Solana (SOL) Introduction
In this article, we will discover about Solana (SOL) - a decentralized blockchain built to enable scalable, user-friendly apps for the world.
What is Solana (SOL)?
Solana is a next-generation internet platform (Web 3.0) structured as a publicly traded blockchain-based crypto network. Solana’s open-source software network coordinates decentralized computers across the globe into a fully unified, user-owned, and operated cloud platform. Solana supports high-speed and low-cost transactions on a single-layer blockchain alleviating the need for additional scaling solutions that other networks typically require.
Founded in 2017 by Anatoly Yakovenko from Solana Labs, the Solana blockchain adopts a new method of verifying transactions. Bitcoin, Ethereum, and many other projects suffer from scalability and speed issues. Using a method known as Proof of History (PoH), the Solana blockchain can handle thousands of transactions per second.
How does Solana (SOL) work?
Solana is a third-generation, Proof of Stake blockchain. It has implemented a unique way of creating a trustless system for determining the time of a transaction called Proof of History.
Keeping track of the order of transactions is hugely vital for cryptocurrencies. Bitcoin does this by bundling transactions into blocks with a single timestamp. Each node has to validate these blocks in consensus with other nodes. This process adds a significant waiting time for nodes to confirm a block across the network. Solana instead takes a different approach. Let’s take a closer look.
Transaction flow through the Solana network: Source: Cointelegraph
Solana’s core innovation: Proof of History
While the Solana blockchain contains a number of innovations that power its greater scalability compared to other blockchains at present, the big breakthrough at the heart of the Solana blockchain is a consensus mechanism known as ‘proof-of-history’ (PoH).
Conventionally, the primary means of reaching consensus on blockchains has been known as ‘proof-of-work’ (PoW), where members of the network (miners) expend effort solving arbitrary mathematical puzzles to process and validate transactions on the blockchain.
This is the consensus mechanism utilized in Bitcoin and Ethereum (historically), and has been criticized for being energy inefficient, expensive, and not scalable.
In response to the challenges of PoW, many blockchains have moved to a new consensus mechanism known as proof-of-stake (PoS), which requires users to lock up cryptocurrency assets to become validators in the network.
These validators are responsible for the same actions as miners in the PoW mechanism, with the added advantage of greater energy efficiency (since less computational power is required) and lower barriers to entry, with reduced hardware requirements necessary for validators to participate in the network. Notably, Ethereum is moving to PoS as part of its move to Eth2.
While both PoW and PoS rely on sequential production of blocks that require confirmation across their respective networks before moving forward (i.e., different nodes need to interact with each other to establish time and order of events), Solana’s PoH breaks this sequential mechanism via the concept of a historical record.
Proof of History Infographic / Image Credit: Solana Labs
In simple terms, the Solana network essentially chains messages together to create a proof of the relative order and time of each message in the historical record.
This ‘cryptographic timestamp’ establishes the relative order and time of each message in the historical record, which allows Solana validators to verify these proofs in any order, creating superior throughput and efficiency in the network.
This core innovation powers the ability of the Solana network to handle 50,000 transactions per second with 400 millisecond block times, which is currently unparalleled in the blockchain.
What is The Native Token of The Solana Network?
SOL is the native token of the Solana network and represents a piece of ownership in the ecosystem. SOL was launched in March 2020 and has strived to become one of the top 10 cryptocurrencies entering the space by means of total market capitalization. The SOL token is utilized for (i) powering Decentralized Applications (dApps), (ii) making payments, (iii) paying network fees, (iv) providing network security via staking, and (v) facilitating network governance.
SOL token operation scheme is similar to that used in the Ethereum blockchain. Even though they function similarly, Solana token holders stake the token in order to validate transactions through the PoS consensus mechanism. Furthermore, the Solana token is used to receive rewards and pay transaction fees while also SOL enabling users to participate in governance.
SOL uses the SPL protocol. SPL is the token standard of the Solana blockchain, similar to ERC20 on Ethereum. The SOL token has two main use cases:
Paying for transaction fees incurred when using the network or smart contracts.
Staking tokens as part of the Proof of Stake consensus mechanism.
DApps building on Solana is also creating new SOL use cases. For example, Chainvote is creating a (decentralized finance) Defi voting app for corporate governance using SOL tokens to vote. Solana’s price saw an almost 30 times increase in the first two quarters of 2021, making it a popular pick with investors and speculators.
Solana Ecosystem Overview / Image Credit: @Solanians_ (Twitter)
Rapid Growth With White Space for Further Mainstream Adoption
As Solana has increasingly demonstrated its value proposition to developers, the number of protocols running on it has grown significantly, with a total of 302 at the time of writing (compared to 47 in May last year).
However, this still lags behind other blockchains such as Ethereum, which has over 3,000 decentralized applications in its network.
Popular decentralized applications (Dapps) on Solana include Raydium (leading decentralized exchange in Solana), Mango Markets (cross- margin trading and lending), and SolFarm (yield aggregation).
Solana Ecosystem Overview / Image Credit: @Solanians_ (Twitter)
The popularity of new segments such as play-to-earn and NFTs in the cryptocurrency space offers a large white space opportunity for Solana, given the large user bases and high transaction volumes involved.
While the Ethereum network is in the process of upgrading, many users continue to be frustrated by high gas fees and network congestion, particularly at times of ‘peak’ usage, such as during limited NFT releases and NFT gaming events.
As more developers join the ecosystem and build new protocols on Solana, it will be exciting to see how the network develops in comparison with its more mature peers such as Ethereum and BSC. Solana is also one of the most popular Layer 1 blockchains now that is enjoying an L1 Defi Summer 2.0.
How to Buy SOL Tokens?
In 2020, Solana raised its fourth private sale (dubbed a Strategic Sale) and held a public auction sale hosted by CoinList, which brought in another ~$4 million combined. The remaining tokens from the initial SOL supply will go to Solana Labs team members, the Solana Foundation (to help fund development and balance validator voting power), and a "community reserve" (also managed by the Solana Foundation) to fund community initiatives and application developers.
The initial distribution of SOL tokens is as follows:
15.86% to Seed Round investors
2.63 to Founding Sale investors
5.07% to Validator Sale investors
1.84% to Strategic Sale investors
1.6% to Public Auction Sale investors
12.5% to team members
12.5% to the Solana Foundation
38% to the Community reserve fund (managed by the Solana Foundation)
Are you looking for a reliable exchange to buy sol from? You can buy and trade Solana (SOL) on Bitget exchange. You can establish an account with this exchange, and then fund the account with fiat by credit card, Apple Pay, and Google pay.
