What is Solana? A Complete Guide On an Ethereum Killer

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    What is Solana

    Since its inception in 2009, Bitcoin has experienced numerous ups and downs on a global scale. Following Bitcoin, various rival coins such as Ethereum, Litecoin, and Binance Coin appeared, and all of them have undoubtedly seen potential growth. With the crypto industry growing at a breakneck pace every month, a slew of new digital coins are entering the fray.

    Digital currencies such as Dogecoin and Shiba have also created buzz in the crypto market, and various experts agree on their future potential. As a result, new digital coins enter the crypto market on a daily basis, with new hypers, as such, newly launched in the Solana. Within a few months, it had become another popular cryptocurrency among crypto enthusiasts.

    Although it is based on a decentralized network system, some claim it is an Ethereum killer, while others mark it as another hype bubble in the crypto world. Thus, if you seek to invest in Solana but are confused about its actual potential, this guide will help you make the right decision before putting valuable assets into (SOL).

    What is Solana?

    Solana (SOL) is one of the most well-known cryptocurrencies based on a blockchain network introduced in 2020. Anatoly Yakovenko created it, and while working on a decentralized network, it also utilizes a blockchain ledger. It likewise manages and tracks the currency in a blockchain database. Moreover, it keeps vital records of each transaction that ever happened in it, similar to a long-running receipt.

    Solana allows users to make any transaction without an intermediary. Moreover, the decentralized system helps the network be strong. The developers claim Solana is the fastest blockchain system globally, with the ability to handle and verify around 65,000 transactions every second with minimal cost.

    If you think Solana is just like any other cryptocurrency, you may be mistaken. Solana is a digital token that can be used to power other platform applications. Solana can also be used to power smart contracts, such as decentralized finance applications, NFTs, and many others. To fully comprehend the aspects of Solana, it is necessary to go over the features that comprise Solana.

    Features of Solana

    1. Proof of History (PoH)

    The famous cryptos like Bitcoin and Ethereum’s blockchain network run on a “proof of work” where each node on the blockchain network will show up at an agreement before any new entry. Assume the method for allowing and limiting entries to its data set is

    However, the Proof of Work (PoW) is relatively slow and a complex system that slows down the transactions. To overcome this disadvantage, the PoH (Proof of History) was presented. Simply put, proof of history implies another block could be linked to the blockchain network with no standard agreement.

    Hence, in Solana, each node has its own clock and the ability to make decisions without consulting each other. It likewise speeds up the transaction process. Moreover, it also gives an effective blockchain network and tracks the transaction records.

    2. BFT Algorithm

    This algorithm is sort of a safety layer for the Solana ecosystem. Solana’s entire working system is kept running by BFT, even in the case of any node failure. The BFT algorithm also assists the failed node in remaining operational.

    3. Gulfstream

    Memepool is awaiting a part that keeps all the unprocessed transactions until they are processed. Thus, Gulfstream was introduced to end this “memepool system.” Consequently, Solana could handle a memory pool size of around 1,00,00 transactions with the help of Gulfstream.

    4. Turbine

    Turbines are the small packets that Solana divides from blockchain nodes. The entire function of this system is to increase the transaction speed and rapidly verify the packet’s information. Solana can also address any bandwidth-related issues with the Turbine feature.

    5. Pipeline

    The majority of the tasks in Solana’s system are isolated to guarantee quick handling of transactions. Solana allows data to be input to various network-connected hardware.So, the pipeline is the multiple hardware validating the information blocks.

    History of Solana

    Solana, a popular blockchain platform that was founded in 2017, focuses on hosting decentralized, scalable applications. This open-source project, run by the Geneva-based Solana Foundation, was introduced by San Francisco-based Solana Labs. Solana is a faster application in terms of transaction count and transaction fees. Solana’s architecture design aspires to demonstrate the existing set of software algorithms used in conjunction to implement a blockchain, thereby eliminating software as a performance bottleneck and allowing transaction throughput to scale in proportion to network bandwidth.

    Furthermore, the architectural design of Solana suits every aspect of the required attributes for a blockchain, viz., secure, scalable, and decentralized. The architectural design of Solana highlights a theoretical upper limit of 700,000 (approx) transactions per second (TPS).

    standard gigabit network and 29 million TPS on a 40-gigabit network.

