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What Is Solana (SOL) and How Does SOL Coin Work?

Blockchain technology has revolutionized the world of finance, enabling the creation of decentralized applications that run on distributed networks without intermediaries or censorship. However, blockchain technology also faces some challenges, such as scalability, cost, and usability. In this article, we will explore one of the most promising blockchain platforms that aims to solve these challenges: Solana.

What Is Solana (SOL)?

Solana is a decentralized computing platform that uses SOL to pay for transactions. Solana aims to improve blockchain scalability by using a combination of proof of stake consensus and so-called proof of history. As a result, Solana claims to be able to support 50,000 transactions per second without sacrificing decentralization.

Solana History

Solana was founded by Anatoly Yakovenko, a former software engineer at Qualcomm and Dropbox. He first proposed the idea of proof of history in 2017, as a way to create a historical record of events on a blockchain that could be verified without relying on a third-party clock. He then teamed up with his former Qualcomm colleague Greg Fitzgerald, and they launched Solana Labs, the company behind the Solana protocol, in 2018. Solana went live in March 2020, after raising $25 million in a series A funding round led by Multicoin Capital. Since then, Solana has attracted more investors, developers, and users, becoming one of the top 10 cryptocurrencies by market capitalization as of September 2021.

Solana’s Technology

Solana’s technology is based on four key innovations:

  • Proof of history (PoH): This is a way to encode the passage of time into the blockchain, by creating a sequence of hashes that can be easily verified by anyone. PoH allows Solana to achieve high throughput and low latency, as well as to synchronize the network without relying on external sources.
  • Proof of stake (PoS): This is a way to secure the network and reach consensus among validators, who stake their SOL tokens to participate in the validation process. PoS complements PoH by providing incentives and penalties for honest and malicious behavior, respectively.
  • Tower consensus: This is a variant of PoS that is optimized for PoH. Tower consensus uses a concept called slashing, which means that validators lose a portion of their stake if they try to validate conflicting blocks. This way, Tower consensus ensures that validators are aligned with the longest and most recent PoH sequence.
  • Turbine: This is a block propagation protocol that breaks down the data into smaller packets and distributes them across the network in a peer-to-peer fashion. Turbine enables Solana to scale up the number of transactions without compromising speed or security.

How Does Solana Work?

Solana works by processing transactions in parallel across its network of validators, who run specialized hardware to perform the PoH and PoS functions. Each validator maintains a copy of the ledger, which is updated every 400 milliseconds with a new block. The blocks are ordered according to the PoH sequence, which acts as a source of truth for the network. The validators also participate in the Tower consensus protocol, which finalizes the blocks and prevents forks or double-spending.

Solana uses SOL as its native cryptocurrency, which is used to pay for transaction fees, staking rewards, and network incentives. SOL also gives holders the right to vote on governance proposals and protocol upgrades. As of September 2021, there are 411 million SOL tokens in circulation, out of a total supply of 489 million. The supply of SOL is designed to increase by 8% in the first year, 7% in the second year, and then decrease by 15% every year until reaching 1.5% annual inflation.

What Makes Solana Unique?

Solana is unique because it offers a combination of high performance, low cost, and high security that is rare among blockchain platforms. Solana claims to be the fastest blockchain in the world, with over 50,000 transactions per second and sub-second finality. Solana also boasts one of the lowest transaction fees in the industry, with an average cost of $0.00025 per transaction. Moreover, Solana is highly secure and decentralized, with over 1,000 validators running the network across the globe.

Solana’s unique value proposition has enabled it to attract a lot of attention and adoption in the blockchain space, especially in the decentralized finance (DeFi) sector. Solana hosts several popular DeFi applications, such as Serum, Raydium, Oxygen, Mango Markets, and Audius. Solana also supports the creation and trading of non-fungible tokens (NFTs), such as Degenerate Ape Academy, Solarians, and Star Atlas. Furthermore, Solana has formed partnerships and integrations with various projects and platforms, such as Chainlink, Circle, FTX, Ledger, Metaplex, Phantom, and Wormhole.

What Are the Features of Solana?

Some of the features that make Solana stand out from other blockchain platforms are:

  • Scalability: Solana can handle thousands of transactions per second, thanks to its PoH and Turbine technologies. Solana also has the potential to scale further with Moore’s law, as hardware improvements will directly translate into higher performance.
  • Interoperability: Solana can communicate and exchange value with other blockchains, thanks to its Wormhole bridge, which allows the transfer of tokens and data across different networks. Solana also supports the Ethereum Virtual Machine (EVM), which means that Ethereum-based applications can run on Solana with minimal changes.
  • Developer-friendly: Solana provides a rich set of tools and resources for developers to build and deploy applications on its platform. Solana supports several programming languages, such as C, C++, Rust, TypeScript, and Solidity. Solana also offers a web3-compatible API, a command-line interface, a block explorer, a testnet, a devnet, and various SDKs and frameworks.

Solana vs. Ethereum

Solana and Ethereum are both leading blockchain platforms that enable the development of decentralized applications. However, they have different approaches and trade-offs when it comes to scalability, security, and usability. Here are some of the main differences between Solana and Ethereum:

  • Speed: Solana is much faster than Ethereum, with over 50,000 transactions per second versus around 15 transactions per second for Ethereum. Solana also has sub-second finality, while Ethereum takes several minutes to confirm a transaction.
  • Cost: Solana is much cheaper than Ethereum, with an average transaction fee of $0.00025 versus around $10 for Ethereum. Solana’s fees are fixed and predictable, while Ethereum’s fees are variable and depend on network congestion.
  • Security: Solana and Ethereum both use PoS as their consensus mechanism, which means that they rely on validators to secure the network. However, Ethereum has a larger and more diverse validator set than Solana, with over 250,000 validators versus around 1,000 validators for Solana . Ethereum also has a longer and more established track record than Solana, which launched in 2020.
  • Usability: Ethereum has a larger and more mature ecosystem than Solana, with more applications, users, and developers. Ethereum also has more network effects and liquidity than Solana, as it is the dominant platform for DeFi and NFTs. However, Solana is catching up fast, as it offers a more scalable and user-friendly alternative to Ethereum.

Bottom Line

Solana is a decentralized computing platform that uses SOL as its native cryptocurrency. Solana combines proof of history and proof of stake to achieve high scalability, low cost, and high security. Solana hosts several popular DeFi and NFT applications, and supports interoperability and developer-friendliness. Solana is one of the fastest-growing blockchain platforms in the world, and competes with Ethereum as the leading platform for decentralized applications.

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