Solana ($SOL) is taking on one of the biggest challenges with existing blockchains: scalability. This problem has always been the bane of mass cryptocurrency adoption. With poor transaction throughput, cryptocurrency cannot fully compete with payment systems like Paypal or Visa. And this is why Solana was developed. With the ability to process more than 50,000 transactions per second, Solana has attracted a number of crypto advocates, including the FTX exchange. But what exactly is Solana and how does it work?
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Anatoly Yakovenko founded Solana in 2017. Yakovenko previously worked for Qualcomm. He also has experience with compression algorithms after previously working at Dropbox as a software engineer.
Along with Greg Fitzgerald, CTO of Solana, as well as Eric Williams, they conceptualized a new way to deal with the performance issues that were present in the Bitcoin and Ethereum blockchains. They envisioned a distributed, trustless protocol that allows for greater scalability, which is how Solana was born.
What is Solana? key innovations
- Proof of History (POH): Cryptographic clock for the blockchain.
- Tower BFT: Solana’s version of the Practical Byzantine Fault Toleration (PBFT) system
- Turbine: Blockchain transmission protocol.
- Gulf Stream: memoryless forwarding protocol.
- Sealevel: parallel smart contracts from Solana.
- Pipeline – Transaction processing unit.
- Cloudbreak – Account Database.
- Archives: storage of blockchain history.
Let’s take a look at these key innovations one by one.
Solana brought the community a new solution to make a more decentralized blockchain.
The PoH system incorporates historical blockchain transaction records to prove that transactions did indeed occur before they are included in the distributed ledger.
This is done by what Solana calls the “verifiable delay function.” In the Solana blockchain, transactions are embedded with timestamps that help establish the sequence of events that were processed before the latest state of the blockchain is broadcast to the entire network.
Transactions are entered in blocks via Solana’s preimage-resistant sequential hash, simply referring to hashes that cannot be altered. These hashes are then used as input for the next transaction. These inputs are then timestamped to record their actual sequence, eventually saving time having to revalidate each hash function entirely.
TowerBFT is Solana’s version of the PBFT system. The consensus algorithm uses PoH as its cryptographic clock to reach blockchain consensus without incurring massive messaging overhead and transaction latency.
Before the ledger status is finalized, validators vote on which version of the ledger is accurate. So your vote is locked. This means that they are prohibited from taking a different vote on a future version of the blockchain that does not show the record of previous votes on it.
Solana makes it easy to transmit data to each blockchain node by breaking it into smaller packets. This helps Solana address bandwidth issues and increase its ability to settle transactions faster.
Solana can achieve a network throughput of 50,000 transactions per second by facilitating the block confirmation process. Gulf Stream makes it easy to capture and forward transactions even before the next set of blocks is finalized for confirmation.
The sea level
Thousands of smart contracts run in parallel with each other to achieve a more efficient runtime for Solana. Transactions that are in the same state of the blockchain can be executed simultaneously.
A set of blocks containing information about transactions is quickly validated and replicated across all nodes in the network. Solana does this by assigning an input data stream to different hardware that is responsible for each of them.
Solana achieves scalability without the risk of fragmentation by organizing a database that simultaneously reads and writes transaction input. Cloudbreak establishes a data structure where transactions are processed in software that uses each hardware responsible for indexing the data.
Solana’s network allows each node to replicate information from the blockchain according to the space available on its hardware. The archivers download their respective data from the validators, and this data is accessible to the network.
SOL Token ($ SOL): What is it and what is it for?
Solana’s native token is $SOL. Currently, there is a circulating supply of 26 million SOL and it has a maximum supply of 489 million SOL.
Solana is a Proof of Stake (PoS) network with branches. Validators process transactions and run the network. Since validators are also chosen based on the amount of participation they have in the network, it is likely that the most important validators will be chosen to enter transactions on the blockchain. And when they do this, they get rewards. Therefore, validators would want to entice delegators (ienon-validator SOL token holders) to allocate tokens to stake on their behalf. Validators do this by offering lower commissions, which delegates must pay to validators in the form of a fee that represents a percentage of the rewards earned.
How to stake SOL tokens
Staking SOL tokens can also be a way for users to make a profit if they just hold their tokens.
- Transfer tokens. In order to stake SOL tokens, users must first transfer their tokens to wallets that support staking. These are wallets like Ledger Nano X.
- Make a betting account. A staking account will have a different address from the compatible wallet you will link it to.
- Select a validator. After creating a participation account, you can choose from Solana’s validators to determine to who you will delegate your SOL.
- Delegate your stake. Once you have chosen a validator, you can use your wallet to delegate your betting account to them.
Solana partners with Serum ($SRM)
The serum is a new high-speed decentralized non-custodial spot and derivatives exchange (DEX) built on Solana. The reason Serum wanted to build on top of Solana is that it wanted to enable the best of both the centralized and decentralized worlds, meaning an exchange that is capable of being censorship-resistant and noncustodial, yet fast, cheap, and highly liquid. . And this can only be achieved because Solana allows Serum to run on a chained central limit order book (CLOB) that is updated every 400 milliseconds.
What does this mean for crypto and DeFi traders? It means that they will have the lowest latency and gas costs.
The common problem with the above blockchains is issues related to transaction settlement speed and bandwidth. With Solana’s new architecture powered by a new way of verifying transactions and coupled with an efficient PoS mechanism, it can definitely be a strong candidate for platforms that could compete with Bitcoin and Ethereum.
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