a full network and application stack to exist within a wallet. Compressed NFTs (cNFT) use Merkle trees to drastically reduce the cost of storing data on-chain, lowering the cost of minting one million NFTs from millions of dollars to hundreds.
Payment system: The Solana Pay protocol powers a seamless, permissionless payment structure ecosystem, allowing businesses to complete payments within seconds.
Gaming and entertainment: Processing massive transactions with the shortest 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 evolve in the future?
The Solana Foundation's Breakpoint 2023 conference introduced some projects that will be launched in the coming months and even years, including:
Firedancer: Jump Crypto is developing new open-source software for Solana's core, including a second validator client. As of November, this client has reached a TPS of 1.2 million in the testing environment. This will further expand Solana's throughput.
Token extensions: A brand new token program launching in 2024. With this program, developers can add various new features, such as confidential transfers and whitelisting approved payees, without writing additional code.
Conclusion
Since emerging 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 cryptocurrency bridges and how they work