What is Solana - Fast Blockchain with Huge Potential

Paul Sazan
| Editor:
January 9, 2024
9 min read

Introduction to Solana

When you land on CoinMarketCap's page, you immediately see Bitcoin and Ethereum leading the cryptoverse. That said, scroll down and it's an endless cryptocurrency list, more than 8,300 independent cryptocurrency tokens (if you're into numbers). That barely reflects the exponential growth and diversification the crypto marketplace has reported. To fully appreciate this growth, you can explore one token, Axie Infinity. The token is a blockchain-powered and gamified ecosystem where a player community or Lunacia can raise, battle, and trade cute NFT pets called Axies.

In the last two years, we"ve experienced a new crypto bull market driven by Bitcoin's halving event and growing inflation concerns. Within this period, Solana went from a relatively unknown ecosystem to one of the largest in the market. During this crypto explosion, it has become one of the biggest gainers and now has the 5th largest market-cap, valued at more than 50 billion U.S. dollars.

The Solana token (SOL) generates value through a unique Proof-of-History algorithm that enables phenomenal transaction speeds. Solana compared to Ethereum, the number of SOL tokens are finite, and can be staked. The project's growth and tokenomics have attracted some of the biggest names in the cryptosphere to invest in Solana, as well as prominent decentralized application developers. This makes Solana an exciting crypto asset for investors.

In this article, we discuss the factors that drive its success and what you need to know to help you to benefit from its features.

Founders and Launch of Solana

Solana was created in 2017 by Anatoly Yakovenko and was officially launched in March 2020 by the Solana Foundation. Yakovenko's vision was to build a blockchain platform that could provide fast, secure, and scalable solutions for developers. The goal was to enable the building of decentralized applications (dApps) and high-speed transactions, addressing some of the common challenges faced by other blockchain platforms.

Solana founders: Raj Gokal and Anatoly Yakovenko. Source: Solana Floor

Solana's Unique Selling Proposition

One of the key factors that sets Solana apart from other blockchain platforms is its unique consensus mechanism, called Proof of History (PoH). This innovative approach allows for efficient and parallel processing of transactions, which significantly increases the speed and performance of the platform.

Another standout feature of Solana is its high transaction throughput. Solana is capable of handling up to 65,000 transactions per second (TPS), making it one of the fastest blockchain networks available today. This capability has propelled Solana to the forefront of the crypto community, attracting developers and investors alike.

In summary, Solana's unique selling proposition lies in its powerful performance and innovative technology, offering a fast and efficient platform for building and running decentralized applications. Whether you're a developer looking to build on Solana or an investor interested in acquiring Solana's native token, SOL, our guide on where to buy Solana and the best Solana wallet to store your assets can provide useful insights.

In the following sections, we'll delve deeper into Solana's technology, its native cryptocurrency SOL, and how it compares to other prominent blockchains like Bitcoin and Ethereum. Stay tuned to understand more about what Solana offers and why it's become a revolutionary powerhouse in the cryptocurrency space.

Understanding Solana's Technology

To fully grasp the concept of 'what is Solana?', it is essential to delve into the underlying technology that powers it. This involves understanding the unique consensus mechanism employed by Solana and how it achieves impressive scalability and transaction speeds.

Proof of History Consensus Mechanism

Solana uses a unique consensus mechanism called Proof of History (PoH), which differentiates it from many other existing blockchain platforms. PoH allows for efficient and parallel processing of transactions, essentially improving scalability and efficiency.

Proof of History works by ensuring the ordering and time-stamping of events on the blockchain. This mechanism creates a historical record that verifies the sequence and time of each transaction, allowing validators on the network to process transactions without the need for communication with other nodes. This streamlined process reduces the time and computational power required, fostering a scalable and efficient network.

Scalability and Transaction Speeds

One standout feature of Solana is its high transaction throughput. Solana claims to support a minimum of 50,000 transactions per second (TPS), significantly surpassing the transaction capabilities of both Bitcoin and Ethereum. This phenomenal speed makes Solana one of the fastest blockchain networks available.

  • Solana’s TPS count is 50,000 - 65,000
  • Ethereum’s TPS count is 15-45
  • Bitcoin’s TPS count is 3-7

Additionally, Solana boasts an average blocktime of 600 milliseconds, allowing for the quick addition of new blocks to the network. This capability is a testament to Solana's scalability, presenting it as a viable solution for large-scale and demanding applications.