    How does Solana work?

    In terms of the working process, Solana has a perfect combination of Proof of History (PoH) and Proof of Stake (PoS) that assists in the fastest transaction process. The Proof of History gives a simple method for approving transactions without communicating with nodes. Whereas Proof of Stake is a cycle where people stake cryptos to support transactions. The working formula of PoH is relatively straightforward. It allows a given node to have a “leader position.” Any node with such a position needs to create the whole “proof of history” or statement. However, in the wake of getting the responsibility of making a proof of history statement, the blockchain network’s leader nodes organize different nodes to create a proof of history statement.

    Each Solana network has a single leader. The verifier node is also process-aware and has capabilities similar to a leader hub. Furthermore, Solana benefits the most from the usability of both PoH and PoS. In contrast to the blockchain networks of Bitcoin and Ethereum, this allows it to directly handle the processing at a low cost.

    What are the benefits and drawbacks of buying Solana?

    Solana is a rising crypto computing platform that aspires to achieve high transaction speeds without compromising decentralization. It has been considered a top performer in 2021. It has shown a constant rise through the ranks of altcoins, thus achieving the position of fourth-most valuable cryptocurrency in the world.

    As per a recent survey, Solana is now worth $64.2 billion. Not only this, the ever-growing community of its investors is super excited about how Solana’s technology competes with market leaders Ethereum and Bitcoin. However, investors need to remember that Solana is a newcomer. Moreover, the high volatility of digital currencies clearly reflects the high-risk nature of speculative investment at this point.

    But, for those who are still ready to take on this risk, it is essential to go through the benefits with possible gains. However, there may be some complications or drawbacks to purchasing Solana. We will look at the same thing below.

    Advantages

    Being a new cryptocurrency, the creators obviously launched it with something unique that set it apart from other cryptos. Below are some key advantages offered by Solana:

    1. Speed and Fees

    As mentioned earlier in this article, transaction speed is Solana’s most significant selling point. It is the most efficient rival to Ethereum amongst altcoins, mainly due to its speed. With the potential to handle 10,000 transactions per second, Solana shows an advantage over Ethereum, where it could only handle thirteen transactions per second (approx).

    Ethereum operates on the “proof of work” model, wherein the miners can make complex calculations to validate transactions. On the other hand, Solana functions on a combination of models, including proof-of-history and proof-of-stake, to verify transactions based on coin ownership. The ease of verification further helps Solana function at lower fees compared to Ethereum. The average fee for Solana is as low as 1 cent per transaction.

    2. NFTs and Smart Contracts

    Ethereum is considered the first network in cryptocurrencies to pioneer smart contacts. This refers to the code that allows blockchain platforms to enable dAps, or decentralised applications. But, with increasing networks and the popularity of smart contracts and dApps, the congestion on the Ethereum network has also increased, thus paving the way for faster alternatives.

    Solana is a rapidly growing market with a high-growth share in the non-fungible token world. The NFT marketplace, Solana, functions on the Solana network, thus providing NFT buyers the opportunity for fast and secure transactions and lower fees compared to what Ethereum network buyers get. Increasing demand for NFTs and smart contracts has paved the way for a boom in the Ethereum network and Solana in the long run.

    3. Environment Impact

    One of the major criticisms faced by Ethereum and Bitcoin, as next-gen technologies, is the negative impact they impose on the environment. The computing power required for mining Bitcoin and verifying transactions using the PoW model releases approximately 1 million tonnes of CO2 every year. It is quite similar to the ratio of CO2 emitting Bitcoin to Greece.

    Furthermore, the carbon footprint of Bitcoin is only one of the reasons why Elon Musk reversed his decision to accept Bitcoin as payment in Tesla Inc. earlier this year.On the contrary, Solana’s PoS and PoH verification processes are way less energy-intensive, thus making crypto a more potential and greener alternative to Ethereum and Bitcoin.

    Disadvantages

    Apart from the numerous benefits that Solana provides to its users, there are some disadvantages that you should be aware of before investing in or using the Solana cryptocurrency. Listed below are some common drawbacks to help you stay aware and make informed decisions:

    1. Inflation

    Seeking refuge from inflation is one of the primary reasons investors flocked to cryptocurrencies in 2020. Many cryptocurrencies feature hard caps on the total existing coin count. For example, the Bitcoin count is limited to 21 million coins, wherein the final coin is expected to be mined in 2140.

