Know your coins! The future is bright for Solana and SOL
If you're a developer looking for a blockchain platform that can handle high transaction volumes without sacrificing decentralisation or security, Solana might be the right fit for you. In this article, we'll take an in-depth look at how Solana works, its native token SOL and what sets it apart from other blockchain platforms.
SOL is the native currency of Solana – a high-performance blockchain platform that is scalable, secure, and energy efficient. The platform supports large-scale applications and provides a superior user experience. Solana uses a unique consensus algorithm that enables the platform to achieve high transaction throughput while maintaining decentralisation.
When Ethereum was launched, it was hailed as a platform that truly reflected what decentralisation meant. However, Ethereum struggled with speed as it could only process up to 15 transactions per second. Compared to mainstream payment systems like Visa, which processes 1,700 transactions per second, Ethereum has a long way to go.
Also, the "gas fee" or the transaction charge on the blockchain is high, and scalability remains a significant bottleneck. (The upcoming ETH2 upgrade is designed to make Ethereum much faster than it is now)
Pull quote: The average gas fee for Ethereum has fallen to $1.57, the lowest since 2020. Between January 2021 and May 2022, Ethereum charged an average gas fee of around $40, with the highest average daily gas fee of $196.638 on May 1, 2022.
The blockchain trilemma is the challenge of simultaneously achieving all three of the following goals on a blockchain network: security, scalability, and decentralisation. Achieving any two of these three goals is relatively straightforward, but completing the holy trinity of all three is much more difficult.
This is because each of these three goals tends to conflict with the others. For example, increasing decentralisation generally decreases security and scalability. Whereas increasing security generally decreases decentralisation and scalability.
The difficulty of the blockchain trilemma was first identified by Vitalik Buterin, the co-founder of Ethereum. In a 2016 blog post, Buterin proposed that any blockchain network would have to choose between two of the three goals and that it would be impossible to achieve all three simultaneously.
Since then, many projects have attempted to solve the blockchain trilemma. Some have focused on increasing scalability, while others have concentrated on improving decentralisation. Solana is one of the few projects that has attempted to tackle all three aspects of the trilemma head-on.
Solana is a third-generation blockchain that supports several DeFi solutions, including developing DApps and smart contracts. This open-source initiative also allows for much greater efficiency than current models using only a few hundred nodes. Solana was built to focus on the below-mentioned:
- Scalability and high speed: The network processes over 2,500 transactions per second at press time. Solana claims that it supports 50,000 transactions per second.
- Low cost: Average transaction cost is $0.00025
- Decentralised and secure: The network is spread through 1,910 validator nodes that ensure safe transactions.
Solana is a proof-of-stake blockchain that uses a hybrid consensus algorithm that combines proof-of-history (PoH) with proof-of-stake (PoS). This novel technique enables the network to carry out up to 50,000 transactions per second.
In a traditional blockchain, nodes must agree on the timing a block was mined along with the transactions on the block. And since timestamping maintain the chronological order of transactions, it is crucial.
Proof of History (PoH) is a technique for adding time to the blockchain to reduce the burden on network nodes when processing blocks.
8 key innovations make the Solana network possible:
1. Proof of History (POH) — a clock before consensus;
2. Tower BFT — a Poh-optimised version of PBFT;
3. Turbine — a block propagation protocol;
4. Gulf Stream — Mempool-less transaction forwarding protocol;
5. Sealevel — Parallel smart contracts run-time;
6. Pipelining — a Transaction Processing Unit for validation optimisation
7. Cloudbreak — Horizontally-Scaled Accounts Database; and
8. Replicators — Distributed ledger store
The network is powered by an SOL token. Today, the SOL token remains an integral part of the Solana ecosystem. It is used to pay fees and power transactions on the Solana network. The SOL token is also used as collateral by validators who stake their tokens to earn rewards for securing the network. It also gives holders voting rights in future upgrades.
Interestingly, SOLs are divisible into lamports, named after Solana's biggest technical influencer Leslie Lamport. A Lamport holds a value of 0.000000001 SOL and is used for micropayments.
The SOL token was created in 2017 by a team of developers led by Anatoly Yakovenko. The token's launch was preceded by a successful $20 million Initial Coin Offering (ICO).
Before founding Solana, Anatoly Yakovenko worked at the American MNC Qualcomm. Soon after, Yakovenko switched to Dropbox to work as a software engineer before eventually leaving the company to start building Solana in 2017.
The project's official whitepaper was released in February 2018. Solana was ultimately released in 2020 after a series of testnet phases.
Participants stake their own SOL to become validators and earn a fee.
SOL is also a "governance token," which means holders can vote on the Solana community's future upgrades and governance ideas.
The price is consolidated in one channel as shown in the diagram. Technically, the breakdown/breakout of this channel is supposed to move prices in 1:1 proportion to the width of the channel. The crucial price levels would be as below:
Immediate resistance: 49.24
Immediate support: 33.70
Where to buy SOL?