Solana has emerged in recent years as a real competitor and potential “Ethereum killer,” if it can be called that. It offers a range of technological advancements that set it apart from other blockchain platforms and has had connections to controversial figures known in the industry. In this detailed guide, we will explore the fundamentals of Solana and its technical features.
Solana is an open infrastructure focused on providing scalability for crypto applications. It is known for its new consensus mechanism of Proof of History, which helps maintain time on the blockchain and enables the chain to process up to 50,000 transactions per second.
Solana boasts a block time of just 400 milliseconds, significantly faster than Ethereum’s 10 seconds and Bitcoin’s 10 minutes.
They claim it can handle up to 710,000 transactions per second (theoretically). A capacity that is about 30 times more than what Visa currently processes. Although the highest transaction volume recorded on the network is 50,000 per second, the theoretical capacity remains much higher.
The Solana community is vast, with millions of participants. Notably, the network has supported over 29.7 million fee-paying accounts and has been used to mint more than 340 million NFTs. Its appeal is bolstered extremely by low transaction fees, with a median fee per transaction of just $0.00064.
Created by Anatoly Yakovenko and Greg Fitzgerald, who were previously engineers at Qualcomm, the project officially began in 2017, when it launched its whitepaper and the internal testnet not long after in 2018. SOL went live in 2020. Fun fact: Solana is named after Solana Beach, a place where the founders gladly sat down.
Recently, Solana announced that $500 million in funding was gathered from top venture capitalists (VCs). A giant funding round that surpassed the initial capital raised by Solana itself.
This review of Solana (SOL) was created for informational purposes. This article is not intended for promotion.
If we look at the inner workings of Solana, we can see it is designed to process a high volume of transactions efficiently and, as one of its unique points, at a lower cost compared to its rivals.
How this is done can be attributed to its combination of hybrid proof-of-stake (PoS) and proof-of-history (PoH) consensus mechanisms. The PoH, in particular, allows the blockchain to timestamp transactions rapidly and accurately in a way that faster consensus can be reached. We explain it briefly in the next chapter.
Proof of History is not in itself a consensus mechanism but a method to record the time sequence of transactions. It uses timestamps and cryptographic proofs to streamline the process of data organization on the blockchain.
This method reduces the need for validators to constantly communicate to agree on time and helps the blockchain to verify the order and time of transactions more quickly than traditional proof-of-work systems.
Solana utilizes Proof of Stake as a security and operational mechanism, which involves validators who are selected based on the number of tokens they hold and willing to stake this as collateral. A commonly known system that not only reduces energy consumption but also ensures added security.
Becoming a validator on Solana’s network is accessible in terms of token requirements, as there is no minimum staking amount necessary. However, the hardware requirements are substantial. Validators need powerful computers, typically with at least 128 GB of RAM and a 12-core CPU, resembling server-grade hardware. This high barrier in hardware requirements ensures that while the network is technically open to many, only those with significant resources can participate as validators.
While Solana and Ethereum share many similarities, including their open-source nature and support for smart contracts, decentralized applications (dApps), and NFTs, they mainly differ in their technical mechanisms and performance. Solana offers greater transaction speeds and improved scalability compared to Ethereum, due to its unique combination of PoH and DPoS.
Solana is often referred to as an “Ethereum killer” due to its similarities with Ethereum. Like Ethereum, the SOL token is widely available on most major cryptocurrency exchanges. The primary use of the SOL token is to facilitate transactions on the Solana network, which offers several advantages over other blockchains.
While both Solana and Ethereum offer smart contract capabilities and use a proof-of-stake consensus mechanism, Solana is significantly faster and cheaper in terms of transaction processing. Ethereum, however, benefits from a larger ecosystem and greater adoption due to its first-mover advantage. Ethereum’s ongoing upgrades aim to address its scalability and cost issues, which could affect how Solana competes in the future.
Phantom is a leading wallet provider for the Solana ecosystem, offering a gateway to a myriad of web3 applications, with a focus on superior user interaction and design. The upcoming updates for the Android app will include support for the Mobile Wallet Adapter, allowing users to sign transactions directly from the Phantom Android app for both mobile and web decentralized applications (dApps).
Orca, known as the leading automated market maker (AMM) on Solana, is focused on making DeFi accessible to everyone, particularly through mobile devices.
Magic Eden has pioneered immersive gaming within its marketplace, allowing users to engage directly with games. They were also the first to introduce a launchpad and creator tools within the marketplace.
Magic Eden aims to deliver a comprehensive mobile experience that matches the capabilities of desktop interfaces. They envision a system where users receive notifications on their phones, connect their wallets effortlessly, and complete the minting process quickly and securely—an experience that caters to the excitement and anticipation of NFT drops.
The Solana Mobile Stack – SMS is a framework that enhances mobile devices’ capabilities to interact with blockchain technologies. It includes several key components such as SeedVault for secure key storage, Mobile Wallet Adapter for transaction processing, and Solana Pay for mobile payments.
