Solana Explained

Everything You Need To Know About Solana’s History and Technology

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Solana is a blockchain network that supports the SOL cryptocurrency in addition to decentralized applications such as smart contracts. As a cryptocurrency, Solana is known for its fast transaction speeds and low transaction processing costs. As an open-source blockchain platform, Solana is used by developers of non-fungible tokens (NFTs), decentralized finance applications, and other software projects.

Keep reading to understand what Solana is and how the Solana blockchain works. Find out what you need to know about SOL before you invest.

What Is Solana?

Solana is a blockchain platform that supports many decentralized applications, including its native cryptocurrency SOL. More than 400 projects are already hosted by the Solana platform, encompassing:

  • Other cryptocurrencies, including Tether (USDT), Terra (LUNA), and Chainlink (LINK), among more than 100 others
  • Decentralized finance (DeFi) projects, including decentralized lending and trading
  • Decentralized internet (also known as Web3) applications
  • Decentralized finance (DeFi) projects
  • Non-fungible token marketplaces
  • Music streaming
  • Gaming

The Solana blockchain’s ability to support its own and other cryptocurrencies plus blockchain-based projects positions it as a direct competitor to Ethereum, a larger and better-known blockchain.

The Solana blockchain uses the proof-of-history (PoH) protocol, which relies on validators rather than miners to process transactions and mint new cryptocurrency. The proof-of-history method processes transactions in the blockchain network using timestamps submitted by many different validators.

Special Features of Solana

Solana is designed to ensure that network usage costs are consistently less than one cent per transaction, with new blocks confirmed more than twice per second. Solana’s use of the proof-of-history operating protocol is what enables the blockchain network to operate so quickly.

According to Solana, it can process hundreds or thousands of transactions per second at an average price of $0.00025 per transaction.That’s in comparison to Bitcoin, which can sometimes require up to 90 minutes to process and confirm a transaction, and Ethereum, which has charged as much as 0.068219 ETH per transaction as processing fees.

Here’s Solana in a nutshell:

   Solana
Inception 2017
Already Minted / Total Supply (as of Jan. 18, 2022) 511,616,946 / no maximum supply
Special Feature Fast, low-cost transactions

How To Stake or Validate Solana  

You can earn SOL by participating as a validator or liquidity provider for the Solana network. Participating as a validator requires advanced computing power while staking your SOL to create liquidity requires not transferring or selling your SOL holdings.

Solana network validators require computing devices with 12-core processors, 128GB or more of random access memory (RAM), and at least 1.5TB of hard drive space. You can also establish a virtual computing device via a cloud platform, provided that you have the relevant technical knowledge.

In accordance with the proof-of-history operating protocol, validators use a system of time stamps and cryptographic verification to add new blocks to the Solana blockchain. Validators simultaneously add blocks, which are later synchronized across the Solana network.

The Solana blockchain requires validators to have voting privileges within the Solana network. While Solana validators can participate without any minimum SOL balance, using what’s known as a Solana vote account—a prerequisite for validators—can cost up to 1.1 SOL per day.

Even without powerful hardware or voting rights, you can earn SOL by staking—committing to not trade or sell—your Solana holdings. The exact process of staking your SOL varies based on the digital wallet or exchange provider that you use.

How To Invest In Solana 

If you want to invest in Solana, then you can purchase SOL directly via a cryptocurrency exchange. These are the basic steps to invest in SOL:

  1. Choose a cryptocurrency exchange: Solana is supported by several major cryptocurrency exchanges, including Binance, Kraken, and Coinbase. You can research and choose the exchange that is best for you.
  2. Establish a funded account with the exchange: You typically need to verify your identity and provide your personal information to create an exchange account. To make any purchases, you also need to fund the account using fiat money like U.S. dollars.
  3. Initiate a SOL purchase: Using the exchange’s desktop or mobile platform, your next step is to initiate a transaction to buy SOL. After entering the purchase details, double-check that you’ve entered all of the information accurately—then click or tap the buy button to complete the transaction. 
  4. Securely store your SOL: You need a digital wallet to store your SOL.That wallet can be hosted by the exchange or can be a non-custodial wallet that you maintain independently. Exchange-hosted wallets are generally the most convenient, while other types of digital wallets are typically more secure.

Notable Solana Happenings 

Solana’s launch was marked by the release of a whitepaper in November 2017, by Anatoly Yakovenko. Other notable happenings include:

  • February 2018: Developer Greg Fitzgerald created the first working software prototype.
  • March 2018: The blockchain project was published to GitHub and officially named Solana. 
  • June through July 2018: The Solana network was launched at scale, with the ability to support at least 250,000 transactions per second.
  • September 2021: The Solana blockchain was attacked by bots that generated a large volume of fake transactions to flood the network. The Solana blockchain required a full restart after a network stall occurred.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Article Sources

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