What is Solana?

Learn how Solana differs from Bitcoin, whether it is better than Ethereum, the cons, and why it’s so popular.

What is Solana?

Solana is a blockchain platform that has gained considerable attention in cryptocurrency and blockchain. It was founded in 2017 by Anatoly Yakovenko, a former Qualcomm engineer, to solve the scalability and performance issues affecting many existing blockchain networks. Solana has employed innovative design and cutting-edge technology to establish itself as a strong contender for becoming the leading blockchain platform for decentralized applications (dApps) and digital assets.

What is SOL?

SOL is the native cryptocurrency of the Solana blockchain platform. Solana is a decentralized blockchain that is designed to create and deploy decentralized applications (dApps) and smart contracts in a highly efficient manner. The SOL token has several purposes within the Solana ecosystem, including:

1. Governance: SOL token holders can participate in the decision-making process of the Solana network by voting on network upgrades and other governance proposals.
2. Staking: Token holders can stake their SOL tokens to help secure the network and earn rewards in the form of new SOL tokens.
3. Payments: SOL can be used to pay for transaction fees on the Solana network, as well as for purchasing goods and services within applications built on the platform.
4. Liquidity: SOL is used as a form of liquidity in decentralized finance (DeFi) applications on the Solana network.

SOL was launched in 2020 and has gained significant traction in the cryptocurrency market due to its high-speed transactions, low fees, and scalability.​

What does Solana actually do?

At its core, Solana is a decentralized, open-source blockchain that enables the creation and execution of smart contracts and decentralized applications. It provides a high-throughput, low-latency platform for developers to build and deploy various applications, including decentralized finance (DeFi) protocols, non-fungible token (NFT) marketplaces, gaming platforms, and more.

Solana’s key functionalities include:

• Smart contract execution: Solana supports the creation and execution of smart contracts using its native programming language, Rust, as well as C and C++. This allows developers to build complex applications with custom logic and automate various processes on the blockchain.
• Token creation and management: Solana enables the creation and management of digital assets, including fungible tokens (like cryptocurrencies) and non-fungible tokens (NFTs). This makes creating and trading various tokens on the Solana blockchain possible.
• Decentralized trading: Solana’s high-performance capabilities make it an attractive platform for decentralized exchanges (DEXs) and other trading applications. Its fast transaction times and low fees enable efficient and cost-effective trading of digital assets.
• Governance and staking: Solana incorporates a Proof-of-Stake (PoS) consensus mechanism, allowing token holders to participate in network governance and earn rewards for staking their tokens. This helps maintain the security and decentralization of the network.

Solana was founded in 2017 by Anatoly Yakovenko, a former Qualcomm engineer who aimed to create a blockchain with high throughput and low latency without compromising security or decentralization. In 2018, Yakovenko collaborated with his colleagues Greg Fitzgerald and Stephen Akridge to develop the Solana whitepaper, quickly gaining traction among investors and developers. The Solana team conducted multiple testnet phases to optimize performance and security before launching the mainnet beta in March 2020. Since then, Solana has continued to grow and evolve with regular network upgrades and improvements.

The team behind Solana and their expertise:

Anatoly Yakovenko, Solana’s Co-Founder and CEO, has extensive experience in distributed systems and compression algorithms from his time as a Qualcomm engineer. Yakovenko was crucial in developing Solana’s core architecture and consensus mechanism.

Greg Fitzgerald is a seasoned software engineer with an operating systems and blockchain technology background. He has played a key role in implementing Solana’s high-performance runtime and optimizing its transaction processing capabilities.

Stephen Akridge, Solana’s Co-Founder and Chief Architect, has extensive experience as a systems engineer in high-performance computing projects. His contribution to designing Solana’s scalable and efficient network infrastructure has been instrumental.

Raj Gokal, the Co-Founder and COO, brings valuable experience in product management and business development to the Solana team. He played an instrumental role in driving the adoption and growth of the Solana ecosystem.

In addition to its core team, Solana has attracted engineers, researchers, and advisors who contribute to the platform’s development.

Solana Key Features and Innovations

Solana is a blockchain platform that stands out due to its distinct combination of pioneering features and technologies. These features allow Solana to achieve remarkable performance, scalability, and low transaction fees, making it an appealing choice for developers and users.

High throughput and scalability:

One of Solana’s standout features is its ability to process many transactions per second (TPS), far exceeding the capabilities of many other blockchain networks. Solana can handle up to 65,000 TPS, and has the potential to scale even further in the future. This high throughput is achieved through innovative consensus mechanisms and parallel transaction processing.

Low transaction costs:

Solana boasts a high-performance architecture that enables it to keep the transaction fees low even as the network expands and the number of transactions increases. This is achievable due to the platform’s effective resource utilization and its capacity to process transactions in parallel. The low transaction costs make Solana a desirable choice for developers and users who intend to build and use decentralized applications without incurring high fees.

