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Solana is a monolithic layer-one (L1) smart contract protocol developed to enhance network scalability and performance through its novel Proof-of-History technology. The Solana ecosystem is supported by its own native cryptocurrency, SOL, an SPL token that operates similarly to the well-known Ethereum ERC-20 tokens. Through the SOL token, Solana has the ability to host decentralized applications (dApps), marketplaces, and other protocols to support a growing decentralized financial (DeFi) ecosystem.
- Extremely cheap fees (<$0.10) and fast transaction finality when compared to other leading smart contract platforms
- Incredibly well-funded project with backing from key entities like Alameda Research, FTX exchange, and Multicoin Capital
- Top-5 developer community and dApp ecosystem with over 500 dApps being built
- Easy-to-use wallet and beginner-friendly UI helping to onboard crypto novices
- High barrier to become a validator due to hardware requirements and ongoing costs to maintain (~$40,000-$95,000 per year) lead to network centralization
- Extremely high wealth concentration—a large portion of SOL are owned by early insiders and venture capital companies
- “Single-chain layer-one” design, while highly performant now, will struggle to scale into the millions of transactions per second
- Suffered multiple distributed denial of service (DDoS) instances that congests the network and makes it largely unusable, including once shutting down the network completely for 17 hours
The Solana network is designed to give developers a highly performant Web 3.0 cloud platform that offers scalability at the Layer-1 blockchain level. This monolithic (as opposed to modular, seen in NEAR, Cosmos, Polkadot, etc.) approach aims to remove the complexities of Ethereum’s Layer-2 solutions by optimizing for speed, cost, and decentralization, from a political and geographic standpoint.
Source: Delphi Digital
Specifically, these features quantify to:
- Speed: 400 millisecond block times
- Cost: 0.000005 SOL (~$0.001) per transaction
- Decentralization: ~1,600 global nodes.
In the monolithic blockchain approach, network scalability is constrained to what the single weakest node can process. This means the performance of the chain is thereby limited by hardware/computer performance, e.g. higher throughput is only achieved by more expensive, performant hardware. As of Q2 2022, Solana has been able to achieve a blazing fast blockchain for today’s standards with a sufficient amount of nodes (relative), making it a great choice on the performance-decentralization spectrum.
However, ~1,000 or even 50,000 TPS won’t be sufficient if adoption continues to grow and Solana delivers on some of its promises dApp and DeFi promises. Therefore, more specialized and more expensive hardware will be required in the future to run the chain. One can follow this train of thought to the end in which, if Solana continues to grow, network health and governance will be maintained by a select few that have the access, technical prowess, and capital to run these machines. Solana’s growth actually makes it more difficult to maintain the same performance and decentralization guarantees.
Solana uses PoS, specifically “Bonded Proof-of-Stake” (BPoS), meaning anyone who holds SOL can delegate their votes to any validator they choose and share in the rewards (or penalties) for validating transactions.
Solana is unique for its implementation of Proof-of-History (PoH), the first such use of this type of consensus algorithm. Achieving its competitive advantage from PoH, Solana can achieve high speeds and the ability to scale due to PoH acting as a decentralized clock for the network. PoH enables asynchronous transactions by effectively time-stamping transactions. Validators in the network process as many transactions as possible using PoS and then, thanks to PoH, can arrange the transactions quickly based on the timestamp.
Simply put, PoH is (essentially) a trust-minimized global clock within the Solana protocol. In traditional PoW blockchains, miners hash together blocks, while in Solana with PoH, validators hash the hashes themselves continuously intra-block. The advantage of this approach is a global, trust-minimized concept of time for all of the nodes to use for consensus.
Because of this independent “timechain,” the leader in Solana block production is able to propagate timestamped transactions out to the network much faster. There’s no longer any lost time due to some arbitrary order determined by the block producer. The timechain provides a canonical order which can be easily checked.
A key problem with the speeds and scalability of decentralized networks is that nodes can’t rely on a centralized or external source to keep track of the appropriate flow of time. This creates bottlenecks as the “supermajority” of nodes must first occur on the appropriate timestamp which is then propagated back to the rest of the network. Other L1 PoS blockchains require validators to communicate and reach an agreement on time. However, with PoH in Solana, all validators must maintain their own clocks.
PoH represents a way for blockchains to keep time between computers that don’t trust each other. Solana’s website explains: “A reliable clock makes network synchronization very simple. When synchronization is simple, the resulting network can be blazing fast, bound only by network bandwidth.”
PoH provides a solution to this problem as it creates a way for every node to always be able to sequentially compute the passage of time cryptographically between two events without simply trusting the corresponding timestamp of each transaction. This bypasses having to first wait for the majority of the network to verify the timestamp. Essentially, transactions on Solana are verified and ordered without needing all nodes to agree simultaneously, making it quite different and much faster than typical blockchains. It also means Solana is a monolithic blockchain, serving as a single shard, whereas other chains, like Ethereum, Cosmos, Polkadot, etc. have gone with a modular (sharded) architecture. Solana does everything on a single chain in a single state.
Continue reading about Solana's technology stack and how it achieves ultra fast finality here.