What is Solana Blockchain (SOL) & How does it work?

Of all the consequential technological developments in recent years, Cryptocurrency remains among the most noteworthy. It brought seismic transformation to the financial technology landscape and continues to wow us with the concept of digital currency.

Cryptocurrency is a digital asset which can be used for exchange without being controlled by a bank or government. Forbes Advisor estimates that there are 22,088 Cryptocurrency projects operating now, which together account for the whole £672 billion Cryptocurrency market.  

Blockchain Technology, the distributed database that keeps transaction records in the digital realm, is at the heart of this transformation. This technology is critical to the fabric of Cryptocurrency, and Solana Blockchain (SOL) is a testament to this. It is making waves with its super-fast speeds and low costs, transforming how we think about online transactions. This blog delves deep into Solana Blockchain's history, unique features, use cases and more.

Table of Contents

1) What is Solana (SOL)?

2) History of Solana

3) How does Solana work?

4) Features of Solana

5) What makes Solana Blockchain unique? 

6) How to begin making investments in Solana? 

7) Solana use cases

8) Solana vs Ethereum 

9) Conclusion

What is Solana (SOL)?

The Solana company was created in 2017. This Blockchain platform serves exclusively for the creation of applications that are decentralised and scalable with an open network in nature. This non-profit organisation was founded by the Solana Foundation and headquartered in Geneve. Its Blockchain infrastructure is crafted by Solana Labs from San Francisco.

Solana Blockchain is known for the best transaction speeds, and its fees compare extremely favourably to those of competing chains, including Ethereum. In fact, the biggest Solana con is the native Cryptocurrency on the Solana network, namely Solana (SOL), which surged to nearly 12,000% in 2021—flirting even with a market cap north of £75 billion—among leading Cryptocurrencies.

Still, SOL was not completely immune to the devastating Crypto market crash of 2022. By the end of that year, its market capitalisation fell to around £3.63 billion. But some light was visible at the end of the tunnelas SOL was to regain almost half of its value the following year, 

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History of Solana

Solana Co-Founder Anatoly Yakovenko's prior work experience included the field of Distributed Systems Design with leading technology companies such as Qualcomm Incorporated (QCOM. This experience made him realise that a reliable clock simplifies network synchronisation, and the resulting network would perform exponentially faster.

Yakovenko predicted that using Proof-of-History would speed up the blockchain tremendously as compared to blockchain systems without clocks (Bitcoin and Ethereum). These systems struggled to scale beyond 15 transactions per second (TPS), which is a fraction of the throughput handled by centralised payment systems such as Visa (V).

Proof-of-History Concept

In November 2017, Yakovenko published a white paper detailing the proof-of-history (PoH) concept. PoH enables the blockchain to reach consensus by verifying the passage of time between events. This concensus is used to encode the passage of time into a ledger.

In the white paper, Yakovenko noted that then publicly available blockchains did not rely on time. Each node in the network depended on its own local clock without any knowledge of other participants' clocks. This meant that when a message timestamp was used to accept or reject a message, there was no guarantee that other participants would make the same decision.

Expansion

In 2018, Yakovenko co-founded a project called Loom along with five others. However, due to the possibility of confusion with an Ethereum-based project of a similar name, they renamed it to "Solana,". This name was chosen after the small beach town near San Diego, where the co-founders previously lived.

In June 2018, the project was scaled up to run on cloud-based networks. A month later, the company posted a public test net which supported bursts of up to 250,000 TPS.

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How does Solana work?

Proof-of-Stake (PoS) and Proof-of-History (PoH) methods are combined to power Solana. These algorithms stand in stark contrast to the Proof-of-Work (PoW) techniques employed by networks like Bitcoin. 

To add blocks and transactions to the Blockchain, PoW forces computers to compete with one another to solve challenging riddles. Because of how difficult these problems are to answer and how much computer power is needed, they use an enormous amount of energy. Solana takes these conundrums out of the equation. As a result, it has far higher TPS performance and doesn't lead to the same level of environmental deterioration. 

Features of Solana

Fourth-generation Blockchain Solana has all the recognition of its early pioneers as well as a few extra functions. These additional features allow it to do rapid transactions in a flexible way. The features of Solana are listed below.

1) Proof of Interest

Similar to Blockchains like Ethereum, Solana enables users to stake SOL tokens, which helps to process transactions more quickly and effectively. Users can vote for Blockchain modifications proposed by members of the Solana Developer community using the staking process.

2) Open-source Software

Solana features an open-source application, as many other Blockchains do. Anyone can use the source code for both personal and business purposes by downloading it.

3) Stacked Services

To increase productivity, Solana employs a number of services on top of the network. It is one such technology where different layers conduct a particular function.

4) Generator Protocol

Solana transmits information to neighbourhood node clusters, which are close by, using the Generator protocol in smaller pockets. This makes it possible for it to validate transactions more quickly.

5) Brief Block Times

Solana has a block time of 400ms. Transactions are processed quickly and may easily process thousands of transactions per second due to short block periods.

What makes Solana Blockchain Unique? 