The combination of Solana's unique Proof of History consensus mechanism and its impressive transaction speeds creates a robust platform that can handle a significant number of transactions simultaneously. This scalability positions Solana as a compelling choice for developers and investors alike.

The SOL Cryptocurrency

In the heart of the Solana ecosystem lies its native cryptocurrency, SOL. This digital asset plays a pivotal role in driving the network's functionality and has made significant strides in the cryptocurrency market.

Purpose and Use Cases of SOL

SOL, the native cryptocurrency of Solana, is primarily used for transaction fees and staking within the network. Its utility extends to the validation of transactions, securing the network, and participating in network governance. As with other cryptos, SOL can also be held as a store of value or traded on various cryptocurrency exchanges.

The increased adoption of Solana's high-performance blockchain platform, designed for decentralized applications (dApps) and DeFi applications, has fueled the demand for SOL. The platform's promise of fast, secure, and low-cost transactions has been a driving factor behind SOL's popularity, particularly among developers and investors in the DeFi sector.

Market Performance of SOL

Since its launch in 2020, SOL has been a standout performer in the cryptocurrency market. Despite being launched during a bear market for cryptocurrencies, SOL managed to make it to the top ten cryptocurrencies by market cap in a relatively short period.

As of September 2021, SOL had a market cap of over $40 billion, with its value witnessing a significant upswing, reaching an all-time high in 2021. This impressive market performance has put SOL on the radar of many investors, highlighting the potential of Solana's robust technology.

  • SOL Market Cap has grown from $1.6 billion in 2020 to $44 billion in 2023

Investing in cryptocurrencies like SOL requires careful consideration and research. If you're interested in expanding your crypto portfolio, you might also want to look into other cryptos like Monero and Dogecoin. Read our guides on how to buy Monero and how to buy Dogecoin for more information.

The performance of SOL underscores the potential of the Solana platform and its aim to revolutionize the DeFi and dApps landscape. However, like any investment, it's important to do your research and understand the risks involved when investing in cryptocurrencies. Always consider your financial goals and risk tolerance before diving into the crypto market.

Solana and Decentralized Applications

As a high-performance blockchain, Solana supports a wide range of decentralized applications (DApps), including decentralized finance (DeFi) protocols, gaming platforms, and non-fungible token (NFT) marketplaces. Thanks to its unique consensus mechanism called Proof-of-History (PoH), Solana can confirm transactions quickly, providing a seamless user experience for DApp users.

DeFi Protocols on Solana

Solana's fast transaction confirmation and cost-effective price, with a typical network fee of $0.00025 per transaction, have made it a popular choice for DeFi protocols. These include services such as decentralized exchanges (DEXs), lending and borrowing platforms, and yield farming. Some of the top Solana projects in 2023 include Serum, Raydium, Mango Markets, Solrise Finance, and Step Finance, each offering different DeFi services and features on the Solana blockchain.

By leveraging Solana's technology, these DeFi protocols can provide traditional financial services in a decentralized manner, enabling users to trade, lend, borrow, and earn interest directly on the blockchain without the need for intermediaries.

Gaming and NFTs on Solana

In addition to DeFi, Solana also supports the development of blockchain-based games and virtual worlds. These games utilize Solana's ability to manage tokens, including cryptocurrency, NFTs, and other digital or physical assets. The high throughput and low fees of Solana make it an ideal platform for asset tokenization and efficient transactions, enhancing the gaming experience for users.

Moreover, Solana's technology enables ownership of in-game assets, provable scarcity, and interoperability between different games and platforms. This has led to a surge in the creation of NFTs on Solana, transforming the way players interact with games.

Solana's ability to support a diverse range of DApps, combined with its high-speed, low-fee transactions, makes it a strong contender in the blockchain space. Whether you're interested in DeFi, gaming, or NFTs, Solana offers a robust platform for building and using decentralized applications.

Comparing Solana with Other Blockchains

When it comes to understanding 'what is Solana?', it's essential to compare it with other established blockchains such as Ethereum and Bitcoin. This comparative analysis can help investors and users see the unique features and benefits that Solana offers.

