- In 2017, the founder of Solana proposed the Proof of History consensus mechanism along with a whitepaper of the project
- Unlike most other crypto projects, Solana adopts a single chain protocol
- Solana utilizes a special Proof of Stake (PoS) based consensus mechanism, known as the Tower BFT
- Solana is able to process 50-65 000 transactions per second and a theoretical limit of over 70,000 transactions per second
Solana is hailed and sold as the world’s first web-scale blockchain. Since launching in 2020 Solana has become one of the most promising crypto projects, fostering a dedicated global community of over 650,000 members, entering some remarkable partnerships, and amassing over 350,000 validators.
The project focuses on a very simple alternative, one that solves a number of the problems of many blockchain architectures.
Here’s what you need to know:
What is Solana?
Solana is a relatively new player in the crypto industry, promising high-performance. Solana’s blockchain supports smart contracts as well as decentralized applications, similar to the Ethereum network.
However, unlike other similar blockchains such as Ethereum and Polkadot, Solana adopts a single blockchain (layer 1) solution. The network does not delegate operations to other attached chains (layer 2).
Currently, Solana runs the Proof of Stake (PoS) consensus mechanism (with future plans to upgrade) to achieve a low barrier entry along with timestamped transactions to maximize efficiency.
This technology allows Solana to process 50-65,000 transactions per second. Consequently, Solana could process a theoretical limit of over 70,000 transactions per second (TPS) (compared to Bitcoin’s 7 TPS and Ethereum’s 15 TPS).
History of Solana
Although Solana completed its launch in March 2020, its origins can be traced as far back as 2017 in a whitepaper published by Anatoly Yakovenko, the founder of Solana.
In the original whitepaper, Yakovenko drafted a new timekeeping technique for distributed systems called Proof of History (PoH).
Together with his Qualcomm (NASDAQ:QCOM) colleague Greg Fitzgerald, Yakovenko released the first internal testnet, along with a demo network and the first official version of the project’s whitepaper, in Feb. 2018.
Following a seed round in April 2018, Solana raised over $20 million in a Series A round by July 2019.
The mainnet of Solana was officially launched in March 2019 shortly after the project raised $1.76 million in a public token auction hosted on CoinList.
Solana Labs, the creators of the Solana blockchain and crypto, remains a core contributor to the Solana network, while the Solana Foundation helps fund ongoing development and community building efforts. The project is based in San Diego, California.
Since its mainnet launch in 2020, Solana experienced substantial growth and has produced over 50 million blocks. Projects like Serum, Chainlink, Terra, Audius, USDC, and USDT have all joined the Solana ecosystem.
Proof of History vs Other Blockchains
At the time of the announcement, PoH was a revolutionary idea. PoH was created to solve one of the most difficult problems in distributed ledger systems – agreement on time to reach a consensus on the order of transactions.
Yakovenko believed his new technique could automate the transaction ordering process for blockchains, providing a key piece that would enable crypto networks to scale well-beyond their capabilities at the time.
The hypothesis of Yakovenko’s whitepaper stated that timestamping transactions would exponentially increase the scalability of a cryptocurrency blockchain, without reducing the security or decentralization of the network.
Yakovenko reached this conclusion based on his experiences building and implementing database solutions at Google (NASDAQ:GOOGL) and Intel (NASDAQ:INTC) but with one major difference; they were in a centralized capacity.
Solana’s Consensus Details
Initially, PoH was not built as a consensus mechanism on the Solana blockchain but was designed as a component in Solana’s PoS consensus.
The PoH technology helps Solana create historical records on the network that prove an event has occurred at a specific moment in time. These records are easily remembered and implemented in future operations.
Unlike other blockchain solutions where validators are needed (and are required to communicate for an agreement to be reached that time has passed) validators on the Solana network maintain their own clock.
Solana utilizes a special PoS-based consensus mechanism known as the Tower BFT. The model leverages the network’s PoH technique as a clock before consensus to reduce Communication Overhead and latency. This is achieved by encoding the passage of time in a simple SHA-256, sequential-hashing verifiable delay function (VDF). Although not an outright consensus model, PoH has proven to be a fundamental move in the right direction for the structure of blockchain networks in regards to speed and capacity.
