Solana Facts

Solana is a publicly-owned open-source blockchain that can support smart contracts, including the non-fungible currency (NFTs) and a range of decentralized applications (dApps). The Solana blockchain’s native token is the SOL token, which offers security for the network through staking and a way to transfer value.

Solana was established at the end of 2017 by Anatoly Yakovenko and current Solana board Chairman and Chief Operating Director Raj Gokal. Yakovenko currently serves as Solana Lab’s CEO, comes having a career in systems design, and was looking to apply his experience to create a brand new paradigm of blockchain that would allow speedier processing speeds.

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Solana Facts

  • Solana is a demonstration-of-stake cryptocurrency with smart contract capabilities, including DeFi dApps and NFTs.
  • Solana boasts a theoretical capacity of 65,000 transactions per second and has almost zero costs.
  • The explosion of NFT and DeFi and NFT markets has made the fees for Ethereum very high, leading crypto enthusiasts to search for alternative alternatives like Solana.
  • Solana is in the spotlight of controversy within the crypto market as critics say that the speed of transactions is only possible because the chain compromised the principle of decentralization.

The creators wanted to develop an entirely new blockchain technology that could be scaled to worldwide acceptance. In the beginning, the speed of transactions on blockchains was only 15 transactions per second, which was insignificant compared to Visa and Mastercard’s capability to handle roughly six thousand transactions in a second. Yakovenko and Gokal set out to create an entirely new blockchain that could handle global demand.

Solana can now boast a maximum capability of 65,000 transactions per second. It is now one of the utilized blockchains because of its speed and its low cost of transactions.

As with most blockchain systems in the present, Solana is still very fresh and has not been without controversy.

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Blockchain for Solana’s

Solana is based on a hybrid platform of the proof-of-stake (PoS) and an idea Solana refers to as the proof-of-history (PoH). Proof-of-stake is an algorithm that helps a blockchain keep up-to-date data across all its participants.

Proof-of-stake

With Proof-of-stake, crypto owners commit (or “stake” their coins to a validator.

Validators are the machine that runs the software for blockchains that has their copy of the blockchain. They are the equivalent of miners on the proof-of-work blockchain, similar to Bitcoin’s.

Instead of competing against other computers to solve complex puzzles such as in Proof-of-work, validators are chosen to join each block of transactions according to their stake (how many coins they’ve committed for the system) and how long they’ve staked and a host of other factors.

The concept is to gauge network members’ level of commitment and reward them for their commitment. The greater the stake about supply circulation and the greater decentralization and safe the network gets.

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What is proof of history?

Proof-of-history can verify that transactions are conducted correctly sequenced and are uncovered by the correct leader.

Solana’s blockchain is divided into slots or intervals of time during which an authenticator insinuates transactions and creates blocks. The leaders are picked before each slot to speed up the process.

A node (or validate) is selected to be the “leader” of an account through the proof-of stake method based on the amount of SOL held. Each validator is accountable for keeping the count or tally of the time, known as a proof-of history sequence and the following block of transactions in the slot they were selected for.

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How does proof-of-history work

  1. Validator A will be assigned slot one and then spends five seconds locating that block.
  2. Validator B gets slot number two. It takes five seconds to locate the block that follows, equivalent to 10 seconds.
  3. The Validator C slot is allocated to number three and takes about five minutes to locate an obstruction. At the end of the game, 15 minutes have passed.

Each validator takes an identical duration of time to finish the process. Validator C is assigned to slot number three. And because each block requires an identical amount of time, we can determine that slot three must begin at 10 seconds. Thus, validator C should not start before or until the timer has been reached for 10 seconds.

Because this time-tally of the duration of time is visible to all validators and because the slot leaders are picked before time, Everyone knows when a leader is required to start. Suppose there was an additional validator (validator D) selected as the leader of slot number four. In that case, everyone will be aware that validator D is permitted to start when the time is 15 seconds.

What is the reason to use proof-of-history?

