What is Solana crypto? Best 4 minutes that will get you up to speed

What is Solana crypto?

Solana is a crypto currency that is very similar to the Ethereum Network i.e. it is a platform that allows developers to build decentralized applications using smart contracts. 

Founded by some pretty legit players (more on them later), Solana was built to address the deficiencies of the Ethereum network: slow transactions and high fees. 

Fast,  decentralized and scalable. 

The first thing you should know about Solana is that it is super-mega-ultra fast.

It  can currently process 50,000 transactions per second. This is more than twice the processing capacity of Visa and more than 10 times that of Ethereum.

They claim that their theoretical maximum is 200K per second.

Secondly, Solana’s fees are much much cheaper than Ethereum’s.

To process a transaction it currently costs $0.000001 compared to the more than $30 on Ethereum. 

Because Solana is so much faster and cheaper it is much more attractive as a platform to build on.

For example, say you are building a decentralized exchange. Wouldn’t you much rather use a platform that offers faster and cheaper transactions?

The way that Solana deploys software means it is also scalable. Its only limit is how far hardware can go.

Effectively it is the processing power of chips that creates the upper bound for performance .

As processing power improves following Moore’s law so too will Solana. In reality 50,000 transactions per second is more than enough. 

Solana’s innovation is the way that it validates transactions on the blockchain. 

Like many other blockchains Solana uses a proof of stake model.

Whereas proof of work requires energy, proof of stake requires validators to stake capital in the form of tokens. In this instance they stake SOL tokens.

In short, a validator known as a miner stakes tokens and if they try to cheat the system they lose their tokens. So economic incentives ensure they stay truthful. 

The fast transaction speed is attractive to many dapp developers. Solana has built a large ecosystem of decentralized apps

Image of the top dapps using the Solana blockchain
Some of the top dapps in the ecosystem. Source: solana.com

How is Solana different to other blockchains

What is unique about Solana is that in addition to the proof of stake they use an innovative method called Proof of History.

The mechanics of how this works and why it matters require you to have a computer science background so I will only describe this at a high level.

The core idea is that up until now it was very hard to measure time on a decentralized exchange.

You and I can look at our watches or phones to know what time it is but computers can’t.

Knowing the timestamp of blocks is key to processing transactions securely.

The proof of work mechanism that Bitcoin uses allows it to figure out the time but this slows down processing. As a result a block is created every 10 minutes as opposed to every 800ms on Solana. 

Solana figures time out by feeding the hashes.

This way miners know the order of transactions and can therefore process transaction in batches which results in them being many times more efficient. 

Founders

Solana was founded by Anatoly Yakovenko who was a seriously good engineer working at Qualcomm.

He hired a bunch of his team when he left to found Solana.

Solana is named after his favorite beach in San Francisco where Qualcomm was based. 

Anatoly had come across Satoshi Nakamoto’s whitepaper on Bitcoin when it came out but had dismissed it.

Later in 2013 he revisited and acknowledged there was something more profound in it that he had originally had realized.

As a senior engineer he was able to critique the strengths and weaknesses of Bitcoin.

His epiphany on proof of time came after a coffee and beer induced night at 4 am in the morning. Once he discovered this concept he left what he calls an ideal job to found Solana.

Photograph of Solana founder, Anatoly Yakovenko
Anatoly Yakovenko , Solana’s founder. Source: thepavlovictoday

One of Solana’s key sponsors is Sam Bankman-Fried, the now multi-billionaire founder of FTX.

Sam is an influential stakeholder in the crypto space and he has used Solana to build a DeFi platform called Serum.

By the way if this article is going over your head it would be best to read my foundational explanation, What is Ethereum, first

Criticisms of Solana

The founders say that they are still in beta mode.

This means that their blockchains is still rough around the edges. In computer geek speak it means that things might break. And they do.

Recently the Solana network was out for more than 48hrs and this is not the first time it happens.

For a blockchain with a a market cap of $35Bn as of February 2022, outages such as this are not acceptable to many.

Solana’s detractors claim that it is neither truly decentralized and neither does it fulfill it promise of …well, actually working.

Another criticism is that you need to write code in Rust.

Rust is a more robust language. The problem is that fewer people know it and have to invest time and effort on it if they want to build dapps on Solana.

It’s a wrap

Solana is ultra fast and backed by serious people in the crypto space.

As such it could be a serious contender to Ethereum and other layer 1 solutions.

However it is still experiencing growing pains. I guess we will find out how things pan out.