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What is Solana (SOL)?
Luis Clark
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Luis Clark
What is Solana (SOL)?
Solana is an open-source, public blockchain. The network supports smart contracts such as various decentralized applications and non fungible tokens (NFTs). Its rapid growth has helped place it as a top competitor to other leading programmable blockchains like Cardano and Ethereum.
Solana is powered by its native cryptocurrency SOL, which is used to pay for transactions on the network as well as provide network security through staking.
Who is the Founder?
Solana was co-founded by Anatoly Yakovenko and Raj Gokal in 2017. Anatoly is currently the CEO of Solana Labs and Raj Gokal is the Chief Operations Officer. Anatoly Yakovenko’s background is in system design and his objective in creating Solana was to use this knowledge to develop a new blockchain platform that allowed for faster processing speeds.
How does Solana (SOL) Work?
Solana was developed to solve scalability and speed problems, and it achieves this via its unique hybrid protocol. The Solana protocol utilizes the Proof of Stake consensus mechanism and the Proof of History algorithm, which is unique to the network.
Proof of Stake is a protocol that allows for the validation of blockchain transactions. Each validator is chosen based on the number of crypto tokens they have pledged to the blockchain (staked). In exchange for validation, validators receive rewards when they add new blocks of transactions to the blockchain after confirming them.
On the other hand, the Proof of History protocol verifies the order of blockchain transactions as well as the time lapse between them. Transaction timestamps are built into the blockchain. This means that validator nodes do not have to communicate to confirm transaction times.
While there are a couple of other reasons for Solana’s speed, the primary cause is its Proof of History protocol. Its special protocol helps make transactions faster by reducing the workload for validators, allowing them to process transactions more quickly.
Key Features
The key features of the Solana protocol include the following:
Turbine
The turbine is a block propagation protocol used by Solana that divides data in smaller increments and simplifies the transfer of data between nodes.
The blockchain nodes in Solana are divided into small packets to make transactions easy without experiencing any bandwidth or validation problems. This makes it easier for transactions to be settled faster.
Gulfstream
Gulfstream is a Mempool-less transaction forwarding protocol that pushes transaction caching and forwards it to the edge of the network. Simply put, Gulfstream puts an end to Mempool needs. Mempool has to do with a waiting area where unprocessed transactions queue to wait for their turn.
With Gulfstream eliminating this waiting time, Solana can manage a memory pool size of 1,00,00. The network forwards transactions to its Validators before a new transaction is added and the time for verifying transactions is also reduced. There is also faster leader switching and reduced memory pressure on validators which often results from unconfirmed transactions.
Gulfstream enables Solana to touch approximately 65,000tps. Validators can also clear the meme pool, leaving no unconfirmed transaction in Solana’s blockchain.
Sealevel
Sealevel is a hyper-parallelized transaction engine that allows different smart contracts at the same time. It is used to scale horizontally across SSDs and GPUs.
Solana’s power to handle multiple contracts simultaneously brings efficiency and speed to its network, making it cost-effective.
Archivers
This is a network node in Solana’s blockchain used by validators to delegate data storage. Data on the Solana network is offloaded from validators to the Archivers.
Archivers are not part of consensus meetings, but they are subject to frequent routine checks to ensure that they store the appropriate data for the network. This is done by archiving small sections of the state. The state’s history is then erasure-coded and fragmented.
Pipelining
This is a process where a stream of input data is assigned to different hardware responsible for it. It is a transaction processing unit for validation optimization.
Solana’s pipeline system uses multiple sequential steps to process data input streams. Each step in this process is assigned to dedicated hardware.
The use of multiple hardware for the different steps makes the validation of transaction information faster and easily replicated across all the nodes in the network.
Cloudbreak
Cloudbreak is a horizontal scaling method used to increase Solana’s scalability. It organizes a database that can accurately read and write transaction input. It also establishes a connection between software and hardware.
Tower Byzantine Fault Tolerance Algorithm (BFT)
The BFT is an algorithm that supports failing nodes to keep them working. This is like a safety shield for Solana. If one of the nodes faces a disruption or fails, the BFT takes charge to ensure that other functioning nodes are not affected.
Tower Byzantine Fault Tolerance uses the Proof of History as a cryptographic clock. It helps it attain the consensus without any communication between the nodes.
Weaknesses of Solana (SOL)?
While Solana has numerous advantages, it also has some weaknesses.
A major weakness of the Solana ecosystem is its centralization. About half of the token supply is owned by insiders and venture capitalist firms. Also only nineteen nodes in the network hold over one-third of the cumulative stake, this means that a third of validated transactions are done by only 19 nodes.
Additionally, the amount of SOL and hardware requirements a validator must own to maintain a node is too high, this has limited the number of users who are willing to participate. This means that just few people validate transactions.
Solana has also been criticized for its network issues. In November 2021, the network was offline for 17 hours as a result of resource exhaustion.
There have also been questions about the transparency of the network about the total circulating token supply. The class action lawsuit filed against the network in July 2022 accusing Solana of being unregistered security has further reduced the confidence users have in the network.