Solana vs Ethereum

Solana's unique consensus mechanism, Proof of History (PoH), puts it a step ahead of Ethereum in terms of efficiency and scalability. Unlike Ethereum, which currently relies on a Proof of Work (PoW) consensus mechanism (with plans to switch to Proof of Stake (PoS)), Solana's PoH ensures the ordering and time-stamping of events in the blockchain, improving scalability and efficiency.

One of the key differences between Solana and Ethereum is the transaction speed. Solana supports a minimum of 50,000 transactions per second (TPS), while Ethereum can currently handle around 15-45 TPS. In addition, Solana's average blocktime is 600 milliseconds, enabling it to quickly add a new block to the network.

The cost of transactions is another important factor. A typical transaction fee on Solana is $0.00025, which is significantly lower than the average fee on Ethereum, which is around $6.86.

Solana's high transaction throughput and low fees make it an attractive alternative to Ethereum for decentralized applications (dApps) and users. For a deeper dive into the differences between these two blockchains, check out our article on Bitcoin vs Ethereum.

  • Solana is a Proof of History (PoH) blockchain with the transaction speed of at least 50,000 TPS and an average block time of around 600 milliseconds. A transaction costs around $0.00025. 
  • Ethereum is a Proof of Stake  (PoS) blockchain with the transaction speed of 15-45 TPS and an average block time of around 10-20 seconds. A transaction costs around $6.

Solana vs Bitcoin

When comparing Solana with Bitcoin, the differences are even more pronounced. While Bitcoin is the original cryptocurrency and has a larger market cap, Solana outpaces it in terms of technological advancements.

Bitcoin uses a Proof of Work consensus mechanism, which is notoriously energy-intensive and slow, with a maximum capacity of only 4.6-7 transactions per second. On the other hand, Solana's Proof of History mechanism enables a minimum of 50,000 transactions per second.

Moreover, Solana's block time is 600 milliseconds, compared to Bitcoin's block time of 10 minutes. This allows Solana to confirm transactions much faster than Bitcoin.

The transaction cost is another area where Solana has a clear advantage. The average transaction fee on Solana is only $0.00025, compared to Bitcoin's average fee of $14.64.

  • Solana is a Proof of History (PoH) blockchain with the transaction speed of at least 50,000 TPS and an average block time of around 600 milliseconds. A transaction costs around $0.00025. 
  • Bitcoin is a Proof of Work (PoW) blockchain with the transaction speed of 4-7 TPS and an average block time of around 10 minutes. A transaction costs around $14. 

These comparisons show that Solana holds significant advantages over both Ethereum and Bitcoin in terms of speed, cost, and scalability, making it a strong contender in the realm of blockchain technology.

Noteworthy Projects on Solana

As the Solana ecosystem continues to evolve, a number of impressive projects have emerged, leveraging the blockchain's unique capabilities. Among these, Audius, a music platform, stands out. Additionally, there are other top projects that deserve attention.

Audius: A Music Platform

Audius, described as a "next-generation Web 3 music platform", is one of the most prominent projects built on Solana. It allows musicians to retain ownership of their music and freely communicate with their audience, a revolutionary step in the music industry. Since its inception, Audius has experienced significant growth, going from just under 2 million registered monthly users in 2021 to heading toward 8 million.

The decision to build Audius on Solana came after it migrated from Ethereum, seeking a solution that could support its growth and development. This move was primarily influenced by Solana's low gas fees and scalability, which proved to be more advantageous than multiple layer-1 and layer-2 scaling solutions considered by the Audius team.

Other Top Projects on Solana

In addition to Audius, several other noteworthy projects have found a home on Solana. For instance, Helium, a decentralized internet project, also migrated from Ethereum to Solana, leveraging the blockchain's superior scalability and low-cost transactions.

As more projects continue to adopt Solana, it's worth keeping an eye on this dynamic ecosystem. Whether you're an investor, developer, or simply a blockchain enthusiast, understanding these projects can give you insight into where the blockchain industry is headed and why Solana is increasingly becoming a go-to platform for decentralized applications.

If you're looking for easy to use and non-custodial Solana Wallet, choose Atomic Wallet.

In conclusion, the growth and development of projects like Audius and Helium underline Solana's potential as a blockchain platform. As more projects continue to emerge, the answer to 'what is Solana?' becomes even more compelling.

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