While Ethereum did give decentralized finance or DeFi a head-start, it has proven to be slow and pricey. Large blockchain companies like OKGroup and MXC turned to alternatives and started investing in one of them, Solana. In this Beginner’s Guide, the ChangeHero team will introduce and explain what is Solana and the native Solana token, SOL.
- Solana is a decentralized protocol for distributed computing and building dApps. Its main advantage is the ability to scale up to 65,000 transactions per second;
- Solana combined original Proof-of-History protocol with the Proof-of-Stake consensus algorithm which makes it faster and more energy efficient;
- Solana platform is backed by major market players like Circle and Tether. DApps built on it already have millions of active users.
What is Solana?
At its core, the value proposition of Solana is not very different from Ethereum’s. It is a public base-layer blockchain protocol which is best suited for decentralized computing and creating decentralized applications (dApps). What is Solana’s improving, then?
By design, this protocol is near-perfectly optimized for scalability. As a result, dApp devs do not need to design around performance bottlenecks. This is achieved by combining a Proof-of-Stake (PoS) consensus algorithm with a novel Proof-of-History (PoH) timestamp system.
Thanks to PoH, on Solana, automatically ordered transactions and sub-second settlements become real. In a very short amount of time, every 400 ms, validators vote on inclusion of transactions in slots. Each subsequent vote doubles the amount of time needed to roll the vote back.
PoH relies on Proof-of-Stake (in Solana’s case, the Tower BFT algorithm) for consensus. To pass it, at least two thirds of all nodes have to agree with each other. PoH is more an additional securing mechanism which prevents rollbacks.
History and Team behind Solana
In 2017, Qualcomm engineer Anatoly Yakovenko published the Proof-of-History whitepaper. With his colleagues, Greg Fitzgerald and Stephen Akridge, they built a prototype testnet in 2018 and founded Solana Labs. The team was joined by Raj Gokal, who is now the company’s COO.
Through 2018 to 2019, the team was fundraising and building the protocol in parallel. By March 2020, Solana Labs was ready to launch the mainnet, shortly after a Solana token auction which raised $1.76 million.
Solana Labs, which is still the major contributor to the development, itself is based in San Francisco, California. The team members can be found on every continent. There is also Solana Foundation, a non-profit working on promoting and supporting the project, based in Switzerland.
What is SOL Crypto?
What is Solana token, SOL? Just like ETH, it is the lifeblood of the platform. The ledger keeps record of transactions that are denominated in it or in the tokens.
Solana coin is inflationary but the rate of issuance is designed to be decreasing. In ten years, it is programmed to have about 1.5% annual inflation rate. Aside from the ~38% in the Community fund and founders’ ~12.5%, the rest of the supply (469,358,938 SOL at the moment) is liquid.
Solana launched in Q2 2020, but didn’t reach a $1 mark until July. It rallied along Bitcoin in August, peaking at $4.74 after the news about Tether stablecoin support. After that, it was in a long-term downtrend until the start of 2021.
Soon after 2021 began, SOL was caught up by the bull run and skyrocketed. As evident from the graph, it has spent winter and April so far in price discovery.
What is SOL coin price today? At the moment of writing, it is $27.92 USD. The current ranking is #20, with a market cap of $7,538,141,561 USD.
What is Solana and SOL Use Case?
What is the primary use case of Solana? Of course, it’s DeFi! Low transaction costs and throughput of about 65 thousand transactions per second make it a legitimate alternative to Ethereum.
SOL can be put to use by staking. Anyone can become a validator, but the hardware requirements (more specifically, GPU specs) of running a node are rather high. In that case, a stake can be delegated to a validator, of which there are 592 at the time of writing.
Comparison with Similar Projects
The first analogous platform that comes to mind is Ethereum, the problems of which Solana set out to solve. Ethereum has a throughput of about 16 tps and can realistically scale only with second-layer solutions. Binance Smart Chain, the second most popular DeFi platform, can handle more load but is often criticized for being centralized.
There have been other projects with premises and scaling capabilities similar to Solana. Marlin is an open protocol that provides a high-performance programmable network infrastructure for DeFi and Web 3.0. However, unlike Solana, Marlin runs on top of Ethereum.