This reduces time to complete transactions and improves throughput since slot leaders transmit transactions to the validators in real-time instead of waiting for the entire block then sending it all simultaneously.

Because validators track the amount of their time, they mark each transaction received with a date or proof of historical value, which means that the other nodes can also order the transactions in a block accurately even if they’re not recorded in chronological order. The other nodes can check the transactions they are brought in instead of needing to look over all transactions in one go.

What is it that makes Solana different?

Solana differs from other blockchains regarding the way consensus is built between the nodes. While proof of history is a good thing, there are some issues regarding the Solana voting mechanism and whether it leads to centralization.

With Solana, Nodes have to vote on block blocks and the legitimacy to be valid before they can be part of the chain. Nodes vote for the leader, and the leader is then accountable for counting the votes and approving the block.

In the typical blockchain, validators are selected via proof-of-stake. Then, they create the following block of transactions and announce it to all other nodes on the network. The remaining network examines each block of transactions against its ledger version. Every node checks its version of the ledger as well as this new block is compared to the other nodes within the network. Then, each node can decide if they want to accept the new block is genuine or not.

It continues to be a process until most nodes have endorsed a different version for the chain. While it takes time, allowing nodes to reach an agreement without the need for an intermediary voting system has been a key element to decentralized blockchains ever since Bitcoin was invented.

Solana tokenomics

There are at present 315,000,000273 SOL coins in circulation. This is an overall supply of 511,616,946 with no limit on supply.

The SOL token can be used in two instances. Staking is one where token holders can put their stake in SOL and earn rewards. Another option allows users to utilize SOL to pay for costs that are associated with the operation of smart contracts or for other transactions.

In addition, Solana distributes a fixed amount of rewards based on inflation across its validator set, which is weighted and protects it as a Solana network. Each stake reward is weighted by the number of tokens staked. Yield is proportional to the number of tokens staked against the total supply of tokens.

Solana was launched at an inflation rate of about 8percent and is predicted to decrease by 15% per year, in a downward direction which will continue to decrease until the rate falls to 1.5 percent per year, after which it remains. Issues will be distributed to validators, and 95% of the issued tokens are used to reward validators, and 5% is reserved for operating costs.

Token distribution

The data from Messari indicates that close to 50% of the initial token allocation was to insiders, such as venture capital companies. A small portion was allocated to the general public.

Solana investors

Solana investors comprise several of the most famous venture capital companies in the crypto sector, such as a16z CoinShares, Alameda Research, Coinfund as well as Parafi Capital. The popularity and scale of its investors, as well as the funds they have contributed, have helped boost Solana’s standing in the market.

Solana network statistics

Solana’s network permits a theoretical capacity of up to 65,000 transactions per second. which is a substantial increase from Bitcoin’s 7 transactions per second and Bitcoin’s five transactions per second. (TPS). In conjunction with the high gas prices on the Ethereum blockchain, Solana has significantly lower barriers to entry, which helps to expand the number of users.

Transactions that are conducted on Solana are priced at a fraction of the cost of another cryptocurrency, with a median of $0.00025. Solana is a popular choice for users around the world due to its low price and its increased capacity for throughput.

Solana today has 1 469 of its nodes within its network, with more than 74% of its tokens that are circulating supply being invested in the network and that generate rewards.

Solana’s DeFi

The Solana (decentralized financial) DeFi ecosystem currently has more than $8.6 billion worth of value that is locked up across its different platforms. This places Solana in sixth place, just in comparison to other chains such as Ethereum, Terra, Avalanche and Fantom.

The top Solana platforms include an exchange that is decentralized Serum as well as the open-liability mining system Quarry along with the Solana Staking platform Marinade Finance.

Solana’s praises

Since DeFi and the NFT and other non-fungible token (NFT) platforms have grown over the last two years, Ethereum’s infrastructure has become extremely expensive to utilize. Solana’s chain provides what Ethereum’s base layer does not – speedy transactions with minimal or no cost.

