What is Solana Blockchain? - A Simpe Guide for Beginners!
18 September 2021
Introduction to Solana blockchain
Scalability is one of the most complex challenges in blockchain technology. As these networks expand in size, they frequently encounter constraints in transaction speed and confirmation timeframes. Solana intends to address these constraints without compromising security or decentralization.
The Solana blockchain employs a novel way of transaction verification. Scalability and speed concerns plague Bitcoin, Ethereum, and many other projects. The Solana blockchain can handle thousands of transactions per second using a mechanism known as Proof of History (PoH).
Solana is a blockchain network that focuses on high throughput and quick transactions. To enhance speed, it employs a one-of-a-kind way of arranging transactions. Users can use SOL, the network's native cryptocurrency, to pay transaction fees and participate in smart contracts.
What exactly is the (PoH) Proof of History of Solana?
The SHA256 hash(#) function is used to hash all Solana events and transactions. This function takes an input and generates a one-of-a-kind result that is exceedingly difficult to anticipate. Solana takes the result of a transaction and feeds it into the next hash. The order of the transactions is now included in the hashed output.
This hashing method results in a lengthy, uninterrupted chain of hashed transactions. Without the requirement for a traditional timestamp, this feature creates a clear, verifiable sequence of transactions that a validator adds to a block. Hashing also takes time to complete, so validators can readily determine how much time has elapsed.
Bitcoin's Proof of Work consensus method uses a different technique called Proof of History. Bitcoin blocks are huge collections of unsorted transactions. Based on their local clock, each BTC miner adds the time and date to the block they mine. The timing may change from node to node or could be erroneous. Nodes must then determine if the timestamp is correct.
By organizing transactions in a chain of hashes, validators process and deliver less information in each block. Using a hashed representation of the most recent state of transactions significantly lowers the time it takes to confirm a new block.
It is critical to recognize that Proof of History is not a technique for reaching an agreement. It is instead a method of shortening the time spent confirming transaction orders. Choosing the next validator for a block becomes considerably easier when paired with proof of stake. Because nodes require less time to check transaction orders, the network may select a new validator more quickly.
Key features of Solana blockchain:
The Solana team has created eight essential technological elements to enable the blockchain to match the capabilities of a centralized system, according to its blog. The most famous is perhaps Proof of History, although there are others as well:
Practical Byzantine Fault Tolerance (Tower BFT) is a PoH-optimized variant of Practical Byzantine Fault Tolerance.
A Transaction Processing Unit (TPU) that improves validation is known as pipelining.
Cloudbreak is a database of horizontally scaled accounts.
Distributed ledger storage with archivers.
The turbine is a protocol for block propagation.
Gulf Stream is a transaction forwarding mechanism that does not need a mempool.
Sealevel — Run-time of parallel smart contracts.
As a consensus mechanism, Solana uses Delegated-Proof-of-Stake, an enhanced form of PoS. Although Ethereum has this functionality, Solana is hundreds of times quicker! Validators are SOL token holders who process transactions and earn rewards.
What Ethereum and Solana are disrupting Finance?
Bitcoin was the uncontested champion of the cryptocurrency world for a long time. However, as compared to Bitcoin, the value of Ethereum has increased dramatically in the last year. This is due in large part to a vibrant developer community and an ever-growing number of Ethereum-based apps. Ethereum has pioneered smart contracts, DeFi, nonfungible tokens (NFTs), and other features.
Due to its first-mover advantage and a great brand, Bitcoin has a big and devoted following. However, in terms of real utility in financial transactions, Ethereum has recently become the dominating force.
This is where Solana comes into play. Solana has emerged as one of Ethereum's primary competitors. Others have definitely made an attempt. Cardano, for example, could theoretically alleviate many of Ethereum's resource constraints and hefty transaction costs. Cardano, on the other hand, has been sluggish to implement smart contracts and other sophisticated features.
Solana, on the other hand, has had little trouble turning its technical promise into reality. Sarson Funds' senior portfolio manager, Blake Richman, emphasized the action on Solana. According to Richman "Solana currently has almost 400 dApps (decentralized apps), which are comparable to those found on Ethereum and include DeFi, NFTs, and gaming. Solana currently has almost $12 billion in DeFi applications, up from $2 billion in only 30 days ".Solana has made significant progress with NFTs.
For example, its Degenerate Ape collection of paintings has been a big sensation. Some Degenerate Ape NFTs have sold for over a million dollars apiece. And it's far from the only social activity that's becoming increasingly popular on Solana. "It seems like a new NFT minting event is happening on Solana every day," Richman adds, "and there are a few eagerly anticipated blockchain-based games being published on Solana, such as Star Atlas."
The fact that Solana has such low transaction costs is one of the main reasons for its rapid growth. The average transaction fee on Solana is comparatively less than other primary cryptos, according to Ben Weiss, CEO, and co-founder of Bitcoin ATM operator CoinFlip. That's hundreds of times less expensive than Ethereum and other popular cryptocurrencies. "In many ways, Solana's capacity to transact swiftly and inexpensively sets it apart from the pack," Weiss adds.
Other than that, Solana has a lot going for it. Solana's easy-to-use Rust programming language might assist promote greater community acceptance, even if its development community is still considerably smaller than Ethereum's. Low costs combined with a shorter learning curve might be a good combo. "By the bulk of criteria, Solana is the most efficient blockchain right now," Weiss adds.
SOL is Solana's native cryptocurrency, and it serves as a utility token. When making transfers or dealing with smart contracts, users will need SOL to pay transaction fees. The network burns SOL as part of its deflationary approach. SOL holders can also act as network validators. Solana, like Ethereum, lets developers establish smart contracts and blockchain-based projects.
The SPL protocol is used by SOL. SPL is the Solana blockchain's token standard, comparable to Ethereum's ERC20. The SOL token has two primary applications:
Expenses spent when utilizing the network or smart contracts are paid.
As part of the Proof of Stake consensus method, tokens are staked.
How to store SOL?
You can store your SOL tokens through Phantom( desktop), the Trust Wallet App (Mobile), and the Ledger hardware wallet. Staking requires the usage of a wallet that supports it. You may use the Solana command-line tools or the SolFlare wallet. You'll be able to create a stake account in your wallet and delegate your SOL tokens to a validator.
Solana has delivered its promises in terms of speed and scalability. Its token price has also fared well, attracting investors' attention. Nonetheless, the network's acceptance and usage are still in their early stages.
We won't know whether Solana's speed makes a significant impact in the bitcoin industry until we witness tremendous traffic and additional use cases. Having a fast network is beneficial, but the advantages will only accrue when more people utilize it and new use cases emerge.