What is Solana? Learn More About the Solana Crypto
How does one create a blockchain that is fast, decentralized and secure?
Solana tries to combine all of this into a single package. Thanks to its innovative consensus mechanism, Solana has quickly grown in popularity.
So, what is Solana?
It is a public blockchain, and a direct competitor to Ethereum. As mentioned above, Solana sets itself apart by employing a unique consensus mechanism known as Proof of History (PoH).
The blockchain also has its own native cryptocurrency, which is also named Solana (SOL).
This article will go into further detail about the Solana blockchain. We will cover everything you need to know about it, including how to trade SOL at Admirals.
Table of Contents
What is Solana Cryptocurrency?
Conventional, centralized payment methods such as credit cards can easily process tens of thousands of transactions per second. Blockchains such as Bitcoin and Ethereum, on the other hand, struggle to match that.
Scalability is a big issue for blockchains without clocks, as most struggle to go beyond the 15 transactions per second threshold. In other words, these limitations would keep blockchains from becoming the truly global payment system they were intended to be.
In November 2017, Solana’s creator Anatoly Yakovenko, a former leading developer at Qualcomm, published the Solana whitepaper. The document featured a proposed solution to that long-standing problem: Proof-of-History.
How exactly could you get all the different nodes to agree on time?
If each event had a trustworthy timestamp within its data structure, then it would be possible to neatly organize them into a sequence. If all nodes agree that Event A had to come before Event B, without having to verify that information with another node, it naturally speeds up the entire process.
With each event carrying a unique “cryptographic timestamp”, it becomes possible to create a verifiable order of events. Since the transactions have already been timestamped, the network can work on validating multiple blocks at once, skipping the long wait for the previous one to be validated.
On its launch in 2020, Solana was already able to process up to 65,000 transactions per second, confirming that Proof-of-History was indeed blazingly fast compared to conventional blockchain consensus mechanisms. It also offers much cheaper transactions, with an average fee of $0.00025.
Solana has a hybrid mechanism, combining its innovative Proof-of-History with the Proof-of-Stake. In this case, a leader is chosen using Proof-of-Stake. This leader then becomes the one responsible for writing a new transaction to the ledger.
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In order to make this whole operation work, Solana has its own native cryptocurrency, which also shares the blockchain’s name. The Solana crypto token SOL is used to stake and allow a node to become a validator and is also given as a reward for participation in the system.
There is no minimum requirement to run a validator, although a voting account requires a reserve of 0.02685864 SOL. Additionally, vote transactions can cost up to 1.1 SOL per day.
Solana is an open-source project maintained by the Solana Foundation, which is based in Geneva, Switzerland.
What is Solana Used For?
Just as mentioned earlier, Solana can refer to the blockchain itself, and also to its token. In order to make things easier for you, we will take a look at both. What is the Solana blockchain used for? And what is the Solana cryptocurrency (SOL) used for?
What are the capabilities of the Solana blockchain platform?
Solana has a very ambitious goal and also has the tools to achieve it. Its innovative consensus mechanism allows the blockchain to process transactions at an incredible speed.
This sky-high scalability, especially when compared to its closest competitors, means that Solana has enough potential to grow into a truly global platform.
- Fast-growing ecosystem with thousands of projects: Solana’s crypto space isn’t limited to a single-use. It currently has thousands of different projects, including apps, music, games and much more.
- Smart contract capability: Solana also has the ability to create smart contracts, which are a key part of a decentralized economy.
- Token creation: It’s also possible to mint or purchase NFTs and many other digital assets on Solana.
What are the use cases of SOL?
SOL and its uses aren’t restricted to the blockchain. Solana Pay, its decentralized, peer-to-peer payment option, was launched in February 2022.
- Stake rewards: SOL is primarily used as the Solana blockchain currency. Validate transactions and you will be rewarded accordingly in SOL.
