What is Solana (SOL)? Go From Newbie to Expert in Minutes

What is Solana

Solana is an open source blockchain network with smart contract functionality that allows developers to create decentralized applications (dApps). It is a third-generation blockchain network powered by its native cryptocurrency SOL, which serves as both utility and governance coin. 

Unlike Bitcoin and Ethereum, Solana was designed to scale throughput beyond what earlier blockchain technologies could dream of achieving without sacrificing low costs, security and decentralization.  Simply put, Solana was built to solve the lifelong blockchain trilemma challenge: security, scalability and decentralization, a concept proposed by Vitalik Buterin, the Ethereum creator. 

Solana has positively influenced the cryptocurrency industry in just a few years of existence with its advanced technology which presents a new structure for verifying transactions and a very effective consensus algorithm.

The capabilities of the Solana network are far-reaching and can seem complex at first to be understood by those new to the crypto space. But it has become one of the fastest growing communities in the crypto industry. So it is wise to brush up your knowledge of the Solana network by understanding the various concepts that answer the question: what is Solana?

This comprehensive Solana guide covers the following topics:

How Does Solana Work?

Solana operates on the basis of a blockchain network just like Bitcoin and Ethereum. Blockchain is a decentralized public distributed ledger where all transactions are verified and recorded with no third party control. These records are called blocks and are linked together using cryptography to secure and verify transactions. 

Most blockchain networks make use of either Proof-of-Stake (PoS) or Proof-of-Work (PoW) consensus to process transactions, but in the case of Solana, the network boasts of many sophisticated innovations that facilitate its operations. 

  • Proof-of History

As the first web-scale blockchain, Solana runs on both Proof-of-Stake and Proof-of-History (PoH) protocols to give the network a unique hybrid consensus.

Proof-of-History is a  Variable Delay Function (VDF) implemented as a sequence of computations that can provide a way to cryptographically verify passage of time between two events. It provides electronic records of events to prove the occurrence of such data in the network at any moment. PoH is designed as a cryptographic secure function written to override the possibility of predicting output from the input. 

PoS, on the other hand, is designed for quick confirmation of sequences produced by the Proof-of-History generator within a certain timeout. 

  • Tower BFT

Tower BFT  is an optimized version of a voting-based algorithm which serves as a clock to reduce messaging overhead and latency. 

It works by locking out nodes after voting on a form for a certain period of time. The basic idea behind Tower BFT is to stack consensus votes and double lookouts. 

  • Turbine

Turbine is a block propagation protocol used by the Solana network to break down blocks into separate nodes called neighborhoods before randomly distributing the information among validators. 

Each node is responsible for sharing any data it receives to other nodes  within the neighborhood. This way the network will not be congested while dealing with the nodes. 

  • Gulf Stream

Gulf Stream is implemented as a transaction forwarding protocol. It controls unconfirmed transactions by pushing and moving transactions forward. 

Gulf Stream  supports connections directly from WebAssembly apps, as well as showing users their transaction progress in real time,  including votes and voter stake weight. 

  • Pipeline

The Solana network uses this technique for optimizing transaction validation.  The validator consists of two pipelined processes used separately in both leadership and validator mode. 

However, the hardware being pipelined is the same as the network output, GPU cards and the write disks. This tool comes in handy when there is a stream of input data that needs to be quickly processed by a sequence of steps. 

Why is Proof-of-History Special? 

Proof-of-History is more energy efficient in terms of power consumption than many other algorithms. It also solves the problem of agreement of time seen in most distributed systems.  

Thanks to the timestamp built together with the blockchain, PoH is capable of scaling hundreds of¬† thousands of transactions within a small amount of time. Validating blocks are also incredibly secure. Investors have great confidence in PoH, which is considered Solana’s primary innovation.

The use of PoH allows Solana to offer high performance and cheap transaction fees. At full production, the network is expected to process transactions at a very high speed of  50,000 to 65,000 TPS with transaction fees costing less than a cent.

What is SOL?