The unique hybrid consensus model of Solana enables it to push the limits of confirmation times. As a result, the network provides the effectiveness of a centralized system without sacrificing security or decentralization.
Solana’s network architecture was created to scale with bandwidth and hardware. Validators can utilize GPU cores to parallelize execution and reduce verification times.
Due to GPU requirements hardware expectations are slightly higher than some protocols. Estimated costs for a satisfactory setup are around $5,000.
Future of Solana
Solana’s current Tower BFT PoS-based consensus mechanism is not the final stop for the high-performance blockchain. Solana Foundation’s roadmap shows that the mainnet is planned to operate in delegated-Proof-of-Stake (dPoS).
When Solana migrates to the dPoS, token holders will be able to participate in the block production process. Validators will be able to earn rewards by either staking their tokens themselves to become a validator, or delegating their tokens to validators they trust.
Solana allows any individual to become a validator on the network. Validators can contribute to the overall security of the Solana network. Solana has no minimum staking requirement, however, the leader selection process is stake-weighted. The leader selection process involves the procedure in which a validator gets to propose the next block.
The leader selection is pseudorandom, meaning that the amount of SOL an individual stakes influences their likelihood of becoming a leader which produces blocks. Nodes that misbehave will see their stakes slashed and the funds added to block generation rewards.
Special Features of Solana
There are many special features of the Solana blockchain; the PoH technology to start. However, aside from this there are two stand out features: Sealevel and Gulf Stream.
The Sealevel feature on the Solana network makes it possible to quickly identify all non-overlapping transactions and process them at the same time.
Gulf Stream on the network makes it possible to know a small number of upcoming leaders so that they can already begin accumulating transactions before they begin producing blocks.
On the Flipside
- The amount of energy required to mine cryptocurrencies has always been a source of criticism, even more, as they grow in number and prominence.
- According to tech inventor and Billionaire, Bill Gates, “Bitcoin uses more electricity per transaction than any other method”.
- Bill Gates made the comment after Bitcoin’s estimated energy consumption reached its highest ever rate of 130 TWh.
- According to the University of Cambridge Centre for Alternative Finance, the electricity generated to mine and process Bitcoin is equivalent to the amount emitted by whole countries, including New Zealand and Argentina.
Price Analysis of Solana (SOL)
Shortly after Solana launched in March 2020, the token, Solana (SOL) hit the cryptocurrency market at a price of roughly 1$USD per SOL.
SOL launched on Binance shortly afterwards. However, the launch did not have a substantial bullish effect on the price as the token drifted down to around 60 cents USD. SOL remained within the 60 cents-$1 range until early July 2020.
In July, Solana launched on the popular cryptocurrency derivatives exchange FTX, Serum. The announcement helped the price of Solana shoot up to $5 over the course of the following month. The price settled around $3 for most of the year.
As the crypto market started the major bullish run at the end of 2020, Solana skyrocketed, moving from $1.5 on January 1, to a peak of $16.9 on the 24th of February 2021.
SOL currently trades at around $13.77 and has a market capitalization of $3,681,261,287 which makes it the 28th largest cryptocurrency. The Solana Foundation announced that there will be a total of 489 million SOL tokens. As of March 2021, about 267.2 million of these have entered the market.
Uses for SOL Tokens
There are two major uses for SOL within the network.
Key Integrations for Solana
Solana proposes an innovative hybrid consensus model. Because of this, Solana has enjoyed interest from small-time traders and institutional traders alike. The Solana Foundation focuses on making decentralized finance accessible on a large scale.
Some of the most notable partnerships and integrations for Solana came in 2020. The project partnered with the likes of Chainlink, Circle, Audius, Akash, Arweave, Tether, and Terra.
Solana has implemented the PoH consensus mechanism alongside innovations like Tower BFT, Proof of Replication, Sealevel, and Gulf Stream. This combination has made Solana one of the highest-performing blockchains in the world.
