What is Solana and how does it work?
What Is Solana Blockchain and Who Invented It?
Solana is a cryptocurrency designed with an aim to deal with the shortcomings of Ethereum. It is proposed in 2017 by Anatoly Yakovenko with the motive to innovate the crypto industry. Solana is an open source project and aims scale throughout making it one of the top cryptocurrencies amongst the 10,000 currently available in the blockchain industry.
Yakovenko worked as a former executive at Qualcomm and initiated the Solana network to decrease the time taken for completing transactions over the blockchain network. Due to its similar features, Solana is referred as “Ethereum killer” as it caters to the disadvantages observed in Ethereum.
What Is The Purpose Of Solana Network?
Solana’s blockchain caters to the drawbacks of Ethereum enabling consumers to process transactions securely over an efficient network. The Sol cluster is a network of independent computers that work together to record the order of events happening and also participate in the programmatic interpretations of different events.
It is a high performance network designed with the motive to reduce latency and validate the addition of new blocks of data. Based on a third-generation architecture, Solana is designed to facilitate creation of decentralized applications (DApps). It also supports Defi platforms and NFT marketplaces.
What Is Solana Labs?
The team of Solana launched its own technology company known as the Solana Labs to revolutionize the blockchain industry. This company is working on several exciting projects such as the Solana pay that will change the world of digital payments completely.
Moreover, it has also launched its Mobile Stack which is an Android toolkit to further expand the network. By 2023, this company aims to launch its first ever mobile phone, the Solana Sage to introduce an innovative product in the smartphone industry. The ambitions and future prospects of this company have increased its popularity in the crypto industry.
How Does Solana Work?
Unlike the Proof of work (PoW) mechanism, Solana blockchain is based on a hybrid consensus mechanism of Proof of stake (PoS) and Proof of history (PoH). The PoS creates a collateral for verification of new blocks whereas the PoH ensures that validation of new blocks of data occur during a specific moment in time.
The input data is entered to the leader node which sequences the messages so that they can be transmitted to other nodes over the network. The leader node stores transactions and publishes them to the final state of verifiers.
The verifiers publish the signatures of the state as soon as they receive confirmation and the published confirmations can then be treated as the consensus algorithm votes.
What Makes Solana Unique From Other Cryptocurrencies?
Solana’s blockchain aims to solve the blockchain trilemma faced by developers to validate transactions on an existing platform. This trilemma includes three major challenges such as decentralization, scalability and security which were experienced while verifying new blocks on the Ethereum blockchain.
By using a hybrid consensus mechanism, Solana maximizes speed and aims for lower transaction fees significantly as compared to its competitors. The innovative consensus mechanism consisting of Proof of stake and Proof of history enables validators to vote on the timestamps of each block on an existing network which caters to the issues faced by centralized exchanges.
Solana’s chain consists of a leader node that transmits messages between the nodes sequence-wise, increasing the throughput without the need for centralization. The Solana ecosystem hashes each transaction by using the output of one as the input of the next one reducing the overall workload enabling better scalability.
How To Buy Solana?
Purchasing Sol tokens can be a piece of cake if you know the proper method to do so. You can use fiat currency or any cryptocurrency to purchase Solana from a centralized exchange. You can even use a decentralized exchange platform to trade one cryptocurrency for another one.
Moreover, staking can also be used as a collateral if you want to verify new blocks over the Solana network. However, staking is not possible for beginners entering the crypto world as you need to own some coins in order to use them as a collateral. One of the greatest advantages of this network is the low fees charging just $0.00025 per transaction. The NFT gas fee is around 0.00045 SOL facilitating a seamless environment for trading digital artworks.
What Can I Do With Solana?
Sol tokens can be utilized for multiple purposes such as for peer-to-peer payments, securing the network as a validator, and for trading activities. Solana can be used to mint and trade NFTs along with validating smart contracts over this cryptocurrency platform.
Solana can be a safe investment option for different types of investors who aim to diversify the risk of their investments. Staking this digital currency can help you earn annual percentage rates (APR) ranging between 11% to 32%. If you stake 10 tokens for about 360 days, you will be rewarded 3.8 additional coins in your wallet.
What Are The Top Innovations Of Solana Foundation?
Solana has initiated several innovations in the blockchain industry making it one of the most popular digital currencies in the world. Here is a detailed overview of the top features of the Solana network.
Proof of stake and Proof of history
Although the Solana blockchain is designed on RUST programming languages which makes the transactions secure, the hybrid consensus mechanism of Proof of stake and Proof of history adds another layer of security to process transactions.
Tower BFT (Byzantine Fault Toleration)
Tower BFT is an optimized version of Practical Byzantine Fault Toleration. Each node on the Solana blockchain consists of a cryptographic clock which keeps track of each transaction creating a scalable network with a high throughput.
It uses the Proof of history consensus algorithm to record cryptographic time-stamp to avoid latency. Hence, having a historical record of the order transactions ensures greater efficiency over the blockchain.