SOL is a native cryptocurrency of the Solana blockchain. As a utility coin, SOL is used to pay for gas fees and holders of this cryptocurrency can vote for future upgrades of the system. Furthermore, SOL is used to reward validators as well as delegators. It can also be passed on to nodes in a cluster in exchange for running an on-chain program. 

Solana (SOL) has a fixed supply of 511,616,946 coins with over 335 million already in circulation at the time of writing. SOL is listed on some of the most popular cryptocurrency exchanges and is also accessible on all Solana-based DEXes.

How Does Solana Staking Work?

Cryptocurrency staking involves delegating your assets to a particular blockchain to earn rewards. It is one of the easiest ways investors can use to generate passive income in the crypto space. Read more on cryptocurrency staking.

Crypto investors holding SOL can delegate their assets to validators who process transactions and run the network to receive rewards. The bigger the coin deposited to a validator, the greater chance he has of being chosen to validate new transactions in the ledger.

Solana rewards both stakeholders and validators with SOL for helping to secure the network. Investors are presently receiving a nominal percentage yield (APY) of 7.23% for staking in the platform. 

Validators, on the other hand, are  rewarded by the number of transactions they write while also receiving commissions for every validated block.

Solana also offers investors complete control and ownership of their delegated assets. You can choose to withdraw your funds or swap validators at any point in time. 

However, one needs to be careful while staking on the network as you risk losing your funds when staking through a process known as slashing. Slashing involves the destruction or removal of a portion of a validator’s¬† stake when the system detects malicious¬† behavior.¬†

How Do I Stake My SOL?

  • Choose your wallet

To start staking SOL, you must first move your assets to a wallet that supports Solana’s staking operations. The good news is that there are many web and mobile wallets to choose from including Phantom, Solflare and Atomic wallet. 

You can also stake your SOL in crypto exchanges like Binance and Coinbase. 

  • Open staking account

Users are required to open a separate staking account different from the one used for trading cryptocurrencies. This way you don’t need to be afraid of losing your funds.

  • Select a validator

After creating a stake account, the next step is to choose a validator to commit your assets to. Simply follow your preferred wallet instructions to select a validator.

Solana does not recommend validators to stakeholders; each user must choose their validators using tools like SolanaBeach which displays recent performance statistics of all the validators on the platform. 

  • Delegate your SOL

Once you have selected a validator, it’s time to delegate your assets to them, which will be used to run the network. Users will receive rewards based on the amount of funds staked.¬†

Who is Behind Solana?

Anatoly Yakovenko, a computer scientist, published Solana’s whitepaper in November 2017 describing Proof-of-History which is the core component of the Solana network.¬† Yakovenko previously worked with Qualcomm, Mesosphere and Dropbox designing systems before resigning to take up the Solana project.¬†

For years, the computer scientist watched how blockchain systems without clocks suffered to scale beyond 15 transactions per second and decided it was something to work on. Although Yakovenko envisioned the idea of Solana, he worked among¬† other groups of computer engineers including Greg Fitzgerald, Solana’s CTO and Eric Williams from Qualcomm to open up Solana Labs where Solana was built.¬†

Solana Labs is a San Diego-based computer software company where the idea of Solana was conceptualized. The firm is overseen by a non-profit organization dubbed the Solana Foundation. The NGO is headquartered in Zug, Switzerland, fully dedicated to the decentralization, growth and security of the Solana network. 

Did You Know?

The Solana project was initially called “Loom” before it was changed to avoid confusion with the Ethereum Loom network.¬†

Solana’s name originated from a small beach town in North San Diego called Solana Beach where the team¬† stayed for years surfing the internet while working with Qualcomm.¬†

In the second quarter of 2018 the company (Solana Labs) started seeking funds to develop its new crypto project and it raised $25 million through a funding round led by Multicoin Capital.  

Solana’s beta Mainnet was later launched in March 2020 featuring smart contracts and basic financial transaction capabilities.¬†

Like many cryptocurrency projects, Solana conducted an initial coin offering (ICO) on CoinList which generated more funds for the developers. Today, the project is known for dealing with throughput problems without sacrificing both security and decentralization. 

What Can You Build on Solana?

