What Is Solana? • Alternative Layer-1 Blockchains • Benzinga (2024)

Solana is a Layer 1 blockchain designed to facilitate smart contracts and the creation of new decentralized applications (DApps). With its user-friendly interface, slick branding and easy-to-understand messaging, this blockchain shot to fame. Solana got a major boost in popularity after it committed to the world of blockchain gaming with a $100 million fund. It also partnered with Faraway, one of the world's leading gaming studios, to develop blockchain-based games.

Overview of Solana

Solana has become important in the world of non-fungible tokens (NFTs) and decentralized finance (DeFI) as crypto enthusiasts seek out new platforms with faster and cheaper transactions. Solana attracts talented young teams of developers and creators looking to build new blockchain projects. It runs on a hybrid protocol of proof-of-stake (PoS) and proof-of-history (PoH). By combining Solana’s unique PoH algorithm with the speed of PoS, Solana significantly increases the speed of transactions. This benefit appeals to teams wishing to build scalable DApps and gaming projects that support built-in NFTs.

The network can process an average of 65,000 transactions per day at an average cost of $0.00025 per transaction, making it not only efficient but also cheap compared to other blockchains.

Solana investors include some of the most prominent venture capital firms in the crypto space: Andreessen Horowitz (a16z), CoinShares, Alameda Research, Coinfund and ParaFi Capital.

Leading projects developing applications within the Solana ecosystem include:

Why Do People Use Solana?

Solana’s cryptocurrency SOL became one of the most valuable cryptos as investors and teams were quick to back this PoS blockchain alternative. In particular, the GEN Z crowd jumped on board, buying the project’s Degenerate Apes NFTs and embracing its speedy, low-cost transactions.

Solana History

In 2017, Solana’s founder Anatoly Yakovenko published a whitepaper detailing a new technique for recording time of transactions in blockchain called PoH. Until then, blockchains were limited in terms of speed and scalability as they relied on the network to confirm all transactions. After teaming with an ex-colleague from QUALCOMM Inc. (NASDAQ: QCOM) named Greg Fitzgerald to build a new blockchain network, they released a second white paper and brought in Stephen Akridge. The founding team, which also included former Apple Inc. (NASDAQ: AAPL) engineers, would go on to create Solana Labs.

In 2018, the newly formed Solana Labs raised over $20 million in private token sales, which became its Series A funding for Solana blockchain. After numerous iterations and testing, the team launched a testnet, followed closely by the mainnet.

Since launching, Solana’s ecosystem has grown exponentially. Solana’s DeFi ecosystem currently has over $8.6 billion in total value locked among its various platforms. As of September of 2022, the market cap of Solana sat just under $12 billion. And, while solana was hit hard by the crypto crash of the summer of 2022, it has recovered faster than some of its counterparts, but, by the fall of 2022, it had not returned to its previous highs.

Where to Buy SOL

Solana’s cryptocurrency is SOL. It is Solana’s native utility token that provides a means of transferring value and staking. SOL was launched in March 2020, becoming one of the top 10 cryptocurrencies entering the space.

To buy cryptocurrency, you open an account with an exchange or trading platform like eToro, verify it with personal identification, receive verification and buy the token.

SOL tokens can also be purchased on most exchanges. The top cryptocurrency exchanges for trading Solana include Coinbase Global Inc. (NASDAQ: COIN), eToro and Crypto.com.

Solana Blockchain vs. Other Blockchains

The main difference that Solana has from other Layer 1 blockchains is its built-in PoH mechanismy. Although some argue that PoH results in elements of centralization that go against the decentralized future of finance, many projects understand the benefits and potential of PoH to increase transaction speed. Instead of relying on the production of blocks, the Solana network can use a historical record that proves an event has occurred at a specific moment in time. By maintaining its own clock, it doesn’t have to wait for confirmation across the network.

In most blockchains, validators are chosen via PoS. They then create the next block of transactions, which is broadcasted to the other nodes in the network. The rest of the network audits the new block against its version of the ledger. Nodes must agree on the legitimacy of the new block. When you extract intermediaries from the equation, you can’t speed up the process, but coming to an agreement without requiring intermediaries is a core part of decentralized technology. Solana’s blockchain is broken into periods of time where a validator ingests transactions and produces a block.

This system saves time because leaders are chosen ahead of each slot. Solana’s PoH proves that transactions are in the right sequence and predicts the right leader so that developers can speed the process of choosing the next block of transactions.

This procedure has led some to believe that Solana is more centralized than other blockchains. Although PoH has benefits and can speed transactions, some worry that Solana’s voting mechanism could ultimately lead to more centralization.

How to Store SOL Safely

Before you invest in cryptocurrency, consider where you’ll store your digital assets. You need either a software or hardware wallet. It’s not recommended to store your crypto on an exchange, which are targets for hackers.

Software wallets are free-to-use applications that allow you to securely store your crypto on a PC or mobile device. Hardware wallets like Ledger are the most secure way to store cryptocurrency, as they store your assets offline on a physical device.

Will Solana Succeed?

Solana has succeeded in building a scalable blockchain with superior branding that has made it attractive to developers and projects that want to get involved in the world of DeFi. Although it has had a number of hiccups along the road, including outages that have left many questioning the security of the network, it still has the ability to scale its ecosystem with new projects, with Arcade Game Studio and Coachella joining as partners.

Although the world of crypto is quickly expanding, blockchain ecosystems may need to balance speed with reliability as DeFi starts to become more a part of everyday use. Solana has secured funding from some of the most reputable venture capital companies and seems to have a bright future in the blockchain world.

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