What is Solana: Learn more about »Ethereum killer«

As one of the “Ethereum Killers”, Solana is a highly functional open source project that brings a new and above all high-speed blockchain to the crypto industry. This is your ultimate Solana guide.

Decentralized applications (dapps) are often perceived as the core utility of blockchain technology. In recent years, there has been a significant expansion in the scale of dapps, with innovations ranging from gaming to decentralized finance platforms (DeFi), and concurrently, user interest has surged. However, a challenge exists. Many of these dapps operate on the Ethereum platform. This platform experiences difficulties managing the elevated demand, resulting in network bottlenecks and escalating transaction costs. Many might vividly recall that during the peak of the prior bullish phase, transaction fees on the Ethereum network reached up to $200.

This is where Solana enters the scene as a rival blockchain. It boasts 50,000 transactions per second (TPS) and block times as swift as 400 milliseconds, offering a solution to the aforementioned challenges.

Fun fact: Solana is named after a beach in San Diego. Reflecting the project’s origins in the sunny state of California.

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What is Solana?

Solana (SOL) is a high-performance open-source blockchain initiative. It aims to utilize various innovative technologies to fuel the future wave of decentralized applications (dapps). The initiative is committed to delivering a maximally decentralized, secure, and exceptionally scalable platform. It is also capable of supporting thousands of nodes without compromising on throughput, addressing several issues encountered by rival platforms, such as Ethereum (ETH).

Its unique architecture enables Solana to handle up to 65,000 transactions per second (TPS). Compared to Bitcoin’s 7 TPS and Ethereum’s 30 TPS, Solana operates at a remarkable speed. Unlike comparable projects like Polkadot and Ethereum 2.0, Solana functions as a single blockchain (Layer 1) and does not allocate operations to connected chains (Layer 2).

Fun fact: Due to its high throughput, Solana has earned nicknames like “The World’s Fastest Blockchain” and “Speedy Gonzales” in the crypto community.

History of Solana

Yakovenko postulated that incorporating timestamps into transactions could significantly enhance the scalability of a cryptocurrency blockchain without compromising its security or decentralization. He was confident in the feasibility of constructing such a system. Both Google and Intel had integrated analogous technologies within their databases, though in a centralized fashion. Solana’s groundbreaking whitepaper was discreetly released in November 2017.

Early on, Solana’s commitment to scalability and low transaction cost. Processing around 65,000 transactions per second (TPS) at $0.00025 per transaction has catapulted it to the forefront of blockchain technology. The network’s ability to offer swift and economical transactions has made it a preferred choice for developers aiming to deploy decentralized applications (dApps) and DeFi projects.

Historical milestones:

• 2017: Solana is founded by Anatoly Yakovenko and Raj Gokal.

• 2018: Solana raises $20 million in a seed funding round led by Multicoin Capital.

• 2019: Solana launches its main-net beta.

• 2020: Solana launches its main-net beta and raises $314 million in a Series A funding round led by Andreessen Horowitz.

• 2021: Solana experiences rapid growth, with its transaction volume increasing by over 100x. It also launches a number of new features, including Solana Pay and Solana NFTs.

• 2022: Solana continues to grow, increasing its transaction volume by over 10x. It has also launched several new partnerships, including with Google Cloud and Meta.

• 2023: Solana continues to grow and evolve, with a number of new features and partnerships in the pipeline.

How does Solana work?

Well, Solana is incredibly complex, so let’s start with the basics.

Proof-of-history (PoH)

At the core of Solana’s architecture is the innovative Proof of History (PoH), a groundbreaking consensus mechanism. PoH is a cryptographic timestamp. So, it allows the network to agree on the order and time of transactions, creating a historical record that optimizes efficiency and scalability. This unique approach mitigates the need for communication between nodes about transaction sequences. Also, it allows the network to reach consensus with minimal delay.

In the PoH mechanism, each transaction is hashed along with a timestamp, creating a unique historical record. This chronological arrangement of transactions forms a hash chain, where each new transaction contains the hash of the previous one, establishing an immutable and verifiable order of events. This ordered sequence allows validators to process transactions without needing to agree on the order beforehand, significantly reducing the time and resources required to confirm a block. The result is a blockchain that can process up to 65,000 transactions per second (TPS), a stark contrast to Bitcoin’s 7 TPS and Ethereum’s 30 TPS.

Synergy with proof-of-stake (PoS)

While PoH is the architect of transaction ordering, Solana leverages a Proof of Stake (PoS) consensus mechanism for the validation and confirmation of transactions. Validators in the Solana network are chosen based on the amount of SOL they stake, and they participate in the validation of the transaction order established by PoH, ensuring the security and integrity of the network.

