What is Solana and How Does it Work?
Despite its financial ties with the now-bankrupt FTX crypto exchange and getting caught up in a heavy bear market, Solana has managed to recover and rise to one of the leading blockchains for DeFi, NFTs, GameFi, and other market sectors.
In this article, we take a deep dive into Solana, the technology behind the blockchain, its key features, how it compares to other chains, and future prospects.
What is Solana (SOL)?
Co-founded by Anatoly Yakovenko and Raj Gokal in 2018, Solana is a high-throughput Layer 1 blockchain that launched in March 2020.
With high scalability and a rapid block time, it is among Ethereum's most prominent competitors in the field of smart contract blockchains. Thus, it features much lower fees than Ethereum's mainnet, with Solana users paying $0.038 of gas fees on average in the last epoch (at the current SOL price of $147.92).
With its inexpensive fees and near-instantaneous transactions, Solana has focused on promoting blockchain technology's mass adoption. The project targets markets like DeFi, GameFi, and NFTs to offer a more user-friendly alternative to Ethereum-based dApps.
The Tech Behind Solana
It's important to mention two major technologies that make Solana unique.
The first is the Proof-of-History (PoH) mechanism, which acts like a global cryptographic clock that provides a digital record of events taking place on the blockchain at any given time. It assigns a timestamp to each transaction that occurs in the network.
With PoH, validators within the Solana ecosystem don't have to wait until everyone verifies a new block to add it to the blockchain. Instead, they check for new votes and add them to the newly generated block in real-time. This allows Solana to operate with a block time of 0.4 seconds while significantly enhancing the Layer 1 chain's scalability.
Solana utilises the Tower Byzantine Fault Tolerance (Tower BFT) consensus mechanism. Based on the Proof-of-Stake (PoS) algorithm, it is a custom implementation of Practical Byzantine Fault Tolerance (PBFT), which has been optimized to work with the Proof-of-History cryptographic clock. As the project describes it, Tower BFT prefers "liveness to consistency," leveraging PoH before consensus to reduce messaging latency and overhead.
As Tower BFT is based on the PoS algorithm, validators must stake the native SOL token to propose new blocks. Upon getting selected by the network and successfully validating a new block, the validator receives SOL tokens as a reward for securing the ecosystem. On the other hand, the slashing mechanism punishes malicious behavior by taking a portion or all of the staker's SOL stake.
What Are the Key Features of the Solana Blockchain?
We have collected Solana's key features below:
High scalability and throughput at 65,000 transactions per second (TPS)
Instantaneous transaction processing with a 0.4-second block time
Lightning-fast and inexpensive transactions, powered by the Proof-of-History cryptographic clock and Tower BFT consensus mechanism
Enhanced user experience for dApp users
One of the most popular chains for DeFi, NFTs, GameFi, and other decentralized applications
How Does Solana Compare With Other Blockchains?
Check out the following table to learn more about how Solana compares with other blockchains based on different factors:
| Solana | Bitcoin | Ethereum | BNB Chain | TRON | |
|---|---|---|---|---|---|
| Smart Contract Capability | Yes | Limited | Yes | Yes | Yes |
| Consensus Mechanism | Tower BFT | Proof-of-Work (PoW) | Proof-of-Stake (PoS) | Proof-of-Staked-Authority (PoSA) | Delegated Proof-of-Stake (dPoS) |
| Number of Validators | 1,506 | 100,000+ | 1 million+ | 56 | 27 |
| Transactions Per Second (TPS) | 65,000 | 7 | 13 | 5,000 | 2,000 |
| DeFi Total Value Locked (TVL) | $4.33 billion | $1.11 billion | $62.07 billion | $5.31 billion | $8.37 billion |
| Market Capitalisation | $68.5 billion | $1.325 trillion | $422 billion | $90 billion | $10.16 billion |
What Could the Future Hold for Solana?
Despite its meteoric start, Solana had a rough time in the crypto market following the FTX scandal. That said, like a phoenix, the high-throughput Layer 1 blockchain has risen from the ashes, becoming one of the leading chains for DeFi, NFTs, GameFi, and other important digital asset sectors.
As a result, Solana has proven that it has an integral role in the blockchain ecosystem, providing a more user-friendly, cost-efficient, and scalable alternative to Ethereum at the cost of some decentralization and reliability (uptime).
Looking to gain exposure to Solana? Head to VALR to trade SOL!
Frequently Asked Questions (FAQ)
What is the difference between Solana and Ethereum?
While Ethereum puts the main emphasis on security and decentralization, Solana's primary focus centers around scalability.
This way, Solana provides users with enhanced throughput with inexpensive transaction fees and instantaneous transactions at the cost of some decentralization and reliability.
What is Solana's Proof-of-History (PoH) mechanism?
Proof-of-History (PoH) is one of the core innovations of the Solana blockchain. It is a cryptographic clock that assigns a timestamp to each transaction that occurs in the network, allowing validators to process blocks before waiting for other validators to verify them.
PoH plays a crucial role in Solana's Tower BFT consensus mechanism and ensures the blockchain's high throughput and a rapid 0.4-second block time.
How many transactions can Solana process in a second?
Theoretically, Solana can process up to 65,000 transactions per second (TPS).
Can I stake Solana (SOL)?
Solana's Tower BFT consensus mechanism is based on the Proof-of-Stake (PoS) algorithm, meaning you can stake SOL to secure the network and generate a passive income. One of the easiest ways to stake SOL is through VALR, where you can earn high APRs with flexible terms. Learn more about Solana staking here!
What is Solana trying to solve?
Solana is trying to solve the issues of high transaction fees and slow transaction speeds found in other blockchains. It aims to provide high scalability, rapid block times, and low costs to promote the mass adoption of blockchain technology.
Is Solana a meme coin?
No, Solana is not a meme coin. It is a high-throughput Layer 1 blockchain designed for scalability and rapid transaction processing, competing with Ethereum in the field of smart contracts, DeFi, NFTs, and GameFi.
What is Solana used for?
Solana is used for a variety of applications including DeFi, NFTs, GameFi, and other decentralized applications. It supports smart contracts and provides a platform for building scalable and rapid decentralized solutions.
Which crypto are based on Solana?
Several cryptocurrencies and projects are based on Solana, including Serum (a decentralized exchange), Raydium (an automated market maker), and various NFTs and DeFi projects that leverage Solana's high throughput and low transaction costs.
Does Solana pay dividends?
No, Solana does not pay dividends. However, you can stake SOL tokens to earn rewards, which provides a form of passive income.
What can you develop with Solana?
You can develop decentralized applications (dApps) on Solana, including DeFi platforms, NFT marketplaces, GameFi applications, and other blockchain-based solutions that require high scalability and fast transaction processing.
Who is the owner of Solana?
Solana was co-founded by Anatoly Yakovenko and Raj Gokal in 2018.