This is why Solana’s blockchain has increased rapidly in both the development and development of decentralized apps (dApps) and in transactions. Although Ethereum is still holding more than $125 billion of funds locked in its dApp ecosystem, Solana is growing exponentially.

Since its launch in 2017 Solana has grown to become the sixth most frequently used DeFi platform for locking value. It currently has $8.6 billion in locked in different DeFi DApps that are on Solana and the majority of that was accumulated in 2021 alone.

The speed of Solana’s algorithm and the low cost makes it simple to compare to other blockchains. This adds to its appeal for novice and experienced crypto users.

Solana’s critiques

While Solana has seen rapid growth in popularity thanks to its low-cost transactions since crypto users look for more efficient and less expensive platforms that aren’t part of Ethereum However, it has been criticized due to a variety of reasons.

Uncertainty about SOL Supply

In November 2021 , there was a rumor that Solana had lied about the entire circulation of tokens and produced millions of tokens. Justin Bons, the founder and chief investment officer at the Cyber Capital, a crypto fund manager Cyber Capital, made a series of tweets blaming Solana and the what he believed to be an “long sequence of lies and deceit” that was perpetrated by SOL.

In his tweets He claimed that the Solana team had initially claimed that the SOL’s supply of circulating was only 8.2 million tokens. However, SOL had in fact, but without informing the community, provided another 13 million tokens an intermediary market maker.

In response to allegations, Solana’s founder, Anatoly Yakovenko posted an article on Medium post to provide an explanation of the additional coins. Yakovenko claimed they were sold to an intermediary to facilitate liquidity on the aftermarket

“The Solana Foundation agreed to provide the market maker with *11,365,067 tokens over a six month period. The issue is that we did not divulge these details to the general public, such as the nature and size of the loan during the CoinList auction, and the subsequent Binance list,” said Yakovenko in his Medium post.

While the intention behind the tokens seemed to be reasonable However, many of the community members were concerned about their lack of clarity as well as the foundation’s decision to distribute a surplus of tokens to the market which could have a devastating impact on SOL investors.

Centralization of Solana

A few opponents of Solana claim that many of its features lead to an uncontrolled system. About half of the token supply is held by venture capitalists as well as other insiders. Although some view this as a stumbling block to the premise of a decentralized system, some see it as a necessity to help finance blockchain adoption.

Furthermore, only 19 nodes control more than 1/3 of the total stake and , therefore, validate nearly three-quarters of transactions. Additionally, over 37 percent of staked SOL was owned by validators running on Amazon Web Services as of September. 2021.

The requirements for hardware and the quantity of SOL that a validator has to own to run a node are important and could push many people who want to take part in other solutions such as AWS.

Solana’s stake-taking system

The nature of Solana’s stake system has also created concerns about centralization. SOL reward amounts are in proportion to amount of staked tokens. If a node was to divide their stake among two validators in order to get the same number of votes they will be awarded the same reward and be required to pay twice the fee for voting.

This is why validators and stakers seek to hold tokens in fewer validators in order to gain more blocks, instead of spreading tokens across the network. This results in a huge barrier to entry into an official Solana node since small validators are awarded small amounts of rewards in comparison to the cost of servers and voting costs.

Although this may be true however, blockchains that are young are almost always centralized in some way until they reach the point of. Solana is an extremely new blockchain that could be significantly decentralized in the course of time.

Solana Node and Validator needs

Technically, anyone is able to become an official for the Solana network, and there’s no set minimum SOL required, however operating a validator will cost money. Solana nodes have to vote every day on the newest blocks. In order to cast votes, validators need to spend SOL and a full day of voting is 1.1 SOL or $133 per day, based on current prices. This amounts to nearly the amount of $48,000 per year.

Hardware requirements can cost as much as $6,000 or more to establish the node. Those who want to become a validator need for an investment.

About Chris

Chris Evan was born in Quebec and raised in Montreal, except for the time when he moved back to Quebec and attended high school there. He studied History and Literature at the University of Toronto. He began writing after obsessing over books.

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