    Contrastingly, Solana doesn’t possess any fixed number of coins. It has begun to increase its production by 8% per annum. That inflation rate falls by 15% per annum to reach a low of 1.5% and remains there indefinitely. Therefore, investors looking for zero inflation should look elsewhere.

    2. Fewer Projects

    Because it is new to the industry, the Solana network has fewer projects than the first-movers in the sector, i.e., Bitcoin and Ethereum. At present, there are 2,887 dApps, as stated by the website “State of the dApps.” Compared to this, Solana claims to possess approximately 350 total projects on its network.

    Solana’s list of projects featured by Solana includes decentralised finance, also known as DeFi, NFT projects, applications, and gaming apps. However, with the rising popularity of Solana in terms of speed and low fees, the number of projects may increase as investors choose Solana over Ethereum. Well, there is still a question mark as to whether or not Solana will be able to build up its network over Ethereum’s first-mover advantage.

    3. Instability

    Since Solana has a shorter track record and a smaller network of users than Ethereum, it may be a little difficult for the investors to show high confidence in the network’s stability. Solana’s reputation was taken aback in September with a tweet by the Solana Foundation, which indicated that the Solana blockchain was going through “intermittent instability.”

    At the same time, Anatoly Yakovenko, CEO of Solana Labs, also stated that similar stability issues occurred in the previous weeks. Reliability is the key for cryptocurrency buyers, most of whom were not satisfied with the reasons given for stability issues.

    What applications are compatible with Solana?

    Solana is one-of-a-kind and well-known digital platform that also interacts with smart contracts. Smart contracts are essentially a collection of apps that range from NFT markets to Defi, games, and decentralized lotteries. DEXs and lending apps have been two of the most popular Solana compatible applications since August 2021. Assets worth billions of dollars are supported by Solana’s crypto app ecosystem.

    Additionally, the Solana blockchain supports wrapped assets and stable coins. As of August 2021, over $700 million in USD coins had been issued on Solana. Furthermore, SOL serves as a “governance token.” This means that holders can vote on governance proposals and future upgrades proposed by the Solana community.

    How to buy Solana?

    Solana is gaining high popularity along with increasing profits every day. Just like any other cryptocurrency, Solana is also easy to purchase. Follow the below given steps if you are interested in buying some Solana coins.

    1. Select Crypto Exchange

    This is the primary step to buying Solana coins. Find a crypto exchange that offers Solana tokens for trade (buying and selling). You may come across numerous exchanges with Solana coins, but make sure to go for one that comes with a built-in wallet. This is because it is the wallet wherein you are asked to add the amount for the Solana trade.

    Furthermore, you have to create an account on the crypto exchange with the required personal details like name, email, and identity, as well as bank details.

    2. Identity Verification

    Once you create an account by entering all the required details, the crypto exchange will ask you to verify your identity. You can easily complete the verification process by uploading any government-issued ID card.

    3. Fund the Wallet

    Your account gets activated after ID verification. Now, you can deposit fiat currency. It can either be US dollars or any other fiat currency accepted by the exchange platform. You can fund your wallet using different portals like direct bank transfer, wire transfer, PayPal, or a debit or credit card.

    4. Complete the Purchase

    After creating and verifying the account successfully and funding the wallet with money, it is now time to purchase the SOL coin. You can directly purchase Solana by paying with fiat currency on some exchanges. However, some businesses can exchange the coins, such as buying a USDT coin and then exchanging it with an SOL coin. Simply put, various crypto exchanges offer unique pairs of currencies to buy Solana.

    Final thoughts

    To summarize, it would be incorrect to say that cryptocurrency has a lot of potential and will grow even more in the future. Aside from significant coins such as Bitcoin and Ethereum, some newly launched currencies such as Dogecoin and Shiba have tremendous future growth potential. As a result, Solana is no exception. The detailed history, as well as its features and upcoming Solana updates, may make it more prominent in the coming years.

    As a result, an intelligent investment incorporates individual research. So, without a doubt, this guide will assist you in comprehending the entire investing aspect of Solana cryptocurrency. However, it would be a wise investment decision to carefully consider the factors before dealing with Solana.