The Saga smartphone is designed to integrate with the Solana Mobile Stack and allows the device to support a wide range of blockchain applications directly on the phone.
The Saga Pass acts as a community passport within the Solana Mobile Stack ecosystem. It is designed for early adopters and developers who wish to influence and govern the direction of the platform. Owners of the Saga Pass will gain access to special experiences, games, and benefits, enhancing the community feel and rewarding those who are first to support and develop on this new platform.
Gaming is also a thing on the Solana blockchain and their approach to digital items and NFTs is also done through an app store with low fees and a swift trade and ownership experience—ideal for gaming.
Solana’s vision for gaming includes support for mobile games and web MMOs, with a focus on leveraging blockchain to enhance digital interactions and item valuations within games.
In December 2020, the Solana network experienced a significant downtime of around six hours. An incident that is very critical as it was more than a challenge to the decentralized nature of the Solana blockchain.
Interestingly, this downtime did not adversely impact Solana’s market price, it was other factors that led Solana to its demise after its first initial run.
Sam Bankman-Fried, often referred to as SBF, played a pivotal role in the rise of Solana, especially notable during its substantial market spike in 2021. As the CEO of FTX, the second biggest exchange of the moment, that went bust, SBF promoted Solana in an evangencial way.
His advocacy extended beyond mere words; SBF, through FTX and associated entities, invested heavily in Solana’s tokens (SOL) and integrated Solana into FTX’s operations.
The collapse of FTX, however, had a profound impact on Solana. When FTX filed for bankruptcy and SBF’s legal troubles began, it created a ripple effect that severely affected Solana’s market position.
And despite his ongoing legal challenges, reports suggest that SBF continues to advocate for Solana even while in detention. According to a New York Times article, he has been recommending Solana to people around him, including the guards at the Metropolitan Detention Center.
The total supply of Solana started at around 500 million tokens. This number will continue to increase due to the proof of stake rewards, which contribute to its inflationary aspect. This expanding supply is a critical factor for potential investors to consider, as it influences the token’s value and availability.
Unlike Bitcoin, Solana does not have a maximum supply. However, it features a declining inflation rate, which is set to decrease by 15% each year until it stabilizes at 1.5% per annum.
During its early stage, Solana conducted four private funding rounds and an initial coin offering (ICO).
The initial distribution of Solana tokens was as follows:
These events sold around 36% of the total token supply at significantly low prices—approximately 25 cents each. Solana also implemented a nine-month lockup period post-launch for tokens sold in private sales, which became liquid around January 7, 2021.
Apart from the tokens sold during the ICO and funding rounds, another 13% of the tokens were allocated to the founders of the project. The Solana Foundation received 10%, and the remaining 39% was earmarked to fund community initiatives, which are managed through the foundation.
An interesting occurrence in Solana’s history was the discovery of a wallet holding 13 million tokens with no clear explanation for its purpose. To address potential concerns, a considerable number of these tokens were burned. So it began a little strangely for Solana in the early stages.
If we look at the Solana token ecosystem, we see that they also have a counterpart, just as Ethereum does regarding NFTs. Tokens on the Solana blockchain can have metadata associated with them through programs like the Metaplex Metadata Program.
This metadata can include the name of the token, an image representing it, and a symbol, providing visual and identifying information about the token. The information is stored within a metadata account, which is owned by the metadata program and linked to the token’s mint.
For those interested in a deeper dive into the technical aspects of NFTs on Solana, the Metaplex documentation (available at docs.metaplex.com) provides comprehensive guides and tutorials.
The Solana Foundation, along with its community, is aware of the controversial energy usage by older consensus methods of older blockchains. This is why they focus on building a more energy-efficient web3 environment that emphasizes carbon neutrality.
Below, we break down the vital statistics of Solana’s infrastructure, electricity consumption, carbon footprint, and comparisons with everyday energy usage.
These figures, updated as of September 12, 2024, reflect Solana’s commitment to maintaining an energy-efficient blockchain network.
Solana’s infrastructure is designed to scale up to millions of transactions per second (TPS) on modern hardware that is readily available, without needing specialized equipment.
The focus now is on adoption and finding real-world applications for the technology to achieve product-market fit.
Solana’s white paper details not only technological innovations such as the Solana cluster and Turbine—a block propagation protocol—but also reveals ambitions to expand beyond just a cryptocurrency platform.
Similar to how early smartphones paved the way for apps like Tinder, Solana’s current developments could lead to groundbreaking applications that are not yet envisioned. The flexibility and performance of the Solana network make it an ideal platform for a wide range of applications, from DeFi to large-scale NFTs, without the prohibitively high costs typically associated with blockchain transactions.
In summary, Solana presents an innovative solution to blockchain scalability through its novel proof-of-history consensus mechanism. This enables the network to process thousands of transactions per second at extremely low cost, far surpassing the capabilities of earlier platforms.
While controversy surrounds some of Solana’s early decisions and connections, its focus on scalability and mass adoption through emphasis on mobile and gaming could pave the way for transformational decentralized applications as yet unforeseen.
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