Proof-of-History (PoH) consensus mechanism:

Solana has introduced a new consensus mechanism known as Proof-of-History (PoH) that enables the network to achieve high throughput and low latency. PoH is a cryptographic clock that creates a historical record of events on the blockchain, which helps the nodes to agree on the order of transactions without the need for extensive communication between them. This reduces the time required to confirm transactions and enables faster block times.

Sealevel parallel processing:

Solana’s parallel runtime, Sealevel, is designed to enable the network to process thousands of smart contracts concurrently. By utilizing the power of multi-core processors and parallel execution, Sealevel allows Solana to achieve high levels of performance and scalability. This parallel processing capability gives Solana a significant advantage over traditional blockchain networks, which typically process transactions sequentially.

Turbine block propagation protocol:

Solana’s Turbine protocol is developed to enhance block propagation and minimize the time required for nodes to receive and validate new blocks. Turbine divides blocks into smaller packets, which enables nodes to process and share these packets simultaneously. This technique reduces the effect of network latency and guarantees that blocks are propagated efficiently across the network.

These key features and innovations work together to create a high-performance, scalable, and cost-effective blockchain platform that can support a wide range of decentralized applications and use cases.

How is Solana different from Bitcoin?

Solana and Bitcoin are two different blockchain platforms that serve different purposes and have different features.

Purpose and use cases:

Bitcoin was created to serve as a secure and censorship-resistant decentralized digital currency for the transfer of value. It primarily functions as a store of value and a medium of exchange.

Solana, on the other hand, was designed to be a high-performance blockchain platform that enables the development and operation of decentralized applications (dApps). While it has its own native cryptocurrency (SOL), Solana’s primary focus is on facilitating the creation of fast, scalable, and low-cost dApps in various sectors such as DeFi, NFTs, and gaming.

Consensus mechanism:

Bitcoin utilizes a Proof-of-Work (PoW) consensus mechanism in which miners compete to solve complex mathematical puzzles to validate transactions and create new blocks. This process is energy-intensive and can result in slower transaction confirmation times.

Solana uses a consensus mechanism called Proof-of-Stake (PoS) in addition to its distinctive Proof-of-History (PoH) algorithm. With PoS, token holders can stake their tokens to verify transactions, while PoH helps speed up transaction ordering and confirmation. This combination leads to greater throughput and lower latency compared to Bitcoin.

Scalability and performance:

Bitcoin’s transaction processing capacity is limited, with a theoretical maximum of around 7 transactions per second. As a result, it can lead to slower confirmation times and higher transaction fees during periods of high network congestion.

Solana has a significantly higher capacity for processing transactions, with the ability to handle up to 65,000 TPS. This high throughput, coupled with low transaction fees, makes Solana a more appropriate choice for applications that require fast and cost-effective transactions, such as high-frequency trading or gaming.

Smart contract functionality:

Bitcoin has limited smart contract functionality, primarily focusing on simple scripting capabilities that enable features like multi-signature transactions and time-locked contracts.

Solana is a smart contract platform that offers advanced and flexible options to developers. It enables them to build complex decentralized applications using languages like Rust, C, and C++. This expanded functionality allows for a wider range of use cases and applications to be built on the Solana blockchain.

Bitcoin primarily serves as a decentralized digital currency, while Solana focuses on providing a high-performance infrastructure for building and running decentralized applications.

Is Solana better than Ethereum?

Solana is a highly efficient blockchain platform that stands out from its competitors in terms of speed and performance. While Ethereum can process around 15 transactions per second, Solana boasts an impressive rate of over 2,600 transactions per second, thanks to its unique consensus mechanism. This speed advantage results in lower fees and enhanced user experience for applications built on Solana.
The introduction of Firedancer to Solana’s mainnet in Q1 of 2024 may further increase its speed and performance.

Apart from its other advantages, Solana’s Proof of History consensus mechanism is considered to be more environmentally friendly than Ethereum’s Proof of Stake.

Solana’s low fees and rapid throughput have led to an explosion in user growth by the end of 2023, surpassing Ethereum on several key growth metrics.

How does Solana make money?

Solana does not generate revenue directly. Nevertheless, there are various ways in which the Solana ecosystem adds value and generates economic incentives for its participants.

Transaction fees:

When a user performs any transaction on the Solana blockchain, they have to pay a nominal transaction fee in SOL, the native cryptocurrency of Solana network. These fees are utilized to reward validators for processing transactions and ensuring the security of the network.

Staking rewards:

Solana utilizes the Proof-of-Stake (PoS) consensus mechanism to secure its network, whereby SOL token holders can stake their tokens to validate transactions. Validators who stake their tokens and participate in the consensus process receive rewards in the form of newly minted SOL tokens. These rewards encourage users to hold and stake their SOL, contributing to the network’s security and stability.

