Solana has been billed by many as the next Ethereum. Those are some pretty big shoes to fill for any new cryptocurrency, but supporters argue that Solana has what it takes to dethrone the king of the altcoins. This article will explain what Solana is and how it works. It will also discuss how Solana is different from Ethereum and take a look at the kinds of decentralized applications (dApps) that run on the Solana network.
What is Solana?
Solana, like Ethereum, is both a cryptocurrency and a platform for running smart contracts and decentralized applications. The reason that many believe it is an Ethereum killer is that it is much faster and more sustainable. The developers hope that Solana’s fast speeds and low fees will eventually allow it to compete with centralized payment networks such as Visa.
Who are the founders of Solana?
Solana was founded by Anatoly Yakovenko who started his career at Qualcomm. It was here that he met Greg Fitzgerald and the two of them teamed up with Eric Williams to found Solana Labs. The project was able to raise over $25 million USD in 2020 via an Initial Coin Offering (ICO) on Coinlist. It was around this time when Solana’s beta mainnet went live, offering basic smart contract features and transaction capabilities.
How does Solana work?
Proof of History (PoH)
Cryptocurrencies like Bitcoin and Ethereum use a consensus mechanism known as Proof of Work (PoW). This method uses miners to verify transactions and produce new coins. Some newer currencies, such as Cardano and Algorand, use a different consensus algorithm called Proof of Stake (PoS). Using this system, the network randomly selects a user who has “staked” an amount of their cryptocurrency, to validate transactions and rewards them with newly minted coins.
Regardless of which mechanism is used, all computers on the network are required to come to a consensus on specific details, such as when a transaction took place. This can be an incredibly time-consuming process. Part of what makes Solana unique is that it uses a combination of PoS and a new system called Proof of History (PoH), which speeds up the process exponentially.
Anatoly Yakovenko, the founder and CEO of Solana, describes PoH as “a historical record that proves that an event has occurred at a specific moment in time.” This mechanism is like a decentralized clock, which is designed to keep time between all of the computers on the network without the need for every computer to come to agreement.
Imagine a series of photos capturing a vase being dropped and shattering into a thousand pieces. Each photo captures a specific moment in time and displays the exact position of the vase and the distribution of the pieces. From these snapshots in time, a sequence of events can quickly be established. This is similar to the way that PoH operates.
Proof of history (PoH) is a cryptographic clock that allows all of the computers in the network to keep time with one another and verify transactions without having to wait for universal agreement. This allows the Solana network to operate at lightning-fast speeds.
Solana vs Ethereum: How are they different?
Solana and Ethereum both have similar core features, however, there are several key differences between the two cryptocurrencies. Ethereum, which launched in 2015, was the first smart contract and decentralized app platform. It also set the stage for the entire decentralized finance (DeFi) industry. Today, Ethereum handles around 1.3 million transactions per day, however, Ethereum was not originally designed to handle that much volume. As a result, transaction times are long, and fees can be very expensive.
Ethereum developers are working on a solution to this – Ethereum 2.0 – which promises vast improvements, including moving towards PoS. But there are several contenders, such as Solana, which launched in 2020, that have similar features and are already scalable. Let’s have a look at the key differences between Solana and Ethereum.
The Solana network’s main innovation is its speed. The average block time is about 400ms, compared to between 13-15 seconds for Ethereum. Solana claims to be able to process 50,000 transactions per second, compared to 15 or less for the current iteration of Ethereum. It’s important to note that the Ethereum 2.0 upgrade promises to increase the transaction throughput of the Ethereum network to upwards of 100,000 transactions per second.
Because of the speed of the Solana network, congestion and fees remain low. The cost of transactions on the network have been averaging just $0.00025, which is not only appealing to users, but also developers looking for a blockchain platform to build their projects on. The average transaction fee on the Ethereum network can range anywhere from $3 to $70, depending on the congestion of the network. The Ethereum 2.0 update aims to reduce these fees significantly.
The PoW consensus mechanism used by Bitcoin and Ethereum requires a huge amount of energy to maintain. Solana, on the other hand, uses the PoS mechanism, which is much more energy efficient, and therefore sustainable. Interestingly, part of the Ethereum 2.0 network upgrade includes moving away from PoW in favour of PoS, which will vastly reduce its energy usage.
Solana is faster, cheaper, and uses less energy than Ethereum. However, the Ethereum 2.0 update aims to level the playing field, making the network faster, cheaper, and more energy efficient.
What is the SOL token?
SOL is Solana’s native token, which has several uses. Users can delegate their SOL to validators (the computers that process transactions and run the decentralized network) and receive a portion of the rewards in return. SOL also functions as a governance token, which means that SOL holders can vote on future upgrades and governance proposals submitted by the community. Finally, users can pay for transaction fees using SOL.
What decentralized apps run on Solana?
Solana’s ecosystem is diverse and expansive, including games, NFTs, music apps, and even decentralized exchanges. Let’s explore a few applications in a little more detail.
Star Atlas is a multiplayer game that is being developed on the Solana blockchain. It will allow players to inhabit and interact with the metaverse in a number of different ways, including space exploration, political strategy, combat, and trading. Star Atlas is based around a real-money economy and NFT assets. Players will be able to buy and trade in game assets such as outfits, weapons, ships, and land.
Serum is a decentralized exchange (DEX) based on the Solana network. It allows traders to buy and sell crypto without have to trust a third party, such as a centralized exchange (which are sometimes susceptible to hacks and exit scams). Serum claims to be much faster and have lower fees than many other exchanges within the DeFi space.
Audius is a music platform that aims to put the power back in the hands of content creators. The platform allows creators to produce creative works that are immutable and time-stamped, registered on the Audius network. Music fans are able to stream and share music directly from the platform just like on Spotify. Audius aims to create a fully decentralized ecosystem of musicians, developers, and listeners.
Did You Know?
The Audius platform was not natively built on Solana but recently migrated to the Solana blockchain. This is because the creators felt that Solana was the only network that could meet their requirements for speed, low costs, and censorship resistance.
How to buy Solana (SOL)
You can buy Solana (SOL) from most big cryptocurrency exchanges. Swyftx is a popular crypto exchange in Australia and New Zealand where users can buy Solana with low fees and store it in their personal crypto wallet.
Solana is an extremely promising platform with an exciting and diverse ecosystem of decentralized applications. This article has explained what Solana is and how it works. It has also explored how Solana differs from Ethereum and detailed some of the decentralized applications on the Solana blockchain. Solana has a lot of work to do if it wants to replace Ethereum, especially with the upcoming Ethereum 2.0 upgrade, but it is certainly giving Ethereum a run for its money.