What is Solana Criticized For?
In December 2020, Solana network went offline for approximately six hours. The critical fault could have been solved in a less amount of time, but the decentralized nature of the platform demanded consensus. The exact reason is still as good as a guess but the developers have provided statements and solutions to all possible causes.
Partnerships and Future Plans
The most prominent partners of Solana are established players of the market, Circle and Tether. After all, it is crucial for a DeFi platform to incorporate solutions like stablecoins which found adoption in the sphere. Another example of Solana adopting DeFi staples would be the cooperation with Chainlink.
After the mainnet launch, there have been no set roadmaps for the platform. Instead, the devs and community focus on bringing more projects into the ecosystem. One of the latest hackathons organized by Solana and Serum, attracted 100+ projects, some of which received funding.
In other Solana coin news, already existing products built on the platform keep expanding. A streaming service built on Solana, Audius Music reported reaching 4 million monthly active users in March.
Solana itself is still receiving funding from companies interested in the development of its ecosystem. One of the recent investments totaled to $40 million and was received from OKEx and MXC.
Social Media Posts
At this point I think $SOL is the easiest 12 month bet.
— The Crypto Dog📈 (@TheCryptoDog) April 11, 2021
One of the most popular traders on Crypto Twitter, Crypto Dog calls Solana token SOL one of his top picks. He is sure that for 12 months or more, SOL is one of the most profitable investments.
— RAJ G◎KAL (@RajGokal) April 9, 2021
The Solana Labs COO, just wanted the community to know that staking can be as easy as tapping two buttons. Whether intentionally or not, he also gave his followers a glimpse of his portfolio in the Exodus wallet.
— Coin98 Analytics (@Coin98Analytics) April 9, 2021
Coin98 Analytics motto is “Let the data speak for itself”. From the data they show, Solana is way ahead of other projects in terms of total transactions on the platform. However, the community questioned the figures, because validator votes are also counted as transactions and no time frame was defined.
How to Buy Solana?
Solana can be traded on some crypto exchanges but trading on an exchange comes with some hassles. You have to create an account and deposit funds into the exchange’s custody. It takes time and your trust to the platform.
ChangeHero is an alternative way. It’s extremely easy to trade SOL against any currency supported by the service. ChangeHero is a non-custodial instant cryptocurrency exchange, so you won’t have to worry about setting up an account or deposits.
Wallets for token SOL
If you are looking for wallets exclusively for SOL, take a look at Solflare or Sollet. They support Solana-based tokens and some dApps.
However, most crypto users own more than one currency. You can check out software Math Wallet and Trust Wallet or Ledger for cold storage.
In the Exodus wallet, you can delegate a stake and exchange SOL right in the app.
How to Exchange SOL?
Exchanging Solana with ChangeHero can be done in a few easy steps:
- Choose the currencies on the home page, amounts and the type of exchange. Provide your wallet address in the next step and check the amounts;
- Send in a single transaction the sum of cryptocurrency you will be exchanging. Fixed Rate transactions have a 15-minute limit;
- All done? Now we are doing all the work: checking the incoming transaction and doing the exchange as soon as it arrives.
- The Best Rate transactions will use the rate current to the time when your funds arrive.
- The Fixed Rate will use the rate at the time of step 1;
- As soon as the exchange has been processed, your SOL are on the way to your wallet.
Our customer support is available round the clock in the chat on the website or through the email: firstname.lastname@example.org.
So, what is Solana? We can say it is a successor to Ethereum in DeFi, because it significantly improves the user and developer experience. If it had an ecosystem as diverse and vast as Ethereum, DeFi would be way more mainstream.
Frequently Asked Questions about Solana
Who created Solana?
Solana was created by Anatoly Yakovenko, Greg Fitzgerald and Stephen Akridge.
Is Solana an ERC20?
Solana’s currency is native to its own blockchain, it is not an Ethereum token but a coin.
Is Solana crypto a good investment?
Analysts and traders consider Solana a good investment based on its fundamental features: high throughput, prominent backers and ongoing development.
How do I buy Solana?
You can buy Solana by exchanging it with other 100+ cryptocurrencies available on ChangeHero.