What is Solana? Learn More About the Solana Crypto

Brandie E Blackler
9 Min read

 How to 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. 
 
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.

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. 

See below the live TradingView chart, showing the Daily fluctuations of SOL:

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. 
 
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. 
 
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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 consensus mechanism, Solana is able to process transactions much faster. Ethereum relies on the conventional Proof of Work 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 is 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. A single Solana transaction consumes 0.00051kWh. For comparison, a single Ethereum transaction, on the other hand, consumes 269.19 kWh.

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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. 

Below, we display the Daily chart of the SOLUSD currency pair – This can bring you some insight into both Buy and Sell position options which may potentially fit your trading style: 

Source: Admirals MT5 - SOL/USD Daily chart - between January 12, 2022 and April 26, 2022). Accessed: April 26, 2022 - Please note: Past performance is not a reliable indicator of future results or future performance.

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. Ethereum transaction fees average $8. 
  • 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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INFORMATION ABOUT ANALYTICAL MATERIALS: 

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals and Admirals trademarks (hereinafter “Admirals”). Before making any investment decisions please pay close attention to the following: 

1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research. 

2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content. 

3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest. 

4. The Analysis is prepared by an independent analyst (hereinafter “Author”) based on Brandie E Blackler, Financial Analyst and Writer, personal estimations. 

5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis. 

6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed. 

7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved. 

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