You can build different kinds of applications on the Solana network as the platform is designed for creators, developers and hardcore gamers. For instance, you can develop innovative applications in various fields including finance, gaming, non-fungible tokens, as well as identity and supply chain management systems. 

Here are some examples of what has been built on Solana so far.

  • Wallets

Wallets serve as a gateway for users to access blockchain networks. Hence, you can build wallet software for both mobile and desktop users to plug into applications built on Solana and also manage their assets. There are currently a range of wallets offering access to the network, with the most popular ones including Phantom, Sollet, and Solflare.

  • DeFi protocols

There are over 223 listed projects in the Solana ecosystem, with these protocols aiming to transform traditional financial products into open, seamless and trustless applications. Solana has decentralized exchanges such as Serum, Raydium, Orca and Lifinity. Other DeFi protocols include decentralized lending protocols such as Solend and PortFinance. 

  • NFTs

Solana offers Metaplex, a collection of tools and smart contracts designed for the creation non-fungible tokens (NFTs). NFTs are  unique cryptographic assets that exist completely on the blockchain and cannot be compromised. The assets can be in the form of digital arts, music, real estate and beyond as long as they can be tokenized. 

Read More: What Are NFTs?

Meanwhile, Magic Eden, a peer-to-peer marketplace for buying and selling crypto collectibles, is the most popular NFT platform on  Solana.

  • Games

Blockchain gaming is one of the latest growing trends in the cryptocurrency industry. Members of the crypto community are currently using games to entice game lovers into the market. Although Solana  just recently initiated its push into blockchain gaming, play to earn games on the network is already gaining momentum among players and investors. 

Solana’s high transactional speed and cheap costs keep attracting many blockchain developers to the network. Just as Solana provides developers with the necessary tools and resources needed to create NFTs, the network also offers the same services to its hundreds of game creators.¬†

Some of the popular games built on Solana are Star Atlas, Aurory, Defi land, Project seed and Ninja protocol.  Players of these games can receive tokens as rewards when they complete tasks according to the rules of the game. Events are often scheduled for players to compete against each other to receive additional rewards. 

Solana Ecosystem Overview 

The Solana ecosystem is home to several decentralized applications. Here are the most prominent ones:

  • Wormhole

Wormhole is the leading interoperability protocol on Solana, connecting it with the Ethereum blockchain. The Wormhole bridge allows users to exchange assets between the two blockchains, converting ERC-20 tokens into Solana’s SPL standard.

  • Serum

Serum is a high speed decentralized exchange (DEX) built on the Solana network. Serum  is completely permissionless and offers low transaction costs. The protocol also supports cross-chain asset swaps including decentralized stablecoins, oracles and non-custodial wrapped BTC. 

Serum users can compose within the network’s on-chain orderbook limits to share liquidity and power market-based features for institutional and retail customers.

  • Civic

Civil is an on-chain decentralized identity network that enables users to create their own virtual identity and store it on their device together with other personal information.

Civil also allows dApp developers, liquidity providers and institutional participants to manage risk and create trust in the crypto ecosystem by using their tools to properly vett users before giving them access to your products and services.

  • Raydium

Raydium is one of the trendy decentralized exchanges that runs on the Solana blockchain. It is an  automated market maker that relies on serum’s order book to enable lightning-fast trades and shared liquidity. 

With this feature, Raydium separates itself from other AMM DEXs and DeFi innovations that only have access to liquidities within their own pools. Raydium offers users liquidity from other pools outside its domain. 

Apart from buying and selling cryptocurrencies,  users can as well list their projects, create a Fusion Pool, or Launch AcceleRator on Raydium. 

  • Step Finance

Step Finance is the front page of the Solana network built for DeFi.  It visualizes everything in the ecosystem including tracking balances and complex positions across every project built on Solana. 

Step finance allows users to compound and claim rewards easily with the various protocols and yield farms available in its network.  Users can also view their  NFTs in their private gallery. 

  • Solend

Solend is a decentralized lending and borrowing protocol. Users deposit assets to earn interest while borrowers are charged origination and interest on their loans. Like most lending protocols, Solend allows users to borrow and short-sell assets or open leveraged long positions. Solend also offers isolated pools offering exposure to stablecoins and presumably risky assets.

