Adoption is difficult for most cryptocurrency projects because of scalability issues. The congestion in the two biggest blockchains, Bitcoin and Ethereum, are hurdles that the whole community is still struggling to find a solution for. This is what Solana is trying to solve.
Compared to Venmo, Visa, or Paypal, transactions done within the Bitcoin and Ethereum network can take longer settlement times. This problem impedes the adoption of these blockchains.
Solana was created to become an alternative to these systems and is armed with a transaction throughput higher than both chains combined. It is a blockchain that can process more than 50,000 transactions per second. And while it has been making rounds in the crypto space, it is interesting to find out exactly they manage to pull this off.
Anatoly Yakovenko, the founder of Solana, has worked in the software industry long before he conceptualized the project. Yakovenko worked for Qualcomm and Dropbox before. His stint involved technologies aimed at developing compression algorithms, which was of immense value in his work at the Solana project.
Greg Fitzgerald, CTO of Solana, along with Eric Williams, conceptualized Solana as a new blockchain network that provides solutions to the transaction throughput problem hounding high traffic blockchains and affecting adoption. They modeled Solana as a trustless and distributed protocol that is more scalable and secure than other chains in existence.
What is Solana?
Solana is a new blockchain network built on the development of both Proof of Work (Pow) and Proof of Stake (PoS). Solana’s new consensus protocol called the Proof of History (PoH), coupled with Tower BFT, enables a more scalable blockchain with faster throughput than Bitcoin and Ethereum combined.
Notable cryptocurrencies that run on Solana include fiat-based stablecoin Tether (USDT) and Serum.
Solana Consensus Mechanisms
Consensus mechanisms secure the validity of all transactions recorded in the blockchain by requiring some amount of work to be done before they are included in its distributed ledger.
The implementation of consensus mechanisms has changed throughout the course of blockchain development. Different variations are seen in how they achieve finality and how the blockchain is updated each time. The goal is simple: create a trustless and secure network to support cryptocurrency transactions.
PoW in the Bitcoin blockchain, for example, requires miners to perform complex arithmetic problems before transactions are confirmed in the block and linked to the chain. Miners are then rewarded for the work that they do in securing the network and making sure that transactions are valid.
However, the community thought that the PoW system wasn’t only time-consuming, but also an energy-hungry mechanism. PoS was developed as an innovative alternative from the PoW.
Proof of Stake
Solana’s PoS network almost works the same way as other implementations in different blockchain models. It is maintained by a set of validators who have a stake in the network.
Stakers are those who have deposited a certain amount of their tokens in smart contracts. In return, they become eligible for nomination as one of the validators in the network.
The validators process blockchain transactions and write them to Solana’s ledger. Other stakers who prefer others to do the work of maintaining the chain can delegate their stake to other validators.
The bigger a validator’s stake, the higher his chances of being selected to write the next transactions on the blockchain. And this means more rewards, benefitting even the delegators for particular validators. Validators perform the important work of maintaining the network and keeping it secure.
Furthermore, validators also collect a commission from delegators as a fee for doing their job. They can offer lower commission costs for delegators in order to compete with other validators who need more stake to back them.
However, there is a likelihood for stakers to lose a number of their deposits in a process called “slashing.” This happens when a validator has shown malicious behavior, such as creating invalid transactions or filtering certain types of transactions and network participants.
When a validator is slashed, token holders who have delegated their stake to them lose their tokens. This mechanism is put in place to ensure that no party can collude for their own benefit alone at the expense of the health of the network.
Proof of History
In addition to the PoS, Solana introduced a new way to make their blockchain more independent from any governing entity. Through the PoH system, all the transactions written in the blockchain are considered as historical records that can validate the future transactions to be included in the network.
Through the ‘Verifiable Delay Function,’ Solana can embed timestamps on transactions as a reference marker for the sequence of events that preceded the latest state of the blockchain that everybody in the network has access to.
Transactions in Solana are secured by a sequential preimage resistant hash, which refers to hashes that are tagged and cannot be altered. These hashes are used to help validate the next input in the succeeding transaction on the same chain. In finality, these entries are marked with timestamps that capture the actual sequence of the chain’s previous states.
Integration with TowerBFT
TowerBFT is Solana’s version of the Practical Byzantine Fault Toleration (PBFT) system. The consensus algorithm uses PoH as its cryptographic clock in order to reach blockchain consensus without incurring massive messaging overhead and transaction latency.
Before the state of the ledger is finalized, validators vote on which version of the ledger is accurate. Then, their vote is locked-out. This means that they are prohibited from making a different vote on a future version of the blockchain that does not show that the record of the previous votes on it.
Like usual PoS systems, Solana also has validators that receive token rewards. By staking Solana’s native token (SOL), they can receive rewards proportional to the amount that they deposited.
6 Key Innovations of Solana
Solana makes it simpler for information to be communicated to each blockchain hub by partitioning them into littler bundles. This aides Solana address transfer speed issues and increment its ability to settle exchanges quicker.
Solana can achieve a network throughput of 50,000 transactions per second by easing the process of block confirmation. Gulf Stream facilitates the process of transaction catching and forwarding even before the next set of blocks for confirmation are finalized.
Smart contracts power the ecosystem of Solana. They run parallel with each other, performing multiple transactions in the blockchain simultaneously.
The blockchain’s record of information is validated right away and is distributed to every node in the network quickly. A specialized stream of input data concerning specific parts of the blockchain is assigned to hardwares that is responsible for such kinds of transactions.
There is no risk of sharding with Solana because it organizes its database while recording transactions written in it. Its data structure is also capable of processing transactions while indexing them at the same time.
To secure the state of the network, all nodes can be tapped to keep the latest record of transactions on-chain. These nodes are called archivers, keep the data that they get from validators, and store them in a ledger that is accessible to the public.
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.
Staking gives users the opportunity to earn rewards by delegating their SOL tokens to validators who secure the network. Since validators are also chosen based on the amount of stake they hold in the network, biggest staked validators are likely to be chosen to input transactions on the blockchain.
How to Stake SOL Tokens
Users can earn profit by staking their SOL tokens.
- Transfer tokens. Users who have wallets that support staking can freely participate in its community by depositing their tokens to wallets that allow it. These are wallets like Ledger Nano S.
- Make a stake account. A stake account is necessary before a user finally begins a new stake account. This will be a different address from the supported wallet that you will link it with.
- Select a Validator. Once stakers have deposited their funds, they can now choose the best option that supports the firm. Also, the tokens held in the smart contract can be vouched to by creating a stake account, which you can choose from Solana’s validators to determine who you’ll delegate your SOL to.
- Delegate your Stake. Once you have chosen a validator, you can use your wallet to delegate your stake account to them.
Continuing a system that is only powered by the usual consensus mechanisms cannot promise the ease in transactions that most real-life users expect for the blockchain. Such a blockchain architecture cannot offer a wide array of use cases, regardless of how innovative or popular they are.
What’s important for the space today is a platform that can be easily implemented in real-life transactions for adoption. The current state of the Blockchain and Ethereum network makes it almost impossible for anyone to use them in normal, day-to-day transactions. Imagine paying in BTC and having to wait for more than 30 minutes just to get your transaction confirmed. It just isn’t workable.
Solana’s new architecture, powered by a new way to verify transactions, coupled with an efficient PoS mechanism, means that it can most likely hold to its promise of processing more transactions than Bitcoin and Ethereum combined.