- Solana Pay: The next step in Solana’s evolution, Solana Pay combines the blockchain’s fast and cheap transactions with a user-friendly interface. This way, it’s possible to complete peer-to-peer transactions without having to rely on intermediaries. Solana Pay is an attractive option for both merchants and consumers.
How is Solana Different from Ethereum?
The one thing that really sets Solana apart from Ethereum is speed. Thanks to its innovative Proof-of-History (PoH) consensus mechanism, Solana is able to process transactions much faster. Ethereum relies on the conventional Proof-of-Work (PoW) mechanism.
While PoW is definitely reliable, as well as a tried and trusted method, it’s not particularly efficient. PoW can process an average of 15 transactions per second. A single node can easily clog the entire network.
There is also an environmental issue.
Since PoW demands a lot of resources from computers, it leads to an increase in energy consumption.
Both Proof-of-Stake and Proof-of-Story are much more energy-efficient, which consequently makes them environmentally friendly.
New blockchains have already learned from the problems related to Proof-of-Work, and as a result, have been able to perfect their consensus mechanisms.
That’s definitely the case with Solana and PoH. With faster transactions that do not require as many resources, Solana offers cheaper fees and better processing times.
As for Solana's 2024 outlook, token extensions will soon be introduced to the network, allowing more flexible features.
The Solana 2024 outlook report also mentions an improvement in the ecosystem's validator clients using the proprietary Firedancer (one of the client validators). This upgrade should allow the network to scale with future hardware advances.
Other client validators of the Solana network which will be relevant in 2024 include Joti-Solana, Sig and TinyDancer.
Will 2024 be the year for Solana to take off? Time will tell, as we are still in early days of the calendar year and awaiting the historic upcoming Bitcoin halving.
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Is it Good to Trade Solana?
There is no right or wrong answer to this question, as it depends on the trader and investor. Since SOL is a fairly new cryptocurrency, it is even more volatile than other existing crypto options.
That is also the case for the Solana blockchain. While it certainly has some advantages over the already established blockchains, it is a very recent project. Naturally, this does come with its own set of risks.
View the Daily chart of the SOLUSD currency pair via the TradingView widget. This can bring you some insight into both Buy and Sell position options which may potentially fit your trading style:
*Past results are not reflective of future results.
Advantages and Disadvantages of Solana
Every blockchain comes with advantages and disadvantages. It’s again up to the investor to decide. These are some of the points you can take into consideration.
Advantages of Solana
- Scalability: By far and wide, this is Solana’s biggest advantage over its competitors. Designed with scalability in mind, the blockchain offers very fast processing times.
- Cheaper costs: Solana doesn’t demand as many resources, which means it also has much lower transaction fees. On average, a single Solana transaction fee costs less than a cent, which is quite differential in comparison to Ethereum.
- Environmental impact: Since Solana demands fewer resources, that means it’s a greener alternative. The Solana Network’s carbon intensity is 198 g CO2 per kWh.
Disadvantages of Solana
- Stability: Every single computer software is susceptible to bugs. Solana is no exception. All new blockchains can face stability problems, but these can be easily dealt with.
- Ethereum comparisons: Ethereum will always hold the first-mover privilege. As a newcomer, Solana still needs to punch above its weight to beat its more experienced competitor.
- Possible centralization: Solana’s hybrid system could lead to centralization. While the blockchain itself is decentralized in its essence, the PoS mechanism could have the opposite effect, as a small number of nodes tend to concentrate a high number of SOL crypto.
What is Solana? Conclusion
Solana is an innovative blockchain with incredible potential.
Offering much faster processing times with the Proof-of-History consensus mechanism, along with cheaper fees and costs, it could easily evolve into a truly global crypto payment option.
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What consensus mechanism does Solana use?
The Solana blockchain uses Proof-of-History as its consensus mechanism. This algorithm works by using timestamps to schedule each block formation on the chain, which is determined by a voting system within the Solana community.
Is Solana better than Ethereum?
The answer is somewhat subjective; Solana is faster and a more cost-effective network, whereas Ethereum is considered the most decentralized and secure network.
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