Solana is a web-scale blockchain designed to handle more than 50,000 crypto transactions per second ― one of its kind. This is why it is depicted by experts as the technology for the mass adoption of cryptocurrency.
Applications hosted on Solana enjoy fantastic computational bandwidth comparable to conventional internet.
History of Solana and Major ICOs
The main face behind Solana is Anatoly Yakovenko, a former employee of Qualcomm, Mesosphere and Dropbox. In November of 2017, he published a whitepaper describing Proof of History (this concept will be discussed later). His curiosity was spiked by the inefficiency of the existing blockchain technology to perform more than 15 transactions per second worldwide. Anatoly observed fiat payment systems like Visa could process about 65,000 transactions per second (TPS). Therefore, for cryptocurrency and other crypto-based technology to truly compete and survive future demands, there is a need for blockchain technology that can handle many TPS.
The project to solve this enigma, undertaken by Anatoly, will later birth Solana. Anatoly over the course of development worked with his former colleagues from Qualcomm. Greg Fitzgerald and Stephen Akridge were very instrumental to the success and launch of Solana Lab.
Solana started raising funds on April 1, 2018, according to Crunchbase. By July 30, 2019, it raised $20 million from 20 investors in its Series A led by Multicoin Capital. On March 26, 2020, it raised an additional $1.8 million. The company raised $60 million (its largest sum so far) in May, 2021. Coindesk reported the fund is to expand Solana business in four major countries Brazil, Russia, India, and Ukraine.
Some of their most recent investors are BlockTower Capital, Blockchange Ventures, Hacken, Gate.io, Coin DCX and BRZ.
Solana (SOL) Vs Ethereum (ETH)/Binance Coin Chain (BSC)
Solana(SOL) major competitors are Ethereum(ETH) and Binance Coin Chain (BSC). Does Solana have any edge to compete against these two?
Due to the wide adoption and increasing innovation in the blockchain industry such as NFTs and DeFi, there is a need for technology capable of many TPS. These three blockchain technologies can handle such although Solana edges them in numbers. However, the major problem faced by the industry is having a technology with Scalability, Decentralization, and Security.
Ethereum is capable of Decentralization and Security. BSC can boast of Scalability and Security. None of these two can handle the three problems efficiently. But Solana can seamlessly handle the three (Scalability, Decentralization, and Security).
Wondering how this is possible? When evaluating the efficiency of a blockchain technology like these three, below are the major variables to take into consideration:
- Transaction Latency
- Transactions Per Second (TPS)
- Commission charged Per Transaction
Solana number of validators totals about 594. BSC on the other hand has about 21 while Ethereum has more than 11,000.
Transactions Per Second (TPS)
Solana can process more than 50,000 TPS while BSC and Ethereum can only process about 100 and 15 respectively.
Solana transaction latency is about 4 seconds while BSC has about 75 seconds and Ethereum has up to 5 minutes.
Commission Charged Per Transaction
The commission charged by Solana on every transaction is very insignificant compared to BSC and Ethereum.
Thus making Solana an affordable network for micropayments. Solana charges approx ~$0.00001USD/tx which is way less than competition blockchain networks such as Binance Smart Chain (charges $0.15) and Ethereum (charges $15-60 per transaction).
Just as environmental concern about the power consumed by blockchain technologies using Proof Of Work (PoW) increases, Solana’s edge continues to rise as it uses Proof of Stake (PoS).
In a direct comparison to Ethereum, Solana does use no start in its program while Ethereum does. This slows the processing of transactions.
Solana without sacrificing security can stream transactions without the need to verify using a global consensus. It also transmits this transaction using lower memory. Unconfirmed transactions are forwarded to upcoming validators to handle.
Proof of History (PoH)
The most significant innovation of Solana is Proof of History (PoH). This was the focus point in the whitepaper published by Anatoly in 2017. The concept was to introduce a clock-like technology to keep time between two computers that do not trust each other.
The deployment of this innovation in blockchain is to get a transaction validated without expending much computational power as in Proof of Work.
To fully understand the concept of this innovation, it is important to briefly discuss PoW.
Blockchain technology users send tokens among themselves. These tokens are compiled into a block while miners are expected to solve complicated mathematical puzzles to confirm them.
In Proof of Work, miners compete with each other to confirm validity of a transaction; and invariably produce new blocks to the chain. As more transactions are initiated, the network will require more miners to keep validation and then like a cycle it goes. The computers used for mining require lots of electrical power and it also takes a lot of time to process.
Solana innovation aims to significantly reduce the load of the network and time in processing the blocks by encoding a timestamp into the blockchain. What this means is that instead of using complicated means to verify a transaction, the time stamp is compared.
This does not mean the timestamp is automatically assumed to be valid. Instead, the PoH will ascertain if the transaction has occurred prior to an event or after.
PoH uses a cryptographic concept called Verifiable Delay Functions (VDFs) with a security protocol called Tower Byzantine Fault Tolerance (Tower BFT).
The passage of events on the blockchain is verified using a cryptographically secure function designed in a way that output cannot be influenced from the input, and must be thoroughly processed to generate output.
Validators are required to vote on the authenticity of a PoH hash. Those who vote for a fork not found on the PoH records are penalized.
Backed by Almeda (SBF)/FTX
Sam Bankman-Fried (SBF) is one of the big sharks in the cryptocurrency industry betting on the future of Solana.
The founder of Alameda Research and FTC exchange according to CoinTelegraph made $10 billion from his crypto assets in just three years.
His Alameda Research has daily revenue of more than $2 billion while SBF himself is committing most of his time to developing FTX crypto derivatives exchange and DeFi project Serum. All of these are developed on the Solana Blockchain.
Pro and cons of Solana
We know this is the part you have been waiting for all the while. Here you go:
- Commission charged per transaction is very cheap and almost insignificant
- Investment by big names such as Rockaway Ventures, Kevin Rose, BlockTower Capital, Foundation Capital and more.
- Uses PoH instead of PoW; thus requires less gas to mine.
- Promising ecosystem, considering the frequency of projects rollout.
- Entities behind Solana projects have lots of marketing prowess than those behind Ethereum projects.