Solana differentiates itself in the Blockchain world by its inventive approach to tackling the Blockchain trilemma—decentralisation, security, and scalability.

Proof of History (PoH)

Proof of History (PoH) is one of Solana's unique techniques that makes it possible to achieve high throughput. It operates by providing documentary evidence that a particular incident took place at a particular time and space. This represents a shift from conventional consensus mechanisms, including Proof of Work (PoW) and Proof of Stake (PoS), where validators are required to agree on transaction ordering. PoH is also more efficient because validators can process transactions on their own without having to wait for a consensus on the transaction order.

Validator Voting

In Solana, validators take part in the consensus mechanism by voting on the state of the ledger. This process is made more efficient by PoH, as validators are given a verifiable way of knowing the time between events, which reduces the need for communication between all the nodes. Such a mechanism enables the achievement of high-speed transmission and a level of decentralisation.

Hybrid Consensus Model

The Proof-of-History (PoH) consensus model of Solana incorporates a delegated Proof-of-Stake (dPoS) system. In this model, token holders can choose to delegate their stake to validators who secure the network. A fusion of PoH and dPoS is what makes Solana a network with fast transaction throughput that is still resistant to control by any single entity.

Transactional Chain

The transactional chain in Solana is a sequential computation of the outputs from one transaction that serve as the inputs for the following transaction. Besides this, it is a core part of PoH that a chain of transactions is created, and a verifiable order of events without the need for a centralised clock is created. This framework plays a crucial role in Solana's scalability since it allows the network to process more transactions.

Interoperability

Solana is designed to be interoperable with other Blockchains and other applications. Its architecture is the backbone of digital assets such as Cryptocurrencies, NFTs and personalised data exchange. Such interoperability is vital to the acceptance of Solana, as it allows seamless integration with the wider Crypto-ecosystem.

Rapid Transaction Rates

Perhaps the most popular feature of Solana is its ability to process transactions at really high speeds. With block times as short as 400 milliseconds, Solana can handle up to 65,000 transactions per second. This speed makes it a viable competitor to traditional payment systems and enables real-time application execution.

Censorship Resistance

To combat censorship, Solana employs a network of rotating validator nodes. This design ensures that no single validator can control which transactions are included in the Blockchain. Additionally, Solana uses algorithms to determine the minimum number of compromised nodes required to affect each validator, further enhancing the network’s resistance to censorship.

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How to begin making Investments in Solana?

Buying some SOL tokens and transferring them to a Solana wallet like Phantom is the first step in getting started with the Solana network. Start by transferring some money to FTX, buying SOL tokens there, and then transferring those tokens directly to the Phantom wallet. However, it should be emphasised that only FTX permits direct fund withdrawals to Solana; other exchanges do not.

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Solana Use Cases

Several Blockchain Projects use Solana's flexibility and adaptability. Developers have put Blockchain to innovative use. Some of its use cases are listed below:

1) Decentralised Applications

Solana is a Blockchain platform for Smart Contracts, similar to Ethereum. This indicates that it encourages the creation of Decentralised Applications, or dApps, which have a variety of applications. Simple web apps to complex Decentralised Finance (DeFi) apps can all be built on Smart Contracts Blockchains; nevertheless, establishing DeFi and NFT app platforms has been Solana's primary use cases as developers continue to look for more affordable and scalable platforms.

2) Lending Protocols

A few programmers have developed systems that enable users to deposit or lend money over the Solana Blockchain. Users have the option to set up automated repayments or earn interest. Solend and Apricot Finance are two examples.

3) Non-fungible Tokens (NFTS)

NFTs are the digital equivalent of almost anything like music, photos, video clips, and so on, to be more precise. The distinguishing feature of NFTs is that they are "non-fungible" in the sense that each object has a unique identifier containing ownership data. Moreover, Solana is interested in building NFT marketplaces where the NFTs will be sold. The Solana network is expected to be one of the best NFT platforms and not congested, even though there aren't quite many Solana-based NFT markets.

Solana vs Ethereum

Solana's rapidly expanding ecosystem and versatility have inevitably drawn comparisons to Ethereum, the leading Blockchain for Decentralised Applications (dApps):

a) Smart Contracts: The Solana and Ethereum platforms are Smart Contract-backed. These are valuable tools that help develop applications such as Decentralised Finance (DeFi) and Non-Fungible Assets (NFTs). 

b) Consensus: Solana and Ethereum use this technique. Validators stake their money as collateral for the right to receive rewards for advancing the Blockchain. By integrating PoH as well, Solana enhances PoS.

c) Speed: In 2021, Solana generated significant attention because it outperformed Ethereum in terms of transaction fees and processing times. Solana has a maximum TPS processing capacity of 50,000 and an average cost per transaction of £0.00021. Ethereum, in contrast, has a TPS limit of fewer than 15 and average transaction costs of £1.39.  

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Conclusion

Solana Blockchain is a game-changer, offering a fast, secure, and scalable platform for the future of Decentralised Applications. Its innovative design allows for rapid transactions with minimal fees, making it an attractive choice for developers and users. As we embrace this technology, Solana could be the cornerstone of a new, decentralised internet era.