What are the cons of Solana?

Although Solana has many advantages and innovative features, it is not without its drawbacks. Some potential cons of Solana include:

Centralization concerns:

Solana has been subject to criticism due to its relatively high level of centralization in comparison to other blockchain networks. This is partly due to the initial token distribution being concentrated amongst a small group of early investors and the Solana Foundation. This has raised concerns about the concentration of wealth and influence in a limited number of entities.

In addition, the hardware requirements for running a Solana validator node are relatively high, which could result in a concentration of validating power being held by a smaller group of participants.

Network stability and outages:

Solana network has had several instances of network outages and performance issues since its launch. In September 2021, the network experienced a 17-hour outage due to a surge in transaction volume. This caused the network to fork, and a coordinated restart was required. Although the Solana team has taken steps to address these issues and improve network stability, the outages have raised concerns about the network’s reliability and resilience.

Regulatory uncertainty:

Similar to many other blockchain projects, Solana is uncertain about how it will be regulated in different jurisdictions. The regulatory framework for cryptocurrencies and blockchain technology is still evolving, and there is a possibility that future regulations could have an impact on the adoption and growth of the Solana ecosystem. Compliance with current and future regulations may also be a challenge for projects and applications built on the Solana blockchain.

Why is Solana so popular?

Solana has recently gained popularity due to factors that attracted developers, investors, and users to its ecosystem. Key reasons for Solana’s success include:

High performance and scalability:

Solana gained popularity due to its ability to handle up to 65,000 transactions per second with low latency. This makes it an attractive choice for developers and projects that require a speedy and high-throughput network, especially for applications like decentralized finance (DeFi), gaming, and high-frequency trading. Solana’s outstanding performance has caught the attention of developers and users who are looking for faster and more efficient alternatives to slower and congested blockchain networks.

Low transaction costs:

Solana offers high performance and maintains relatively lower transaction fees than other similar platforms. This is achieved through its efficient design and the use of both proof-of-history (PoH) and proof-of-stake (PoS) consensus mechanisms. The low transaction costs make Solana an accessible and cost-effective choice for users, especially for applications that involve frequent and small-value transactions.

Growing developer ecosystem:

Solana has managed to gather a large community of developers who are working on a variety of decentralized applications (dApps) and projects on the platform. The Solana ecosystem has experienced a rapid growth in areas such as DeFi, non-fungible tokens (NFTs), and gaming. The growing number of high-quality projects and the expanding developer community have significantly contributed to the popularity and adoption of Solana.

Community support and engagement:

Solana is supported by an active and engaged community, including developers, investors, and enthusiasts. The community plays a crucial role in promoting the platform, providing feedback and support, and contributing to the ecosystem’s growth. The Solana Foundation and the project’s core team actively engage with the community through various channels, such as social media, forums, and events.

Compatibility with Ethereum:

Solana is designed to be compatible with Ethereum, which means it allows developers to easily transfer their Ethereum-based projects to the Solana blockchain without having to build them from scratch. This compatibility feature has significantly reduced the entry barrier for developers and projects that are interested in taking advantage of Solana’s high-performance capabilities. In addition, the ability to use existing Ethereum tools, libraries, and knowledge has attracted many developers to the Solana ecosystem.

Why Solana is the next big thing?

Solana possesses numerous features and benefits that make it a formidable contender for becoming a dominant blockchain platform in the near future. Some of the factors that contribute to Solana’s status as a potential game-changer in the blockchain industry include:

Scalability and performance:

Solana is well-suited for applications that require fast and efficient processing of large volumes of transactions. Its high transaction throughput and low latency make it an ideal choice for businesses looking to implement blockchain-based solutions. As the demand for such solutions continues to grow across various industries, Solana’s scalability and performance could provide it with a significant advantage over other platforms that may struggle with congestion and high fees.

Growing DeFi and NFT ecosystems:

Decentralized finance (DeFi), meme coins, and non-fungible tokens (NFTs) are the fastest-growing sectors in the blockchain space. Solana has become a popular platform for these sectors, with many high-profile DeFi projects, meme coins, and NFT marketplaces building on it. Due to its strong presence and capabilities in these areas, Solana’s adoption and growth may increase as these sectors continue to expand.

Attracting developers and projects:

High performance and low fees make Solana an excellent choice for developers and projects that are interested in building decentralized applications (dApps). As more and more developers and projects choose to build on Solana, it could create a virtuous cycle of growth and adoption, where each new project and user adds value to the ecosystem, thus attracting even more participants.

Institutional adoption and investment:

The increasing institutional interest after the FTX crush and investment in Solana could help to accelerate its growth and legitimize the platform in the eyes of mainstream users and businesses. As more institutional players get involved in the Solana ecosystem, greater resources, expertise, and use cases could be deployed on the platform, further driving its adoption and growth.