Solana is a smart contract blockchain that is highly scalable due to its low fees and ridiculous fast transaction speed. The blockchain has gained a lot of popularity amongst regular crypto users and institutions last year thanks to its high speed. It uses a special combination of Proof of Stake and its unique Proof of History to achieve its consensus. However, the blockchain is quite centralized at least for now.
Slow transaction time is one of the biggest issues that cryptocurrencies are facing right now. Some coins that are focusing on payments, like , can be very fast but blockchains with smart contracts usually are slower. It can take an eternity for a transaction on Ethereum to be finalized, most of its competitors can handle one or two thousand transactions per second but nothing get even close to Solana that could allegedly process up to 710k transactions with today’s hardware.
Solana accomplishes this with some unique features like its consensus mechanism that unites Proof of Stake and Proof of History. One problem that many nodes in a blockchain could face is that they can't agree on the time and sequence in which the transactions happened. PoH solves this by creating an encrypted clock across the network which allows nodes to start working on the next block without having to coordinate with the entire network first.
Solana also has a transaction processing engine that can handle non-overlapping transactions in parallel. Something like this usually only works with sharding, which splits the blockchain into smaller parts that each handle a part of the transactions. Sharding can make it possible for a blockchain to scale both speed and decentralization simultaneously, but building applications can be difficult if you have to do it on multiple layers. Solana can handle transactions in parallel while only having one single shard.
One fundamental issue of Solana is that running a node is extremely expansive and only very few people or institutions can afford to be a validator. The Solana Foundation controls most nodes and also most of the coins and this makes the blockchain very centralized. They have so much control over the network that they have casually shut down the blockchain in September 2021 to fix a bug. While it’s great that they fixed a bug, it’s still worrying that they are even able to shut down the chain if they want too. Hopefully, it will soon become easier to run a node to make the network actually decentralized.
Solana has become quite popular due to its low fees and high speed despite the Solana Foundation having this much power over the network. It has a growing ecosystem that features order-book and liquidity pool type DEXes, lending protocols, NFT marketplaces, games and even revolutionary content distribution platforms like Audius.
The SOL Coin
SOL is the native cryptocurrency of Solana. It is used to pay for network fees and for staking to run a node. Holders that don't run a node themselves can delegate their coins to a validator to earn inflationary block rewards.
SOL had an initial supply of 489 million coins and has no max supply but a decreasing inflation. Initially there was an inflation of 8%, but this will constantly be lowered until it reaches about 1.5% in 2031. 37% of the initial supply was sold to investors, 12.5% was given to team members, another 12.5% was kept by the Solana Foundation and 38% was put aside to the community reserve fund that is also managed by the Solana Foundation. Most of the supply is controlled by the founders of the project.
As with all smart contract cryptocurrencies, the value of SOL depends on how much is built on top of its blockchain and how many people are using it. Solana has very low fees and can process transactions with hyper-speed which makes the project very popular and user friendly. However, it is centralized at least for now, and this is a huge risk for any user or investor.
If you want to buy SOL you can do that on . You can use the native Phantom Wallet to store and stake your SOL and to interact with dApps on Solana. The Ledger Hardware Wallet also supports SOL.
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