Solana’s ambitious design aims to solve the Blockchain trilemma; however, it still has several drawbacks, such as its vulnerability to centralization.
Solana is a highly functional open source project that implements a new high-speed, permissionless, layer-1 Blockchain.
Created in 2017 by Anatoly Yakovenko, a former Qualcomm executive, Solana aims to scale performance beyond what popular Blockchains typically achieve while keeping costs low. Solana implements an innovative hybrid consensus model that combines a unique proof-of-history (PoH) algorithm with the lightning-fast synchronize engine, which is a version of proof-of-stake (PoS). As a result, the Solana network can theoretically process more than 710,000 transactions per second (TPS) without the need for scaling solutions.
Solana’s third-generation Blockchain architecture aims at facilitating smart contracts, as well as the creation of decentralized applications (DApps). The project supports a number of decentralized finance (DeFi) platforms, as well as non-fungible token (NFT) markets.
The Solana Blockchain started during the initial coin offering (ICO) boom of 2017. The project’s internal testnet began in 2018, followed by multiple testnet phases leading to the eventual official launch of the Solana Blockchain main network in 2020.
What Makes Solana Unique?
Solana’s ambitious design aims to solve the Blockchain trilemma, a concept proposed by Ethereum creator Vitalik Buterin, in its own way. This trilemma describes a set of three major challenges that developers face when building Blockchain: decentralization, security, and scalability.
The general opinion is that the design of Blockchains forces developers to sacrifice one of the aspects in favor of the other two since they can only provide two of the three benefits at any given time.
The Solana Blockchain platform has proposed a hybrid consensus mechanism that compromises decentralization to maximize speed. The innovative combination of PoS and PoH makes Solana a unique project in the Blockchain industry.
Blockchains generally have greater scalability, depending on the number of transactions per second they can support, as they scale better and better. However, in decentralized Blockchains, time discrepancies and higher performance slow them down, which implies more time for more nodes to verify transactions and timestamps.
In short, Solana’s design solves this problem by having a leader node chosen based on the PoS mechanism that sequences messages between nodes. In this way, the Solana network benefits, reducing the workload that translates into higher performance even without a centralized and accurate time source.
In addition, Solana creates a chain of transactions by hashing the output of one transaction and using it as the input of the next. This transaction history gives name to Solana’s main consensus mechanism: PoH, a concept that allows greater scalability of the protocol, which, in turn, enhances usability.
How Does Solana Work?
The core component of the Solana protocol is proof-of-history (PoH), a sequence of calculations that provides a digital record that confirms that an event has occurred on the network at any time. We can visualize it as a cryptographic clock that timestamps every transaction on the network, along with a data structure that can be a simple addition to it.
PoH has its bases on PoS using the Tower Byzantine fault tolerance (BFT) algorithm, an optimized version of the practical Byzantine fault tolerance (pBFT) protocol. Solana uses it to reach a consensus. Tower’s BFT keeps the network secure and up and running and acts as an additional tool to validate transactions.
In addition, PoH can be thought of as a high-frequency Verifiable Delay Function (VDF), a triple function (set, test, verify) to produce a single, reliable output. The VDF maintains order in the network by showing that block producers have waited long enough for the network to move forward.
Solana uses a 256-bit Secure Hash Algorithm (SHA-256), a set of proprietary cryptographic functions that produce a 256-bit value. The network periodically samples the SHA-256 number and hashes, providing real-time data based on the set of hashes included in the central processing units.
The Solana token/cryptocurrency (SOL)
Solana’s cryptocurrency is SOL, a native and utility token that provides a means of value transfer, as well as Blockchain security through staking. SOL launched in March 2020 and has striven to become one of the top 10 cryptocurrencies entering the space based on total market capitalization.
The operating scheme of SOL tokens is similar to that used in the Ethereum Blockchain. Although they work in a similar way, Solana token holders stake the token to validate transactions through the PoS consensus mechanism. Additionally, people use the Solana token to receive rewards and pay transaction fees. In addition, SOL allows users to participate in governance.
Differences between Solana and Etherium
In terms of processing speed, Solana is able to challenge the dominant smart contract platform, as it is reportedly capable of speeds of over 50,000 TPS. Solana uses different consensus algorithms to avoid slow transaction confirmations. This feature makes Solana one of the fastest Blockchains in the industry to compete with other industries outside of the cryptocurrency space.
Solana is thousands of times faster than Ethereum. Another advantage of Solana is the extreme profitability of the network since the project implements new tokenomics to obtain lower fees.
Although Solana implements one of the PoS variants, it is greener and more sustainable than Ethereum, whose current PoW model requires the use of enormous computing power.
Solana’s Blockchain can compete with high-end Blockchain projects; however, it remains vulnerable to centralization, as there are not many validators on the Blockchain. This carries the risk that anyone in the network can become a Solana validator.
What will happen to Solana from 2022 onwards?
Solana is currently one of the most scalable Blockchains in the world; this adds value to its currency, which could become one of the main cryptocurrencies in the world.
Because price action is showing a full five-wave formation, SOL may have completed its up move and will continue to correct through most of 2022.
While there are several potential “Ethereum killers”, Solana’s low transaction costs and a high degree of scalability make it one of the platforms best positioned to eventually overtake and replace Ethereum.
According to forecasts shared on Tradingbeasts.com, the Solana price is going to decline in 2023. Right now, the Solana price is $81,440, but by the end of next year, the average Solana price will likely fall as low as $60,585.
By Audy Castaneda