But, unlike other Proof of Stake (PoS) cryptocurrencies, Solana does not impose a minimum stake requirement to operate a node on its blockchain. To illustrate, operators of Ethereum nodes are obligated to stake 32 ETH, representing a substantial financial commitment. Inevitably, the quantity of block rewards received is correlated to the volume of SOL tokens staked on the network. Although the selection of Leaders is ostensibly random, the quantity of SOL staked also impacts the probability of being chosen as a Leader to produce blocks. Nodes that exhibit improper behavior have their stakes reduced, and the confiscated funds are allocated to block generation rewards.

Tower BFT

Building upon the foundation of PoH, Solana employs Tower Byzantine Fault Tolerance (Tower BFT) as its consensus algorithm. Tower BFT leverages the synchronized clock provided by PoH to achieve quick and secure consensus. This mechanism ensures the network’s resilience against malicious actors and fortifies the integrity of the blockchain.

Gulf Stream

To enhance the speed of block propagation, Solana incorporates Turbine, a protocol that breaks data into smaller packets. This fragmentation allows validators to receive and process data more swiftly, reducing confirmation times and elevating the network’s transaction throughput.

What is SOL?

SOL is the native cryptocurrency of the Solana blockchain, serving as the fundamental asset within its ecosystem. It is integral to the network’s operations, facilitating transactions, incentivizing validators, and driving the development of decentralized applications (dApps) and projects on the Solana platform. Solana underwent a total of five funding rounds, with the public ICO amassing over 25 million USD across these rounds. Additionally, it offered a buy-back price guarantee of slightly below 20 cents to those who registered and staked their tokens within the initial three months post-ICO.

SOL’s utility within the Solana ecosystem is diverse and pivotal. Here are the key roles it plays:

• Transaction Fees: SOL is used to pay transaction fees on the network, compensate validators for processing and validating transactions, and maintain the security and stability of the blockchain.

• Staking: SOL holders can stake their tokens to earn rewards. Staking SOL helps secure the network by incentivizing validators and stakers with inflationary rewards and transaction fees.

• Governance: SOL may also play a role in the governance of the network, allowing holders to participate in the decision-making process and contribute to the development and upgrade of the Solana protocol.

SOL’s market dynamics are influenced by various factors, including supply and demand, network growth, and developments within the Solana ecosystem. The adoption of Solana-based projects, advancements in the protocol, and the overall market sentiment play crucial roles in shaping the value and market capitalization of SOL.

Where can I buy SOL?

As one of the largest cryptocurrencies, SOL is available on virtually all major crypto exchanges. According to CoinMarketCap, more than a dozen exchanges now offer SOL trading pairs, including major exchanges such as Binance, Coinbase, Bitstamp, and Kraken. Binance is the most popular exchange for SOL and offers many trading pairs, so we will use this cryptocurrency exchange as an example:

• Step 1: Create your Binance account and top up your balance with USDT

• Step 2: Go to the SOL/USDT spot market and go to the order panel at the bottom of the page

• Step 3: Select the “Market” tab and enter the amount of USDT you want to spend on SOL. Click on the “Buy SOL” button to complete your order.

• Step 4: Congratulations, you own SOL! Your token will be processed at the best available price and will then be available in your Binance account

Solana vs. Ethereum

Solana has received much praise for its speed and performance and has even been cited as a legitimate competitor to crypto industry leaders such as Ethereum. So how is Solana different from Ethereum, and can it be considered a potential “Ethereum killer”?

When comparing Ethereum and Solana, the contrast in scalability and performance is evident. Ethereum, while revolutionary, grapples with scalability challenges, processing around 30 TPS, leading to network congestion and elevated gas fees during peak activity. In contrast, Solana’s innovative technologies enable it to offer scalable solutions with low transaction fees, addressing the limitations inherent in earlier blockchains.

The developmental landscape and ecosystem of both blockchains also present interesting contrasts. Ethereum’s mature and diverse ecosystem is a hub for a vast array of dApps, DeFi platforms, and NFT projects, supported by a vibrant and extensive community of developers and users. On the other hand, Solana’s ecosystem, though relatively nascent, is experiencing rapid growth and diversification, driven by its technological prowess and collaborative community. In terms of consensus mechanisms, Ethereum’s transition to a PoS model with Ethereum 2.0 is a significant step towards improving its scalability and environmental footprint. Solana, with its innovative combination of PoH and Tower BFT, offers a secure and efficient consensus model, optimizing transaction processing and scalability.

What we can conclude here is that although Solana is deemed as Ethereum killer, there is no need for that. There is place for both and in fact they complement each other very well. Rather than viewing the relationship through a competitive lens, it is more constructive to perceive Solana and Ethereum as collaborative entities, each contributing uniquely to the advancement and diversification of blockchain technology, fostering innovation, and broadening the scope of decentralized solutions.

