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Inside Solana Network: What You Should Know About it

Inside Solana Network: What You Should Know About it

By SimpleSwap | SimpleSwap Blog | 28 Feb 2024


Today, Solana (SOL) stands as one of the leading blockchain networks. Its main advantages are its speed and low transaction costs. Some researchers have even proclaimed Solana as the "Ethereum killer." But is this really the case, and what factors allow this network to compete with the leaders of the blockchain market? Let's delve into it in this new article.

What is Solana?

The main feature of the decentralized Solana network is its high performance. According to the project's white paper, its throughput can reach 710,000 transactions per second. Due to this factor, the Solana network can confidently compete with major blockchains such as Ethereum (ETH), Polygon (MATIC), and Polkadot (DOT).

Another plus is its accessibility. Solana has gained popularity in the DeFi sector due to this: by the end of 2023, the number of active addresses in the network exceeded 15.6 million.

As of the beginning of 2024, the total value of all locked funds in Solana's smart contracts has surpassed $1.2 billion, with the total amount of funds raised being around $315 million, as reported by DeFiLlama. As a result, the Solana network ranks among the top 5 most successful blockchains.

History of the Solana Network's Creation

Solana was founded in 2017 by a team of experienced developers who previously worked on projects such as OS BREW, Qualcomm, and Dropbox. One of the network's founders, Anatoly Yakovenko, stated that he aimed to create a first-tier smart contract protocol project that would be "hyper-optimized" and "ultra-fast." These two parameters formed the basis of the Solana network.

In June 2020, the Solana Foundation was established – an organization dedicated to the development of the Solana ecosystem. The company actively attracted investors and new users to the project, expanding the product's reach. Four months later, the project team was able to create a cross-chain bridge with the Ethereum blockchain, thereby enabling seamless asset exchange between the two separate blockchains.

The year 2021 was a significant time in the development history of the Solana blockchain. Due to the bullish trend dominating the crypto market at that time, in November 2021, the platform's native token SOL reached its all-time high of $250. Currently, for example, the token is trading on exchanges at around $80 per unit.

How Does Solana Work?

The project implements a unique blockchain synchronization algorithm called Proof of History (PoH), which replaces the outdated Proof of Work (PoW). Among the advantages of the new mechanism are:

  • Increased transaction processing speed.
  • Reduced transaction processing fees.
  • Ability to order and verify transactions without requiring trust confirmation between network participants (achieved through sequential hashing technology).
  • Node operations are scheduled, speeding up all data processing processes.

The new PoH algorithm creates a continuous long chain of hashed transactions, which can be easily verified if necessary. For comparison, the Bitcoin blockchain (BTC) uses the PoW consensus algorithm, which creates massive blocks of unordered transactions. The system here spends more time and resources searching for and verifying the necessary data.

In addition to the PoH algorithm, Solana implements another consensus mechanism - Delegated Proof-of-Stake (DPoS). It serves as an alternative to PoW and PoS solutions, aiming to achieve maximum performance with minimal costs.

Solana Blockchain Issues

The first significant network failures began in 2020. By 2022, the number of failures had increased. The main reasons were technical network overloads and hacker attacks. Developers made several statements about strengthening security systems and addressing scalability issues.

In early 2022, the SOL price began to decline sharply, which was attributed to numerous system failures. In February 2023, attempts to update the software led to production slowdowns and further disruptions in Solana's operation. Despite the network overcoming a series of breakdowns and working on its weaknesses, some of the reasons for the failures remained unresolved. 

SOL Cryptocurrency

The blockchain has its own cryptocurrency – the native token SOL. It is used to pay transaction fees and ensure the operation of the consensus mechanism. The majority of all cryptocurrency funds are held by the project's co-founders and investors. Around 38% is distributed among community participants.

On December 20, 2023, Solana managed to reach fifth place in terms of market capitalization among competitors.

According to our cryptocurrency analysts' forecast, SOL's price is expected to steadily increase over the next five years. By 2030, under favorable forecasts, its value could rise to $275.12.

Conclusion

The Solana project can confidently be identified as a promising platform with open access. While working on performance improvements, its creators often release updates and rely on the experience of more stable and progressive networks such as Ethereum in their decisions. The ambitions of the developers and their capabilities are likely to propel Solana to the top positions in the world's best blockchain platforms in the near future.

If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Solana Labs ChatGPT Plugin” and “Saga Solana Mobile”.

The easiest way to buy, sell or exchange coins is to use SimpleSwap services.
SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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