What is Solana and how does it work?

What is Solana?

Solana is a highly functional open source project that implements a new high-speed, permissionless, Layer 1 blockchain..

Created in 2017 by Anatoly Yakovenko, a former Qualcomm executive, Solana aims to scale performance beyond what popular blockchains typically achieve while keeping costs low.. Solana implements an innovative hybrid consensus model that combines a unique proof-of-history (PoH) algorithm with the lightning-fast sync engine, which is a version of proof-of-stake (PoS). Thanks to that, the Solana network can theoretically process more than 710,000 transactions per second (TPS) without the need for scaling solutions.

Solana’s third-generation blockchain architecture is designed to facilitate smart contracts and the creation of decentralized applications (DApps). The project is compatible with a number of decentralized finance (DeFi) platforms, as well as non-fungible token (NFT) marketsfor its acronym in English).

The Solana blockchain was implemented during the initial coin offering (ICO) boom of 2017. The project’s internal testnet was launched in 2018, followed by multiple testnet phases leading to the eventual official launch of the Solana blockchain. the main network or main network in 2020.

What makes Solana unique?

Solana’s ambitious design aims to solve the blockchain trilemma, a concept proposed by Ethereum creator Vitalik Buterin, in his own way. This trilemma describes a set of three major challenges that developers face when building blockchains: decentralization, security, and scalability..

The general opinion is that blockchains are built in such a way as to force developers to sacrifice one aspect in favor of the other twoas they can only provide two of the three benefits at any given time.

Solana’s blockchain platform has proposed a hybrid consensus mechanism that compromises decentralization to maximize speed. The innovative combination of PoS and PoH makes Solana a unique project in the blockchain industry.

Generally, blockchains have higher scalability, depending on the number of transactions per second they can support, as they scale better and better.. However, in decentralized blockchains, time discrepancies and higher performance slow them down, meaning more time is required by more nodes verifying transactions and timestamps.

In a nutshell, Solana’s design solves this problem by having a leader node chosen based on the PoS mechanism that sequences messages between nodes. In this way, the Solana network benefits, reducing the workload that translates into higher performance even without a centralized and accurate time source.

What’s more, Solana creates a chain of transactions by hashing the output of one transaction and using it as the input of the next. This transaction history gives name to Solana’s main consensus mechanism: PoH, a concept that allows greater scalability of the protocol which, in turn, enhances usability.

How does Solara work?

The core component of the Solana protocol is proof-of-history, a sequence of calculations that provides a digital record confirming that an event has occurred on the network at any time.. It can be presented as a cryptographic clock that timestamps every transaction on the network, along with a data structure that can be a simple addition to it.

PoH is based on PoS using the Tower Byzantine fault tolerance (BFT) algorithm, an optimized version of the practical Byzantine fault tolerance (pBFT) protocol.. Solana uses it to reach a consensus. Tower’s BFT keeps the network secure and up and running and acts as an additional tool to validate transactions.

Furthermore, the PoH can be considered as a Verifiable Delay Function (VDFfor its acronym in English) high-frequency, a triple function (setting, evaluation, verification) to produce a single, reliable output. The VDF maintains order in the network by showing that block producers have waited long enough for the network to move forward.

Solana uses a 256-bit Secure Hash Algorithm (SHA-256), a set of proprietary cryptographic functions that produce a 256-bit value.. The network periodically samples the SHA-256 number and hashes, providing real-time data based on the set of hashes included in the central processing units.

Solana validators can use this sequence of hashes to record a specific piece of data that was created prior to the generation of a specific hash index.. The transaction timestamp is created after this particular piece of data is inserted. To achieve the claimed TPS and block creation time figures, all nodes on the network must have cryptographic clocks to keep track of events rather than waiting for other validators to verify transactions.

Solana token (SOL)

Solana’s cryptocurrency is SOL. It is Solana’s native and utility token that provides a means of transferring value as well as the security of the blockchain through staking.. SOL launched in March 2020 and has striven to become one of the top 10 cryptocurrencies entering the space based on total market capitalization.

The operating scheme of SOL tokens is similar to that used in the Ethereum blockchain. Although they work in a similar way, Solana token holders stake the token to validate transactions through the PoS consensus mechanism. Additionally, the Solana token is used to receive rewards and pay transaction fees, while SOL allows users to participate in governance.

Answering the question of how many Solana coins there are, there will be more than 500 million released tokens in circulation, and the current total Solana supply exceeds 511 million tokens, with the Solana circulating supply being just over half. Around 60% of SOL tokens are controlled by the founders of Solana and the Solana Foundation, with only 38% reserved for the community.

SOL tokens have been listed on most exchanges. The main cryptocurrency exchanges for Solana trading are Binance, Coinbase, KuCoin, Huobi, FTX, among others.

Solana vs. ethereum

Solana has received many accolades for its speed and performance and has even been cited as a legitimate competitor to cryptocurrency industry leaders like Ethereum..

Then, How is Solana different from Ethereum and can it be considered as a potential Ethereum killer?

In terms of processing speed, Solana is able to challenge the dominant smart contract platform as it is allegedly capable of speeds of over 50,000 TPS. Solarium uses different consensus algorithms to avoid slow confirmation of transactions. This feature makes Solana one of the fastest blockchains in the industry to compete with other industries outside of the cryptocurrency space.

Compared to this huge figure, the current poorly scalable Ethereum proof-of-work model can only handle 15 TPS. Therefore, Solana is thousands of times faster than Ethereum. Another advantage of Solana is the extreme profitability of the networkas the project implements new tokenomics to get lower fees.

In addition, it is noteworthy that the Solana blockchain, although it implements one of the PoS variants, is more ecological and sustainable. This contrasts with Ethereum, whose current PoW model requires the use of enormous computing power.

However, everyone in the cryptocurrency community is waiting for the upgrade from Ethereum to PoS. A new type of Ethereum, which is being diligently developed, will consist of an execution layer (formerly known as Ethereum 1.0) and a consensus layer (formerly known as Ethereum 2.0). It could greatly increase performance, improve scalability, reduce transaction fees, and stop unsustainable power consumption.

The disadvantages of Solana

If you are still wondering if Solana is a good investment and if you should have, the answer is up to you. Despite the visible advantages, Solana has its demerits like any existing crypto project.

First of all, Although the Solana blockchain can compete with high-end blockchain projects, it is still vulnerable to centralization as there are not many blockchain validators.. Anyone in the network can become a Solana validator, but doing so remains difficult because it requires a lot of computing resources.

Along with this, the protocol is still labeled as a beta version of the mainnet, which does not negate the possible presence of bugs and errors.

Despite these problems, Solana remains one of the largest ecosystems in the cryptocurrency industry and appears to be on the right path of growth..

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

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