Solana: Pros

• Fast transactions: One of Solana’s most notable merits is its exceptional transaction throughput. Leveraging its unique Proof of History (PoH) and the Tower Byzantine Fault Tolerance (Tower BFT), Solana can process approximately 65,000 transactions per second (TPS). This high-speed transaction processing capability addresses the scalability issues that have long plagued many blockchain networks. Also, it offers a solution that meets the demands of growing decentralized ecosystems.

• Low-cost transactions: The network’s ability to offer low fees, even as low as $0.00025 per transaction, makes it an attractive platform for developers and users. This feature is particularly beneficial for decentralized applications (dApps) and projects in the DeFi space. There transaction costs can significantly impact user experience and overall project feasibility.

• Growing popularity: Solana’s ecosystem is vibrant and diverse, teeming with projects spanning DeFi, NFTs, and Web3 applications. The network’s high throughput and low transaction fees have attracted a multitude of developers. That resulted in the creation of innovative and varied solutions. This growing ecosystem is a testament to Solana’s adaptability and potential to host a wide range of applications, fostering innovation and development within the blockchain space.

• Security mechanisms: PoH and Tower BFT combination ensures the network remains secure and resilient against potential attacks. These security measures are crucial in maintaining user trust. Also, ensuring the integrity and reliability of the applications built on the Solana network.

• User-friendly: Solana places a significant emphasis on providing a user-friendly experience. The network’s speed and low fees enhance overall user satisfaction and seamless application interactions. Furthermore, Solana’s ecosystem hosts a variety of user-friendly wallets and interfaces. So, these things make it accessible to both seasoned crypto enthusiasts and newcomers to the blockchain space.

Solana: Cons

• Network stability: Solana has experienced instances of network interruptions and downtimes. These interruptions pose challenges in maintaining consistent network performance and user confidence.

• Complexity: Solana’s innovative technologies and unique architecture present a learning curve for developers and users. The network’s complexity requires a deeper understanding and acclimatization, potentially impacting the rate of adoption and development.

• Relatively young project: As a newer entrant in the blockchain space, Solana is building its market perception and user base. The evolving perception and adoption rate are crucial in determining Solana’s long-term position and influence in the blockchain industry.

Notable partnerships

In addition to its technical prowess, Solana has also been forging notable partnerships with established companies and organizations. These partnerships are helping to validate Solana’s technology and accelerate its adoption. Here are some of Solana’s most notable partnerships:

Chainlink

One of Solana’s significant partnerships is with Chainlink. A decentralized oracle network that enables smart contracts to securely interact with real-world data and services. This integration allows developers building on Solana to access high-quality, tamper-proof data for their decentralized applications. It clearly enhances applications’ capabilities and reliability in DeFi, gaming, and various other domains. The synergy between Solana’s high throughput and Chainlink’s secure and reliable oracles is pivotal in expanding the possibilities within the decentralized ecosystem.

Tether (USDT and USD Coin (USDC)

Solana’s partnerships with stablecoins Tether (USDT) and USD Coin (USDC) are crucial in enhancing liquidity and enabling a wide range of financial applications on the network. These integrations allow users and developers to transact and interact with stable value on the Solana network. Furthermore, it fosters the development of DeFi projects and expands the utility and accessibility of stablecoins within the Solana ecosystem.

Visa and Mastercard

Samsung

This partnership involves integrating Solana’s blockchain technology into Samsung’s Galaxy smartphones. This integration will make it easier for Samsung users to access and use Solana DApps and NFTs. It will also allow Samsung to develop new and innovative products and services on the Solana blockchain.

Conclusion

Solana stands out as a revolutionary force in the blockchain world. It earned the nickname “Ethereum Killer” due to its innovative approach to decentralized applications and its ability to address scalability and high transaction costs, which are prevalent in many blockchains, including Ethereum. Solana’s distinctive Proof of History consensus mechanism, impressive transaction speed, and low fees have made it a strong competitor in the blockchain field. Furthermore, Solana’s strategic partnerships with prominent entities like Chainlink, Visa, Mastercard, and Samsung, and its integrations with stablecoins like USDT and USDC, serve as significant endorsements of its technology, potentially hastening the incorporation of blockchain technology in everyday applications.

These alliances signify Solana’s transformative potential and its escalating influence in the broader financial and technological sectors. The term “Ethereum Killer” highlights the rivalry between Solana and Ethereum. Still, it’s vital to recognize their complementary contributions to the broader blockchain ecosystem. The relationship between Solana and Ethereum is symbiotic, fostering the ongoing development and diversification of the blockchain world.

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