Cryptocurrency Explained: What Is Solana?
Solana is a decentralized blockchain created in 2017 that provides speedy transactions through the use of both proof of history (PoH) and proof of stake (PoS) consensus mechanisms.
Solana is both a cryptocurrency and a computing platform that can be used to build decentralized applications (dApps) and smart contracts, making it similar to Ethereum (ETH).
Solana’s native governance token is also known as Solana (SOL) and in 2021 it rose to become the fourth-largest cryptocurrency by market capitalization.
What Is Solana?
Solana is a blockchain that was built to host decentralized applications, or dApps, and process many thousands of transactions per second (TPS) on the network, with its theoretical upper limit said to be near 710,000 TPS. By comparison, when the Solana blockchain was first conceived, more established blockchain networks could only handle an upper limit of 15 TPS. Solana’s utility for building dApps, facilitating smart contracts, and purchasing non-fungible tokens (NFTs) often draws comparisons to Ethereum (ETH). The lower transaction fees on the Solana network, which average less than $0.01 per transaction, help distinguish it from rival blockchains like Ethereum (ETH) and bitcoin (BTC).
Unlike Ethereum, Solana relies on a proof of history, or PoH, model to verify transactions based on the timestamp in the ledger. Solana also uses proof of stake, or PoS, to verify transactions. The decision to build the Solana blockchain on a consensus mechanism other than the energy-intensive proof of work (PoW) method helps lend Solana a “greener” designation in the eyes of some cryptocurrency watchers. Solana Labs CEO Anatoly Yakovenko created Solana as an innovative blockchain solution that attempts to be all three of the things that blockchain technology does well: decentralization, security, and stability.
When Was Solana Created?
The Solana blockchain got started in 2017 with the Solana whitepaper. Initially, the project had a different name. But the founders of the project settled on Solana, for the oceanside town where they lived at the time. After some testing in the following years, the official launch of the Solana network was in 2020.
How does Solana work? The proof of history mechanism that underpins the Solana protocol does more than merely provide a timestamp to every transaction on the network – it also includes a hash that indicates whether transactions took place before or after a certain event. This acts as a universal time-keeper between all the computers running on the decentralized network, and they can all set their time to this agreed-upon clock. The result: much faster throughput on the network. Transactions can now be processed with blazing speed compared to the legacy blockchains that came before Solana.
Is Solana Proof of Stake?
To have a higher throughput of transactions than rival blockchain networks like Ethereum, the Solana blockchain uses a novel concept to verify transactions called proof of history. Solana also uses proof of stake. Both of these consensus mechanisms take less energy than traditional proof of work verification, which powers the bitcoin network.
What Is SOL?
The Solana (SOL) cryptocurrency is the native token that runs on the Solana blockchain. SOL tokens reached a sizable market capitalization in 2021, rising to become among the top five cryptocurrencies by market cap that year. The total market cap of SOL was more than $55 billion at the beginning of 2022, according to CoinMarketCap.com.
The Solana network can process many more transactions per second compared to popular cryptocurrency networks like bitcoin and Ethereum, which might be why Solana is quickly becoming a favored alternative to those mainstay crypto networks.
The question that some crypto enthusiasts who are curious about the Solana ecosystem might ask is, “How many Solana coins are there?” Bitcoin is a cryptocurrency that is famously limited in quantity – there will only ever be 21 million bitcoin in existence. Solana tokens, on the other hand, can reach a much higher count. The Solana Foundation announced there will be a total of 489 million SOL tokens in circulation.
What Is Solana Used For?
Similar to Ethereum, Solana can host smart contracts, which are pivotal in the creation and circulation of digital assets such as non-fungible tokens, or NFTs. The NFT marketplace Solanart runs on the Solana network. But dApps that focus on other crypto lending and swapping can also be built on the Solana blockchain.
In the summer of 2022, Solana Labs announced that they were working on building a smartphone that would be powered by the Solana Mobile Stack.
Where Can I Buy Solana?
Solana is available for purchase on most of the well-known crypto exchanges, and it can also be purchased with help from account managers at CoinFlip’s Trade Desk.
What Is the Future of Solana?
Crypto investors and software developers can perform a variety of useful functions, from games to smart contracts to NFTs, on the Solana platform today. It’s also possible for crypto investors to buy and stake their SOL so they gain a say in future governance proposals for the network.
But the future of Solana is still unknown.
The platform has a long way to go to rival and eventually replace the world’s leading payment processing solutions. If becoming the next Visa is the goal for Solana, it has to conquer some of the stability issues it faced in the past, with two widespread outages hitting the Solana network in 2021. Still, many Solana fans will continue touting its speed and lower transaction fees relative to other blockchains as reasons to believe the future of Solana is bright.
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