Solana

A compact What and Why of Solana ecosystem, SOL and brief look at its use cases.

What is Solana?

Solana is an open-source cryptocurrency project aiming to provide superior decentralized finance (DeFi) solutions using blockchain technology. Solana also refers to SOL, which is the project’s cryptocurrency. The work on the project began in 2017 starting with an ICO, which raised 25$ million. However, it was only in March 2020 when the Solana mainnet went live and the project was officially launched.

The maximum supply of SOL is 488.6 million tokens with around 300 million in current circulation.

The founder and current CEO of Solana Foundation (formerly Solana Labs), Anatoly Yakovenko, was already an experienced software engineer when he started working on Solana — he worked as a senior staff engineer manager at Qualcomm and as a software engineer at Dropbox. One year after the initial work began Anatoly hired his former colleague from Qualcomm, Greg Fitzgerald. The company started working with additional ex-Qualcomm employees after the mainnet release in March 2020.

Anatoly Yakovenko is also the one who developed a Proof-of-History (PoH) consensus protocol the project uses, and which makes it stand out.

Why is SOL unique?

As indicated above, Solana implements a new way of reaching consensus on the blockchain. It uses a PoH consensus mechanism, but not only that. It combines the newly developed PoH protocol with more common Proof-of-Stake (PoS) consensus mechanism. This unique combination creates the Solana protocol, where PoH processes network’s transaction while PoS monitors and validates each sequence of blocks created by the PoH.

This unique combination allows for extremely short transaction times while keeping the gas fees low and stable, even when the network is met with unexpected increase of users. This scalability potential, not compromised with higher fees or slower network, is, what fundamentally makes Solana so valuable. Currently, it is the fastest blockchain in the industry and is able to process around 60 000 transactions per second.

What’s more, Solana is a smart contract-compatible blockchain and the incredibly short validation times also apply to smart contract executions, which makes Solana a great platform for building DeFi apps or any Dapps in general.

The only downside of this network architecture could be a cost of running a PoH node (there is currently over 1200 nodes), which is significantly higher than for other protocols.

Use cases

The basic use case of SOL is to pay for the transactions fee on Solana network and to help secure the blockchain. A holder of SOL can become a validator node, if he holds a required amount of tokens. He/She then competes for block validations and fees rewards. If one doesn’t have enough SOL to become a node, he/she can delegate his/her tokens to a validator node of choice, increase its chances of validating a block and still earning a part of the reward. This mechanism incentivizes staking of SOL and making a cryptocurrency passive income while helping further secure the network.

An important goal for Solana Foundation is to make DeFi available on larger scale to broader public.

Due to the unique specs of its hybrid consensus model, Solana attracts small-time customers or traders, as well as institutional investors and large enterprises. It’s ability to maintain such high-functioning model without having to implement solutions similar to other networks allowed many big DeFi project to start building on it. A few examples:

Serum DEX is one of the most used Dapps in Solana ecosystem. It is a decentralized exchange (DEX) for cross-chain trading of different assets.

Coin98 Finance is offering a wide array of DeFi products — from yield farming to crypto incubators and even borrowing and lending protocols.

Solanium focuses on launching new Solana projects through its launchpad and fundraising platform with the goal of faster public adoption of the technology.

Last, but not least, blockchain-based games running on Solana network are becoming widely popular, as well as NFTs collections. Many prefer dealing with NFTs on Solana network over Ethereum because of the incomparable gas fees.

Personal experience

I personally own a bit of SOL, but I have gotten invested in it quite late. I have yet to use any of its Dapps, which makes sense, because I haven’t been using Solana network at all. However, I am very excited to see new upcoming projects and I am going to be monitoring SOL closely from now on.