What is Solana?
Blockchain technology is developing at a rapid pace. Every day we have new solutions pop up, offering different types of services. One thing the majority of developers are focused on is blockchain scalability. Put simply, everyone is trying to make their blockchains run fast(er).
Solana, an open-source, permissionless, and decentralized blockchain, is probably the frontrunner when it comes to scaling. Solana offers high transaction speeds with low fees - it’s easy to see why these features appeal to so many users and developers.
Solana experienced a meteoric rise in 2021 and its adoption is high in the DeFi and NFT spaces. In this article, we cover Solana’s innovations and different use cases this protocol makes possible.
Who Created Solana?
Anatoly Yakovenko published the Solana whitepaper describing the novel Proof of History (PoH) algorithm in 2017. This algorithm introduces a cryptographic clock that keeps the entire Solana network synchronized.
Yakovenko drew on his experience designing distributed systems and imagined a protocol that could support over 65,000 transactions per second. His former colleagues Greg Fitzgerald and Stephen Akridge joined him in this effort. Over the next couple of years, the team built the Solana blockchain and launched it in March 2020.
Today the open-source project is maintained by the Solana Foundation and other core contributors.
The Solana Basics
Solana’s native cryptocurrency is called “SOL.” SOL has two main utilities in the ecosystem: paying transaction fees and securing the network through validating and staking. Of course, users are free to trade and invest in SOL.
The Solana network is secured by validators - these are people or organizations who take part in the consensus mechanism by verifying transactions and adding new entries to the Solana ledger.
Validators earn SOL for their efforts. There is no minimum SOL requirement to participate as a validator, but some technical requirements do apply.
Users don’t have to become validators to earn SOL - you can also stake your SOL by delegating it to your preferred validator. Staking means lending your SOL to a validator and earning interest for doing so. Staking through delegation is generally pain-free, but you should be careful about picking your validator.
Scalability and Solving the Blockchain Trilemma
The current upper bound for transaction speed in the Solana network is cited at 65,000 transactions per second. This number will be tested as Solana gets wider adoption and more users.
At the time of writing, the Solana network is supporting 2.500 transactions per second (tps) on average, at the cost of $0.00025 per transaction. Compared to Bitcoin (4.6 tps at $1.107) and Ethereum (15 tps at $52.46 average fee in January 2022), it’s clear that Solana is much faster. The speed and low cost of transactions are some of the main reasons why Solana is rapidly growing as an ecosystem.
But, what makes this level of speed possible? Why aren’t Bitcoin and Ethereum that fast?
Blockchains are unique because they enable decentralization and high levels of security. Many blockchains do so at the expense of speed and scalability. Ideally, a blockchain protocol would be decentralized, secure, and scalable, but in practice, it’s difficult to achieve success in all three aspects. Vitalik Buterin, the founder of Ethereum, described this problem as the blockchain trilemma.
If we look at Bitcoin, we could say that it’s secure and decentralized. With the genesis block launched in 2009, the Bitcoin network itself has never been successfully attacked. And although in recent years we saw the phenomena of mining power centralizing, Bitcoin is still considered sufficiently decentralized. However, Bitcoin is quite slow. The block time is 10 minutes (contrast that with Solana’s 400 millisecond block time). Only five Bitcoin transactions get processed per second and a transaction is only confirmed once its block is appended to the chain. That means you could wait anywhere from one to 10 minutes or more for your Bitcoin transaction to go through.
Many say that it’s precisely this slowness that prevents Bitcoin from wider adoption as digital cash. And although Ethereum is comparatively faster, it’s plagued by high transaction fees. When the Ethereum network gets congested, fees can reach up to $200 and higher. Ethereum is currently in the process of upgrading the network to Ethereum 2.0, an upgrade that aims to introduce Proof of Stake and sharding as scalability solutions.
Solana, on the other hand, offers scalability out of the box. Scalability is made possible through several innovative technologies, the most notable of which is Solana’s Proof of History algorithm. With Proof of History, Solana is able to implement scalability while preserving decentralization and security.
What Is Proof of History?
Solana uses a hybrid consensus mechanism that combines Proof of Stake (PoS) with Proof of History. Transactions are validated through PoS, but what really makes Solana fast is Proof of History. With this mechanism, transactions in Solana can get verified in real-time, making it cheap and fast to use the network.
On the other hand, in blockchains like Bitcoin and Ethereum, transactions are time-stamped and this timestamp is checked by all nodes. Nodes then need to communicate and exchange messages to confirm they are all on the same page. That’s one of the reasons it takes as long as it does to validate transactions and produce blocks.
In Solana, Proof of History provides a cryptographic clock that automatically applies to all transactions. This clock is shared by all validators regardless of their time zone and is easily verifiable. The term clock is used here as a crutch - Proof of History doesn’t show an exact time (eg. this transaction occurred at 4 pm). Instead, it shows how much time has passed since the last recorded event.
What that means is that all Solana validators operate on the same clock and all have access to a chronologically accurate history of transactions. Validators are inherently synchronized through the network - no communication needed. The entire network shares the same exact time, which makes reaching consensus that much faster.
Read more about Proof of History and how it works here and here.
What Can You Do on Solana?
Solana supports native smart contracts just like Ethereum. In Solana, smart contracts are called programs and are usually written in Rust or a framework like Anchor.
What that means, in simple terms, is that anything you can do on Ethereum, you can also do on a Solana. The Solana ecosystem currently supports decentralized payments, DeFi applications, creation of NFTs and fungible tokens, gaming, DAOs, as well as web-scale dApps of all kinds. One big difference? Solana is faster and cheaper than most blockchains.
Some notable projects include Serum, a decentralized exchange, Magic Eden, an NFT marketplace, and Solend, a lending protocol. Recently, many NFT projects have chosen to mint on Solana and take advantage of its low fees. Plus, Solana also features a vibrant community of DAOs, such as InvisibleCollege.
Are There Any Downsides to Solana?
Critics point out that Solana isn’t sufficiently decentralized. At the moment, 1,945 validators don’t sound like much compared to Bitcoin and Etherreum’s thousands of miners. However, Solana is a new blockchain. As it develops, more validators can join and thus strengthen the decentralization of the network.
Additionally, Bitcoin and Ethereum have the first-mover advantage. People are used to using Ethereum for their DeFi and NFT projects, but this is slowly changing.
Solana is experiencing rapid growth because it’s less expensive, faster, and generally more accessible to users and developers. Where this growth might lead remains to be seen as the network develops, but Solana is definitely a promising player in the space.
How to Get Started on Solana
You can learn more about Solana by reading their documentation. If you just want to dip your toes in, we recommend you join Solana’s Discord or Twitter.
And if you’re ready to join the bustling DeFi and NFT marketplaces on Solana, start by downloading the Phantom wallet. You can use this wallet to store, send, receive, collect, and swap tokens on the Solana blockchain. Alternatively, you can purchase SOL on most centralized and decentralized exchanges.
Have any questions? Hit us up in Discord or on Twitter and stay tuned for next week when we’ll publish our guide to using the Phantom wallet.
Keep in mind that this article, as well as any and all Surge articles, are purely educational and not to be taken as financial advice.