Despite all these weaknesses, developers and projects like Raydium and Solstarter are still joining the Solana network.
How is Solana (SOL) Created?
Solana is created via its unique Proof of Stake and Proof of History hybrid protocol, which enables selected stakers (miners) to validate transactions by being able to identify the correct order of events and transactions that occur on the network. Solana isn’t created by the conventional mining system due to its Proof of Stake and Proof of History protocol.
Bitcoin and other cryptocurrencies use something called Proof of Work to agree on transactions and add them to the network. It’s a process where everyone competes to solve a puzzle and prove that they’ve done the work. Once they’ve solved the puzzle, they can validate the transactions and add them to the blockchain.
Mining Solana (SOL)
Solana cannot be mined in the traditional sense as it is a Proof of Stake and Proof of History hybrid coin. That said, Solana does offer 2 ways that its community can help the network in exchange for rewards just as conventional mining works:
Staking
With staking, you can stake Solana coins that you own with a validator in exchange for rewards. A Solana validator will get you a reward of approximately 8% per year in exchange for staking your coins to aid transaction confirmation on the network.
Validation
With validation, users run a powered server in a data center to verify transactions on Solana. Validators in exchange earn commissions on rewards generated by individuals who stake their coins with them. That said, becoming a validator requires heavy financial investments which restricts a lot of people from starting the process.
Which Blockchain does Solana Use?
Solana uses the Solana blockchain. This blockchain uses a hybrid of the Proof of History and Proof of Stake consensus mechanisms unlike other early cryptocurrencies like Litecoin and Bitcoin that use the Proof of Work algorithm to validate blocks on their chains.
How to Use Solana (SOL)?
SOL is the native token of the Solana ecosystem. It can pass to nodes within the Solana cluster. This is done in exchange for running on-chain programs and validating their output. SOL can be staked to earn staking rewards. SOL token is used to pay transaction fees within the ecosystem. Also, transaction fees incurred when using smart contracts are paid for using SOL.
How To Buy Solana (SOL)?
Solana can be purchased on popular centralized exchanges like Binance, Coinbase, Kraken, FTX, and Crypto.com. You can find a comprehensive list of all the exchanges where you can buy SOL on Coinmarketcap.
The steps for buying SOL on any of these exchanges are similar and straightforward. Below is what the process looks like:
- Create an account on your preferred exchange if you don’t already have one.
- Add funds or a payment method to your account.
- Buy SOL with the funds you added.
Some platforms support the purchase of SOL with other cryptocurrencies like ETH and BTC.
How to Store Solana (SOL)?
SOL can be stored in both hardware and software wallets. You can choose to store it in a wallet on the exchange where you purchased it or you could move it to your wallet on another exchange or a hardware wallet. Either way, ensure that you choose a secure wallet.
If you decide to use a wallet on an exchange, make sure the platform places a premium on the security of the user’s assets. Some exchanges offer staking rewards to users who store their cryptocurrencies on their platform for a specific period. You may want to consider such wallet options if you want your SOL to generate rewards for you when it is stored.
If you wish to store a large amount of SOL for an extended period, you should use a hardware wallet. Hardware wallets are more secure and they give you total control of your asset.
That said, let’s take a look at some of the wallets that support the storage of SOL.
Solflare
Solflare wallet is the first Solana wallet ever. It is a non-custodial community-created wallet built specifically for the Solana blockchain. It is available both on the web and as a browser extension.
Solflare allows you to securely store, send and receive tokens on the Solana blockchain. The wallet supports the staking of SOL tokens. It also grants you access to Dapps on Solana and it supports the storage of NFTs.
Solflare wallet supports the Ledger Hardware wallet on both web and mobile. This enables you to store your SOL tokens on a secure hardware wallet that is safe from attacks.
Solflare has an anti-phishing feature that warns users when they are about to interact with malicious websites. This helps to keep your wallet safe from phishing attacks.
Squads
Squads is a multi-signature self-custody wallet that supports the storage of SOL. Users can also invest in yield-generating strategies, vest tokens, do swaps, borrow, lend and stream directly from the Squads interface.
As a multi-signature wallet, it needs several digital signatures to agree on transactions. This makes it great for groups that want to work together to control their digital belongings. It also reduces the chances of assets getting stolen, since the multi-signature feature removes a single weak point where attacks can occur.
Squads users can also upgrade Solana programs, change upgrade authority, manage program upgrades, and view upgrade history. They can also directly interact with pure Rust Solana and Anchor as well as create custom transactions from the wallet.
Phantom
This is a non-custodial wallet that is tailored for the Solana and Ethereum blockchain. It is available as a mobile device application and as a web extension. Phantom users can store not only SOL tokens but also NFTs on Solana.
Sollet
Also known as the Solana SPL Token Wallet, Sollet is a non-custodial, web-based wallet that enables you to store SOL and other assets on the Solana blockchain. The wallet was developed by the Project Serum (DEX) team.
Asides from the storage of SOL, you can also send and receive funds and interact with Dapps on the Solana blockchain.