  • Arweave

Arweave is a distributed data storage company that aims to provide feasible data permeance. The network stores data with  sustainable and perpetual endowments using novel Blockweave data structures. 

Arweave allows both users and developers to store any type of data,  documents or applications permanently on its network for the first time with a one-time upfront payment. 

  • ¬†Mango Markets

Mango Market is a decentralized cross-margin exchange powered by Serum DEX’s on-chain book¬† and spot margin. What this means is that users can take profits from a single asset/trade and use it to enter another trade without exiting the first order.¬†

Mango Market is a DeFi derivative platform that runs on the Solana network. The platform offers both borrowing and lending services to users with the promise of offering ideal interest rates. For Mango, everything is cross-collateralized and used as collateral to open leverage positions.

  • GARI Network

GARI Network is the brain behind the development of a¬† short video social media platform called Shingari. The app is one of the most trending social media platforms in India with over 100 million downloads and more than 30 million monthly active subscribers. The network’s objective is to build a crypto powered economy through Shingari.¬†

Users of this social platform can use their GARI tokens, a native cryptocurrency governing the social app, to tip their favorite content creators. 

These tokens can be used to boost content or profiles to gain up to 100 million followers and viewers. Holders of this token can access exclusive content on the app by delegating their assets to the creator pools. 

  • Audius

Audius is a blockchain-based music streaming platform that gives artists and curators complete control of the content produced on the network. However, Audius was previously built on Ethereum before embracing Solana in a quest to scale up and meet demand from its rapidly growing customers. 

Audius is fully decentralized and serves as an intermediary between artists and their fans. Unlike most music streaming services, Audius does not benefit from artists’ earnings. Artists receive up to 90% of their total income in Audio, the native cryptocurrency of the platform, while the remaining 10% goes to stakeholders who delegate their tokens¬† to validators to run the platform.¬†

  • Larix

Larix is a financial protocol built on Solana. Its services and products go beyond the basic lending pools. Larix was the first to introduce mortgage lending with auto compounding. It also aims to bridge new types of assets such as synthetic tokens and NFTs. 

Larix is the first-ever lending protocol with live mining functionality, as well as the first partially open-sourced project on the Solana blockchain. The protocol adopted an active interest rate model and  curated more capital efficient pools including crypto tokens, stablecoins and other types of assets. 

  • Orca

Orca is another of the top decentralized exchanges that runs on Solana.  It is the first general purpose exchange that allows easy and fast token swaps using an automated market maker model. 

Here, users can trade cryptocurrencies with minimal gas fees and low latency compared to the earlier Ethereum blockchain. Additionally,  users can provide liquidity in a trading pool to receive part of the transaction fees. The trading platform was launched back when there was not much infrastructure on Solana.

The exchange’s native token ORCA is used for the governance of the platform. Holders can vote on upgrades and the future of the protocol.¬†

Orca is built with an interesting interface that makes it stand out from other exchanges. One of the unique features is the fair price indicators and the image bar which is tasked to observe users’ interaction on the platform.¬†

How to Buy Solana (SOL) for the First Time 

You can buy SOL for the first time using a prominent exchange like Binance. Binance is currently used by over 100 million active crypto traders with relatively low fees compared to other exchanges. The network charges 01.0% as commission when you trade SOL to other supported cryptocurrencies like BNB or USDT. 

  • Open a Binance account

To get started on the Solana investment, you will first need to open a Binance account to be able to access the platform. Go to the Binance official website  and click on open an account, a menu will appear where you will be asked to supply your personal details.

 You can as well  download the Binance app for both Android and IOS and supply all the details needed for verification. 

  • Account Verification

In order to become a registered trader on the Binance platform, you need to get yourself verified. To do this, you can upload any of your government issued identification cards, passport or driver’s license.¬†

  • Deposit Funds

Once your account is verified, you will need to deposit funds into the platform using any of the supported payment methods used to purchase SOL. 

Binance offers users several payment methods ranging from bank transfers as well as credit cards. 

