What Is Solana?
Solana is an open-source blockchain that uses a unique proof-of-history model to dramatically speed up transactions within the network while lowering transaction fees. Still relatively new — founded in 2017 and launched in 2020 — it quickly became one of the most highly-mentioned projects in blockchain news. The cryptocurrency that runs on Solana — SOL crypto — currently sits in the top 10 cryptocurrencies by market cap.
If you hear this name for the first time, and the above paragraph has left you thinking, “What is Solana again?”, we got you covered. This article is here to give you the detailed SOL definition, help you understand what makes Solana different and decide whether you want to add SOL crypto to your cryptocurrency investment portfolio.
Solana History
It’s worth looking at the human being behind the Solana blockchain to get an idea of the project’s story. Solana was created by a solid low-level engineer Anatoly Yakovenko, now Solana Lab’s CEO. Before becoming obsessed with blockchain, Anatoly spent 13 years working with the leading technology companies in the field of distributed systems design. It was Anatoly and his team who wrote software that now runs on millions of mobile devices. Back when he was working on it, mobile phones were not that powerful so he had to be as efficient as possible to squeeze every bit of speed out of the limited chips. It was an incredibly complex work that taught him how to write hyper-efficient code.
In 2017, Anatoly applied all his expertise toward a brand new blockchain paradigm. His core idea was that blockchains like Bitcoin and Ethereum lacked scalability because of low transaction speeds. Anatoly and his team set themselves the ambitious goal of creating a blockchain that could meet demand on a global scale.
The solution they introduced in 2020, after spending 2 years laser-focused on building great software, allows Solana to process 50,000 transactions per second at less-than-a-penny fees (for reference, Bitcoin can process 7 transactions per second while Ethereum is capable of processing around 15 transactions per second). This solution is called the Proof-of-History model. In a bit, we will explain what it means in more detail.
How does Solana’s blockchain work?
Like Ethereum, Solana supports smart contracts, including non-fungible tokens (NFTs) and defi applications (the so-called dApps) that are being launched on the platform in increasing numbers. These emerging projects are all testing new ideas in a variety of industries. Developers seem to love the fact that Solana is so fast and cheap.
You can estimate Solana’s popularity among developers based on Hackathon attendance. Solana’s first Hackathon had 1,000 participants, the second had over 3,000, and the third broke 13,000. These Hackathons help introduce developers to the Solana ecosystem. They’ve already led to the launch of 400 different Solana-related projects: a music service, a gaming project, and a ton of financial services.
As for how Solana is built on the inside, it runs on a hybrid protocol of Proof of Stake and a concept of Proof of History. In terms of Solana’s consensus mechanism, it’s a proof-of-stake network. A consensus is the backbone of any blockchain and it’s how the nodes on the blockchain verify transactions. Proof of Stake lets a blockchain maintain accurate information across all of its participants by permitting nodes to verify transactions based on their level of commitment to the network. That is, how many coins of the total issued native blockchain coins (SOL tokens) they stake, how long they have staked for, and the number of other criteria. Proof of Stake allows for scaling while consuming less power and requiring less computational capacity compared to the older Proof of Work algorithm currently used by Ethereum and Bitcoin.
Proof of History, on the other hand, is a pure novelty that makes Solana truly unique. Let’s dive a bit into how it works, shall we?
Technology: what makes Solana different?
From the very beginning, Solana has aimed for scalability to the extent that no other blockchain project could achieve before. Blockchains are decentralized in their nature, and given that there’s no central point of control, they usually need significant time to verify transactions on the network. This slows the process down and limits the throughput.
Anatoly Yakovenko came up with the bold idea of running something as scalable as a centralized system like NASDAQ on a decentralized blockchain. This meant making a blockchain capable of running thousands of transactions per second, an impossible number for the previously built blockchains like Bitcoin (7 transactions per second) or Ethereum (15 transactions per second).
Anatoly realized that the major hurdle to higher speeds was the time required for nodes to order transactions in the right way. He came up with a solution to this problem which is now the core block of Solana, Proof of History. This is a technique that ensures each transaction on the blockchain is timestamped so that nodes do not have to wait for consensus from the other nodes in the network. Instead, transactions can be approved independently provided that the timestamp is correct. This is possible because the timestamps are recognized by everyone within the Solana network so all nodes are working in sync and agreement with this decentralized clock.
Proof of History is one of the high-level differentiators of Solana compared to other networks. It ensures that the number of transactions that Solana can handle per second is incredibly high, reaching as many as 50,000.
Solana’s scalability also means fewer fees for transactions. This comes because transaction fees are set based on how many transactions can take place per second. If blocks are made super frequently (currently, the Solana blockchain makes a new block every 0.4 seconds), and tons of transactions can fit into them, the competition to get a spot in those blocks is going to be lower. Solana’s average cost for transactions as stated on their website is $0.00025.
Now to SOL definition. SOLs or SOL tokens are Solana’s native coins that circulate within the blockchain. There are 339 million issued SOL tokens in circulating supply right now while the max supply is capped at around 520 million tokens. SOL tokens can be bought and then staked to earn staking rewards much like other proof-of-stake cryptocurrencies.
Best Solana Wallet
One of the most popular wallets for Solana right now is Phantom, and there are several others you can use to manage your SOL crypto. The list includes Solflare, Sollet, Solong, and Ledger Nano X to name a few.
We suggest you make your choice based on your level of experience and personal preferences. If you want a user-friendly wallet for keeping and staking your SOLs, choose an app-based wallet like Phantom. For experienced users who are planning to store large amounts of SOL crypto, a hardware wallet such as Ledger Nano X would suit and ensure the needed level of security.
How to stake your SOLs?
Once you have SOL tokens in your wallet, you can choose to stake them. Staking means delegating your SOL tokens to a node (also called a validator) that processes transactions on the Solana blockchain. By staking, you help secure the blockchain and earn rewards while doing so. This is a shared-reward model. The more users delegate their SOL crypto to a certain Solana validator, the more transactions this validator would process. The more transactions the validator processes, the more rewards he gets to share with you.
Check if your chosen wallet supports staking and follow the steps it offers to create a stake account, select a validator, and delegate.
Is Solana a good investment?
We are not here to give you direct financial advice, but here are some points to consider before making your own decision.
If you are planning to diversify your crypto investment portfolio a bit, Solana seems like a good addition to the all-time favorites in the world of cryptocurrencies. The fact that the max supply of SOL crypto is limited makes it impossible to issue more SOLs out of thin air and should keep the value of the coin in check. Another argument in favor of the decision to invest in Solana would be your wish to invest specifically into the Proof of History technology in case you admire the idea itself and what it does for blockchain efficiency.
Lastly, consider the market right now. Solana is in the top 10. Do you expect it to stay here, go higher, or do you just believe in this for the long term?
How to buy SOL crypto
SOL crypto is easy to buy on Utorg. Already have a Solana wallet? Then all you need is an email and a bank card to complete your purchase. Other payment methods such as Apple Pay, Google Pay, local e-wallets, or instant bank transfers may also be available depending on your geo location.
For new Utorg users, a simple verification step is required. Upload your ID photo and look at the camera. Within 3 minutes, the AI will check your data. This is a one-time process. Your next purchases will go through instantly.
Conclusion
Overall, Solana feels like a project that was made to refute the common criticism of blockchains. For years, people have been saying that blockchains are too slow and expensive. Solana is a perfect counter example to those arguments because it’s fast and cheap, although not too focused on decentralization in the short term as many critics of Solana point out. And yet it seems that the Solana team is making the right trade-offs, at least in terms of attracting developers to build new applications and experiment freely without worrying about high fees.