Trustee Wallet
This is a mobile multi-currency wallet that supports the storage and staking of SOL. Trustee wallet users can store, buy and sell SOL and other cryptocurrencies using their Visa or Mastercard bank cards. It is an open-source wallet and is available for download on both Android and Apple stores.
Asides from all these software wallets, the Solana CLI supports the Ledger Nano S and Ledger Nano X hardware wallets. However, for this to happen, you will need to set up the hardware wallet with the Solana app and install the Solana Command-line tools.
Best Place to Stake Solana?
The best place to stake Solana is on the Solfare wallet. This is the first ever Solana wallet and is recommended by the network itself. The platform has staked up to $3,177,093,520.00 in Solana and 25% of all circulating Solana.
What do You Need to Know about the Future of Solana?
Most analysts agree that Solana has a bright future as its technology and innovative projects keep advancing. At the moment, it is among the top 10 biggest cryptocurrencies based on market cap and its popularity keeps rising. Since the SOL coin is dependent on the growth of the network there’s a lot of positivity surrounding its pricing in years to come.
Conclusion: Should You Put Your Money in Solana (SOL)?
Solana is incredibly efficient as not only does it offer low transaction fees for investors, it is stable and one of the fastest blockchain platforms currently. All these factors come together to make the SOL token a great long-term investment decision in the crypto space.
Risk in Investing in Solana (SOL)
While Solana appears to be an excellent long-term investment of opportunity, our investment advice to you is to keep in mind that all cryptocurrencies are volatile. So never invest more than you can afford to lose.
Our extensive analysis of the different Cryptocurrencies doesn’t stop here. You can also check out our “What is Ripple (XRP)?” guide to know more about another huge project.
FAQ
Most frequent questions and answers
Solana is a blockchain (crypto computing platform with a native currency) intending to attain high transaction speeds without letting go of decentralization. It seeks to achieve this via its hybrid protocol.
On average, Solana can process 2,700 transactions per second (tps) with an upper limit of 710,000 tps on a standard network based on its developer documents.
Just like the Ethereum blockchain, Solana allows for any type of project to be built on its network. Solana supports Automated Market Makers like Raydium, DeFi lending projects like Tulip, cross-margin trading platforms like Mango, Decentralized Finance wallets that support staking and NFTs like Phantom, and DEXs like Serum. There are even play-to-earn games like StepN and Metaverse projects such as BR1 and Star Atlas.
Solana’s blockchain has a gas fee of about $0.00025 per transaction.
Solana fees are so low because the network has a more efficient block size (20,000 transactions) and block time (0.4 seconds). Ethereum for example has a block size of 70 transactions and a block time of 13 seconds.
Its improved block size and block time are the reasons why the Solana blockchain offers very low transaction fees of just $0.00025 per transaction.
When all clocks across a decentralized network are synchronized (due to the Proof of History consensus mechanism), transactions take less time to verify as the individual nodes don’t need to dedicate a lot of processing power toward the verification of numerous timestamps. The synchronization then enables the network to optimize for speed. This is why the Solana blockchain is inherently fast.
The probability that Solana will hit $10,000 is quite low but there are experts that predict that SOL can hit $10,000 by 2040.
Pros
- Solana offers low fees and fast transactions
- The blockchain offers huge support for NFT projects
- You can stake Solana to earn rewards
Cons
- Solana has no fixed supply so it is susceptible to inflation
- While Solana is decentralized it only supports over 1,500 validators while Ethereum supports more than 100,000.
Concerning speed, Solana is currently considered the fastest blockchain. However, Ethereum offers a much larger trading volume and is used not often in the crypto space. So both of these networks have what it takes to keep investors interested in their growth.
The Solana blockchain is one of the leading decentralized blockchain products running as it has more than 1,800 active distributed validators globally as well as a Nakamoto coefficient of 27. But some people in the crypto space consider the network to lean towards centralization.
No, Solana is a public blockchain offering smart contract functionality.
Solana is not EVM compatible (a requirement for MetaMask coins and tokens) so you cannot add its native cryptocurrency SOL to your MetaMask wallet.
No, Solana is a Layer 1 blockchain developed to facilitate the development of decentralized apps and smart contracts.
At the moment, Solana is termed the fastest blockchain.
Solana functions on the combination of Proof of Stake and Proof of History consensus mechanisms.
Yes, Solana’s SOL token is available in lamports (fractional amounts). A Lamport holds the value of 0.00000001 SOL.
Currently, there are 315,100,273 SOL coins in circulation. The total SOL supply is 511,616,946 without a fixed supply.
The Solana Foundation is a non-profit organization that is dedicated to the growth, security, and decentralization of the Solana network.
The Initial token distribution of Solana (SOL) is as follows:
- 38.00% is allocated to Community Reserve
- 15.86% is allocated to Seed Sale
- 12.63% is allocated to Founding Sale
- 12.50% is allocated to Team
- 12.50% is allocated to Foundation
- 5.07% is allocated to Validator Sale
- 1.84% is allocated to Strategic Sale and
- 1.60% is allocated to Public Auction Sale
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