  • Find SOL on Binance

Once you have funded your account, it’s time to buy your favorite crypto. Head to trades and click on the spot to find SOL.¬†

You can choose to scroll through the list of cryptocurrencies available on Binance or hit the search button and type SOL. The next menu will contain a series of SOL pairs. Look carefully before making a purchase to select the right pair depending on the asset you have to exchange with. For example, if you funded your account with USDT then your purchase pair should be SOL/USDT. 

What is Solana Cluster? 

Solana cluster refers to a set of computers working together (sometimes against each other) to validate transactions and maintain the integrity of the blockchain. However, the computers can be viewed as a single computer outside the system. 

Clusters are crucial to the Solana network as they help to verify the output of untrusted transactions and user-submitted programs. Their major use case involves the tracking and identification of a particular computer/s that performed better than others in terms of keeping the clusters running. 

Solana clusters can be used by users to preserve important records of events or the programmatic interpretation of the events as well  as tracking real-life assets outside the ledger. 

The good thing about this technology is that as long as users maintain a copy of the ledger,  the output of the program will forever be reproducible independent of the owners. 

Frequently Asked Questions About Solana 

Is Solana a good investment? 

Solana can be considered a good investment based on its track record and growth potential. Although the protocol was launched in 2017, the network has established itself among the most valuable cryptocurrency in the industry with its scalability prowess. 

Solana (SOL) was among the best performing cryptocurrency back in 2021. Rising from $0.5 in January to more than $260 in November outperformed  other altcoins like Cardano and Polkadot to be among the top 10 largest cryptocurrency by market capitalization.

The network efficiency coupled with low transaction fees and smart contract functionality has attracted both institutional and large investors to the Solana blockchain with millions of dollars injected into the platform. 

Solana has been in a frenzy lately as more people are flooding into its DeFi protocols and NFT market.  The network also offers permission pools for legacy players. Not to give financial advice but like most cryptocurrencies, early adopters benefit more than those that invested late. 

Meanwhile, before going ahead and investing in Solana, it is worth noting that the cryptocurrency market is highly volatile and the price fluctuates. Having an investing strategy is also very important, so make your own research before jumping into the wagon. 

What programming language is Solana written in?

The Solana blockchain uses Rust and C++ as its primary programming language. These languages are used to build programs deployed on-chain that run on Solana runtime where they are permanently stored.

Developers can also use Anchor, a development framework, to make it easier to write Solana programs (smart contracts). The majority of protocols on the network are built with Anchor as it lowers coding time and increases developer productivity.

Can you build a token off Solana?

You can create tokens on Solana just like you can on other networks such as Ethereum, BNB Chain, Polygon, etc. Creating tokens on Solana requires SOL for account rent deposits and transaction fees. 

Currently, there are hundreds of tokens on Solana powering applications launched on the network. Some of the most popular ones include Serum (SRM), Solend (SLND), Raydium (RAY), and Orca (ORCA).

As noted earlier, you can also create NFTs on Solana. Some of the most popular collections include Degenerate Ape Academy, DeGods, and Lifinity Flares.

Is Solana an Ethereum Killer?

Solana is not an Ethereum killer (at least not yet).¬†The concept “Ethereum killers” refers to those blockchain projects with sophisticated tools designed to mitigate Ethereum’s shortcomings such as scalability, high gas fee and energy consumption.

Many agree that Solana fits the description of an Ethereum killer as the network offers increased transaction speed and significantly lower fees. The network’s 400 ms block time is also significantly higher than Ethereum’s 10 second block-time. Solana also allows the building of decentralized applications, a key feature that brought Ethereum to the limelight.

Meanwhile, Solana still has a long way to go if it will overtake Ethereum. An easy way to understand the broad gap is considering the fact that Ethereum currently has a market capitalization above $350 billion, more than ten times larger than Solana’s $33 billion.

Ethereum’s early-mover advantage means it has attracted more developers and capital in its eight years of existence (launched in 2015). Solana would need to exist for a significantly longer period and expend resources to reach the same level of prominence that Ethereum already achieved.

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