Solana uses the Turbine protocol to divide nodes into smaller packets to cater the issues related to bandwidth and validation of new blocks. This is a block propagation protocol that facilitates the faster settlements of verifying transactions.
Gulf Stream is a transaction forwarding protocol that enables validators to process ahead of time and deal with the issues related to confirmation. This protocol enables Solana to process 50,000 TPS .
Sea Level protocol reduces runtime allowing each transaction to be processed simultaneously. This makes Solana cost-effective and efficient by decreasing the time taken for validating new blocks of data. It scales horizontally through the GPUs and SSDs to obtain a more efficient runtime.
Solana uses a Pipeline system to allow the information of each transaction to be validated quickly. This system uses multiple sequential steps in order to input data structure for each transaction. It streamlines different processes for faster validation and replication across all nodes on a network.
Cloudbreak is a horizontal scaling method that enables concurrent reads and writes in the Solana ecosystem leading to greater scalability. This method also plays a major role in establishing secure connections between hardware and softwares.
Archivers are required for data storage and offload data from validators so that it can be stored on separate nodes. Ideally, these nodes are lightweight and are subject to regular checks to ensure that the right data is stored on them.
How To Store Solana?
Sol tokens are stored in crypto wallets after you have purchased from a crypto exchange. Crypto wallets do not store any cryptocurrencies. Instead they store the keys to the digital currencies making them the most important thing for a crypto investor.
Moreover, crypto wallets can either be online or offline. It is recommended that you should opt for offline storage with a cold wallet to ensure safety of your coins. There are multiple options available in the market but one of the best options can be Ledger Nano X Hardware Wallet.
What Are Solana NFTs?
Solanart is one of the top NFT marketplaces on Solana. It provides you access to amazing digital collectibles enabling you to trade them. The most popular Solana NFT collections include Degen Trash Pandas and Degenerate Ape Academy. If you are looking forward to entering the world of digital artworks, then Solana NFT is a must-try.
During the launch of Degenerate Ape Academy in August 2021, Solana’s price witnessed a massive increase from $30 to $75 in value. By November 2021, it was at an all-time high reaching a price of approximately $260.
Is Buying Solana A Good Investment?
Understanding how Solana works is extremely important to determine if it’s worth the investment or not. Just like other major cryptocurrencies, Sol tokens can be traded on a wide variety of exchanges.
Since the Federal Reserve initiated the upsurge in interest rates, Solana has witnessed a massive price increase due to increased confidence of investors in the crypto industry. Many investors who invested in the tokens of this digital currency were able to make huge sums of money initially but this is not the case in recent times.
However, you need to understand the distinction between digital currencies and other asset types. Unlike stocks, digital currencies are not backed by any asset or cash flow so only speculation is the major force increasing the price of these currencies.
Cryptocurrencies are extremely volatile and highly risky so it is recommended that one should consult a financial expert before entering the crypto space. Although you might have full confidence in Sol due to its past performance, you need to have a high risk tolerance level when entering the blockchain industry.
Can Solana Takeover Ethereum?
Solana has gained immense popularity due to its speed and performance as compared to major cryptocurrencies such as Ethereum. When comparing the processing speed of Solana and this major smart contracts platform, Solana uses different algorithms to reduce the time taken to validate transactions on the blockchain platform.
On the contrary, Ethereum is based on the Proof of work mechanism and can handle only 15 transactions per second. This makes Solana much faster than Ethereum making it one of the fastest blockchains in the crypto industry. Another major benefit of Solana protocol is the cost-effectiveness it implements by requiring lower fees to process transactions.
Moreover, Solana implements a new tokenomics to balance the inflationary and deflationary forces determining the total value of design categories such as initial supply, investors, stakeholders, and community of Sol tokens.
Solana’s technology company is working on several innovative projects such as the Solana pay to facilitate faster, safer, and cheaper transactions over the internet. Solana also aims to launch its own mobile phone reportedly known as Solana Saga in 2023.
Overall, Solana is an innovation to Ethereum as it implements the Proof of stake approach with Proof of history to verify transactions over the blockchain. Sol token holders get the opportunity to earn rewards when they stake Solana to the validators on a network.
Here we have a detailed guide for all the crypto enthusiasts who aim to enter the world of digital currencies. You can choose a crypto exchange that offers brokerage services to help you purchase Solana coins. The opinions expressed related to Solana by the investors advocate for the efficiency and advancements this digital currency has introduced in the blockchain industry.
Although the future prospects of Solana depict that it will be worth it in the long term it is still vulnerable to centralization. Please know that we are not providing financial advice and this information is for educational purposes only.
All investment-related decisions should be initiated based on each investor’s risk appetite. We tried to make this article helpful for people who want to enter the blockchain industry and have no prior experience.
We hope this article will help you to clear all your queries related to the Solana blockchain.
Zornitsa is the Editor-in-chief at Coinlabz. She is involved in researching the impact of blockchain technology and the way crypto is transforming peoples’ perceptions of finances.