What is Solana?
Solana aims to address critical issues such as slow network speeds, high transaction costs, and security.
If you’re familiar with cryptocurrency, you’ve likely heard of Ethereum. As the most widely used blockchain network for DeFi (Decentralized Finance) projects and NFTs, Ethereum is known for pioneering smart contracts and decentralized applications (dApps).
However, Ethereum’s popularity comes with problems: the more users on the network, the slower its transaction speed and the higher its costs. To handle the vast data demands of running blockchain applications effectively, blockchain networks must continuously evolve.
Solana is a network designed to tackle these problems head-on. In short, it provides a fast and efficient foundation for the burgeoning growth of blockchain applications.
What is the Solana Blockchain?
Solana was proposed by the Solana Foundation in 2017 and launched in 2020. It positioned itself as a solution to Ethereum's scalability issues. Despite its origins, it has grown to become more than just an Ethereum alternative, developing a respected network with a thriving ecosystem of popular platforms.
Specifically, Solana is designed to support decentralized and scalable applications with fast and low-cost transactions. As a result, the network supports a multitude of decentralized applications (DApps) across DeFi, NFT marketplaces, and gaming ecosystems.
What is Solana’s Native Coin (SOL)?
The Solana network is powered by its native coin, SOL. SOL serves as the token for any action within the ecosystem, from paying service fees to transaction costs, and even staking for rewards.
SOL can also be subdivided into smaller units called lamports, named after computer scientist Leslie Lamport. Each lamport equals 0.000000001 SOL. Today, SOL ranks as the fifth-largest cryptocurrency, with a market capitalization of $59 billion (as of writing).
Solana Staking
Because Solana employs a variation of the Proof of Stake (PoS) mechanism, you can stake your SOL to earn rewards. You have two options:
- Becoming a validator yourself
- Delegating your SOL to an existing validator, who processes transactions on your behalf.
In return for staking and validating transactions, validators receive rewards from the network. Validators can also be penalized by having their rewards removed for misconduct. This mechanism ensures that participants act in the network’s best interest, incentivized by substantial rewards.
How Does Solana Work?
Solana’s ultra-fast and low-cost transactions are made possible by its unique approach to consensus. It combines its proprietary Proof of History (PoH) with a variation of Delegated Proof of Stake (DPoS).
Delegated Proof of Stake (DPoS)
DPoS is a variation of the PoS mechanism. Like traditional PoS, it relies on validators locking up a certain amount of SOL as collateral, also known as staking. This contrasts with Proof of Work (PoW) networks like Bitcoin, which rely on miners solving complex computational problems.
Staking allows Solana to process transactions more efficiently and sustainably compared to PoW systems. DPoS also introduces a voting mechanism, making the validation process more democratic and preventing validators from gaining excessive control over the system.
Proof of History (PoH)
PoH is a unique consensus mechanism first proposed in Solana’s white paper. In simple terms, it adds timestamps to transactions.
Imagine a sprint race where each participant receives a final timestamp upon crossing the finish line. PoH acts like a stopwatch, recording transaction timestamps to ensure they are processed in order.
In PoW and traditional PoS networks, validators prioritize transactions that offer the highest rewards. This is not possible on the Solana network, making the system more equitable and faster.
Thanks to its fair validator selection and transaction sequencing mechanisms, Solana can process significantly more transactions than its competitors. While its white paper claims over 50,000 transactions per second (TPS), actual throughput is lower, averaging 300–1,000 TPS, still far surpassing most EVM chains, including Polygon.
Solana’s Future Outlook
Solana addresses some of the biggest challenges in blockchain today: speed, security, and scalability. However, its growth hasn’t been without setbacks. Over the past two years, Solana has experienced 11 outages, including a 5-hour network shutdown in February 2024, causing panic in the community.
Despite these challenges, Solana remains a highly-followed project in the cryptocurrency space, with its NFT and DeFi ecosystems gaining increasing recognition.
Start Your Solana Journey
Why wait? Equip yourself with a Ledger device to manage SOL securely and enjoy the benefits of self-custody. With Ledger, you can explore the growing SOL ecosystem with peace of mind.