Explanation of Solana: What is SOL?

Published on:

Solana (SOL) is a rapidly growing blockchain network created by Anatoly Yakovenko in 2017. Prior to founding Solana, Yakovenko worked as a software engineer at Qualcomm and Dropbox. Solana is known for its exceptional processing speed, attracting attention from various projects, investors, and users.

Key features of Solana

Transaction Speed

Solana processes approximately 50,000 transactions per second on a globally distributed network. This high throughput is achieved with a block time of about 0.4 seconds and the presence of more than 70 nodes.

High-Speed, Single-Layer Blockchain

Solana operates as a high-speed, single-layer blockchain. Its notable characteristic is the ability to handle a large number of transactions at a rapid pace, making it competitive in the cryptocurrency space.

Blockchain Speed and Size

Solana’s standout feature is its blockchain speed and size. In comparison to other cryptocurrencies, Solana’s processing speed and efficiency make it a strong contender, capable of handling transaction volumes that rival traditional payment systems like VISA or Paypal.

Transaction Cost

Solana offers cost-effective transactions with low fees, contributing to its appeal among users and projects.

Competitive Comparison

When compared to its competitors, Solana excels in terms of transactions per second, transaction fees, transaction latency, and its consensus mechanism.

SOL Comparison with blockchains

Solana’s focus on scalability, speed, and low transaction costs positions it as a viable blockchain for a wide range of applications, including decentralized applications (DApps) and decentralized finance (DeFi) projects.

8 Innovative Developments by Solana

1 – Proof of History (POH)

Solana records transactions in its history ledger.

Timestamps serve as proof of transaction and establish the sequence of events.

2 – Tower BFT – Solana’s PBFT Extension

An extension of Practical Byzantine Fault Toleration (PBFT).

Utilizes Proof of History (PoH) to avoid transaction latency and large message payloads.

3 – Turbine – Blockchain Broadcast Protocol

 Divides nodes in transfers for faster transactions.

Read more:  Critical Factors to Consider When Selecting a Crypto Wallet: A Decision-Making Guide

4 – Gulf Stream – Routing Protocol

Streamlines transaction confirmation process.

Achieves a network throughput of around 50,000 transactions per second.

5 – Sealevel – Parallel Smart Contracts

Runs thousands of smart contracts in parallel for efficient uptime.

Quick confirmation for transactions in the same state.

6 – Pipelining – Transaction Processing Unit

Blocks containing transaction information are quickly verified on all nodes.

Uses different hardware streams for efficient processing.

7 – Cloudbreak – Databases of Accounts

Organizes a database for simultaneous reading and writing of transaction inputs.

Executes transactions without the risk of fragmentation.

8 – Archivers – Storing Blockchain History

Nodes copy blockchain information based on available space.

Archivers download relevant data from validators, making it accessible across the network.

These innovative developments contribute to Solana’s efficiency, scalability, and ability to handle a high throughput of transactions.

Solana SOL Ecosystem

Solana’s DeFi Influence: Pre and Post FTX Collapse

In the era preceding the FTX collapse, Solana wielded considerable influence within the decentralized finance (DeFi) space. However, the aftermath of the FTX collapse saw a decline in Solana’s standing, attributed to the robust connections between FTX, Alameda Research, and Solana. This interconnectedness had adverse effects on Solana’s position in the DeFi landscape, resulting in a significant loss of power.

During the late stages of 2021, prior to the bear market and the consequential FTX collapse, Solana boasted an impressive Total Value Locked (TVL) of nearly $10 billion in DeFi. However, the subsequent market downturn and the FTX collapse brought about a shift in the dynamics.

SOL TVL

In a noteworthy turn of events in late 2023, the SOL token experienced a remarkable surge, catapulting from $9 to an impressive $120. This surge marked a pivotal moment for Solana, symbolizing a resurgence and a distancing from the FTX-associated challenges. Presently, Solana has reclaimed its standing with a TVL of $1.47 billion in DeFi, securing the 6th position after Arbitrum. It appears that Solana has successfully overcome the challenges posed by the FTX collapse and emerged stronger in the decentralized financial landscape.

Read more:  Market Manipulation 101: How to Avoid Liquidation

Join us as we delve deeper into the narrative of Solana’s journey, analyzing the factors that contributed to its resurgence and exploring its current position in the ever-evolving world of DeFi.

TVL Ranking

Solana Vs Ethereum

Solana and Ethereum are both prominent blockchain platforms, each with its unique features and characteristics. Solana stands out for its exceptional transaction speed and low fees, addressing some of the scalability challenges faced by Ethereum.

Solana’s consensus mechanism, Proof of History, supplements its Proof of Stake protocol, contributing to its impressive throughput. On the other hand, Ethereum, as the pioneer in smart contract platforms, boasts a vast and established ecosystem with a diverse range of decentralized applications (DApps) and decentralized finance (DeFi) projects. 

However, Ethereum has faced scalability issues, leading to high gas fees during periods of network congestion. Both platforms are actively contributing to the evolving landscape of blockchain technology, with Solana emphasizing performance, and Ethereum emphasizing its extensive network effects and developer community. The competition between Solana and Ethereum reflects the ongoing pursuit of scalability and efficiency in the blockchain space.

Can Layer-2 Projects end the Solana and Ethereum showdown?

Impact of Layer 2 projects on the competition between Solana and Ethereum is significant. Ethereum, the leading smart contract platform, has been grappling with scalability issues, resulting in high gas fees and slower transaction processing times. Layer 2 solutions, such as Optimistic Rollups and zkRollups, have emerged to address these concerns by offloading transactions to secondary layers while maintaining the security of the Ethereum mainnet. 

These Layer 2 projects have played a crucial role in enhancing Ethereum’s scalability and usability. On the other hand, Solana, known for its high throughput and low transaction costs, has positioned itself as a strong competitor to Ethereum. 

Read more:  BNB Hacker Becomes Rocket Pool rETH Fourth Largest Holder

The adoption of Layer 2 solutions on Ethereum helps mitigate some of its scalability challenges, potentially impacting the competition by making Ethereum more scalable and cost-effective. However, the landscape is dynamic, and ongoing developments on both platforms will continue to shape the competition between Solana and Ethereum.

What Projects are Solana Competitors: Layer-1 Projects

Binance Smart Chain (BSC)

Binance Smart Chain is a blockchain network that runs parallel to Binance Chain. It aims to provide fast and low-cost transactions and has gained popularity for hosting various decentralized finance (DeFi) projects.

Polkadot (DOT)

Polkadot is a multi-chain network that enables different blockchains to transfer messages and value in a trust-free fashion. It allows different blockchains to interoperate, providing scalability and flexibility.

Cardano (ADA)

Cardano is a blockchain platform known for its focus on security and scalability. It uses a proof-of-stake consensus algorithm and aims to provide a secure and scalable infrastructure for the development of decentralized applications.

Avalanche (AVAX)

Avalanche is a platform that aims to provide highly scalable and customizable blockchain networks. It uses a consensus protocol called Avalanche, designed to achieve high throughput and near-instant finality.

Polygon (MATIC)

Formerly known as Matic Network, Polygon is a framework for constructing Ethereum-compatible blockchain networks. It aims to enhance the scalability of the Ethereum network and support the development of decentralized applications.

Tezos (XTZ)

Tezos is a blockchain platform that utilizes a self-amending blockchain protocol, allowing for on-chain governance and the evolution of the protocol without requiring hard forks.

Related