Solana (SOL) for Beginners
It can be challenging to keep track of all the different projects with over 7,000 coins in the blockchain today. Some cryptos in the blockchain are promising, but others are not. One of the most lucrative cryptocurrencies is the 4th generation token Solana (SOL). This is a one-of-a-kind blockchain network targeted at increasing network scalability. This article will look into everything you need to know about this coin.
Solana is a new blockchain platform that can be used to host decentralized applications and smart contracts. For optimal performance, it employs Proof-of-Stake (PoS) consensus processes and timestamp transactions. Solana attempts to address scalability, one of the most significant blockchain challenges. Previous cryptos, such as Bitcoin, used the Proof-of-Work (PoW) validation technique to raise transaction costs as the blockchain network grew in size.
With growth, however, comes congestion. As the networks get more overloaded, several issues have emerged. For example, Ethereum’s transaction costs have increased due to the proliferation of NFTs and DeFi. Other similar currency initiatives to Solana can only manage about 7TPS for Bitcoin and 15TPS for Ethereum, but Solana could manage up to 50,000TPS.
History of Solana
Anatoly Yakovenko is the man behind the first proposal of Solana in 2017. His main objective was to develop a decentralized network of nodes capable of equalling the performance of a single node. Solana Labs is a major contributor to the Solana network. It is also supported by the Solana Foundation, a non-profit organization based in Switzerland dedicated to community growth and development.
As part of Solana Labs, Yakovenko and his team began receiving funding in 2018. The team raised around $20 million privately in a Series A financing that spanned many months into 2019. After its launch in March 2020, Solana raised $1.76 million in an open token sale hosted by cryptocurrency sales platform CoinList.
As stated earlier, Solana is built on a composite protocol that incorporates proof-of-stake (PoS) and a proof-of-history (PoH). Proof-of-stake is a method for a blockchain to maintain reliable statistics among its users. Let’s see what these protocols entail.
Through Proof-of-Stake cryptocurrency owners offer or “bet” their assets to validators. A validator is a computer system that runs blockchain software and keeps a copy of the blockchain on its hard drive. Validators are miners of proof-of-work blockchains such as Bitcoin. Validators depend on the number of coins promised to the network and the duration of use.
They focus on these things rather than contending with other systems to solve complicated issues. This protocol aims to determine the amount of commitment among network participants and reward them. The network becomes more decentralized and safer as the stake grows in relation to the circulating supply. The network becomes more autonomous and secure as it becomes more decentralized and secure.
Proof-of-history is a technique for demonstrating that operations are in the appropriate order and are discovered by the right person. Solana’s blockchain is divided into sections where validator systems ingest transactions and produce a block. Managers are chosen in advance for each slot in this protocol to save time.
The proof-of-stake method chooses a node (or validator) to be the “leader” of a slot based on the amount of SOL owned. Each validator keeps track of the passing of time, often known as a proof-of-history sequence.
What Differentiates Solana?
Solana differs from other blockchains in that it establishes consensus between nodes. While historical proof shows certain benefits, some people are concerned about Solana’s voting system and if it leads to centralization. To be a part of the Solana chain, the node must vote for the block and the transaction’s legality. The vote is then sent to the block’s leader, who counts the vote and unregistering the block.
Validators are chosen via Proof of Stake on a typical blockchain. Then create and broadcast the following transaction block to all other nodes in the network. After that, the remainder of the network compares the new block to that ledger version. Each node then compares the new block and the ledger version to other nodes within the network. Each node must assess whether or not the new chain is valid.
This operation continues until most nodes agree on a new chain edition. Although it is time-consuming, allowing nodes to reach an agreement without an intermediary counting the votes has been a crucial aspect of decentralized blockchains since the inception of blockchain.
SOL is Solana’s native and utilitarian token, and it is used to wager and pay transaction fees. This indicates inflation, but it is intended to restrict supply and achieve a 1.5% annual inflation rate. SOL was established in September 2020 as a beta release and has since grown to become one of the most popular cryptocurrencies. SOL had a successful year in 2021, rising to become the seventh-largest crypto coin by market value in September. The worth of the SOL token is worth 725 times the value of a token like ICO, which is about $ 0.22.
There are currently 315,100,273 SOL coins in circulation, with a total supply of 511,616,946 and no fixed maximum supply. SOL tokens can be used in two ways. Staking is one of them, in which token holders stake SOL in exchange for rewards. The other allows users to pay for fees associated with smart contract execution or other transactions with SOL.
In addition, through a balanced validator set that maintains the Solana network, Solana distributes a defined amount of inflation-based premiums. The number of bet tokens compared to the entire supply of tokens determines the return. Solana started with a consumer price index of around 8%, which is predicted to drop by 15% by the end of the year.
Solana’s DeFi (Decentralized Finance) system now has a total value of more than $ 8.6 billion across multiple platforms. The three primary platforms of Solana are the open liquidity mining platform Quarry, decentralized exchange Serum, and the Solana staking platform (Marina de Finance). In the DeFi sector, Solana has been striving to establish itself as a viable contender to industry leaders such as Binance, Ethereum, and Polkadot.
You can compare them to evaluate their advantages and disadvantages. Solana, as previously stated, is reported to be capable of top speeds of 60,000 TPS. As a result, it is one of the quickest blockchains to compete in businesses outside of the DeFi space.
Circle and Tether, two well-known participants in the market, are Solana’s most important partners. After the rise of interest in NFTs and Play-to-Earn, it did not take long for NFT collections and games to appear on Solana. Hundreds of high-profile investors praised MonkeyBall and SolChicks, while the latter caused some controversy with their 113 endorsing venture capital funds. Organizations interested in developing Solana’s ecosystem continue to invest in the currency. Companies like OKX and MXC’s combined investment was $ 40 million as of March 2021.
Over the last two years, as the DeFi and non-fungible token (NFT) ecosystems have grown in popularity, Ethereum’s networks have become overloaded and too costly to use. Solana’s chain provides what is currently lacking in the Ethereum base layer: fast, low-cost transactions. As a result, both decentralized application (dApps) creation and transactional activity in the Solana chain are growing rapidly.
The Ethereum dApp sea is still over $ 125 billion, but Solana is expanding rapidly. Solana has grown into a popular fixed-value DeFi platform since its inception in 2017. Solana is easy to use due to its speed and low cost.
Solana is frequently chastised for its unstable behavior. In December 2020, the Solana system tumbled down for roughly 6 hours. Critical flaws could have been resolved faster, but the platform’s decentralized nature necessitated consensus.
The bot executed denial of service attack against the primary DEX product, Grape Protocol, in September 2021, causing the entire network to go down. The outage lasted 17 hours in total. Other flaws have been uncovered over time that could have jeopardized the network. For example, Neodyme addressed a problem that allowed additional fractional tokens to be withdrawn from the log.
In November 2021, there was a rumor that Solana had falsified the total amount of tokens in circulation and had produced millions of more tokens. Justin Bonds, the founder, and chief investment officer of Crypto Fund Manager Cyber, accused Solana and himself of trusting in a “long line of fraud, lies, and dishonesty in a series of tweets. Solana’s team claimed in a tweet that there were only 8.2 million SOL tokens in existence, but they claimed to have leased an extra 13 million tokens to makers without informing the public.
SOL can be used to make bets on some exchanges and personal wallets. For beginners, betting on exchanges is a great option, but using your wallet to create a stake pool will help you disperse tokens across your network and then further decentralize them. The easiest approach to keep your private key secure is to use a hardware wallet like Ledger or Trezor. Other wallets include the following:
- Atomic Wallet
- Phantom Wallet
- Math Wallet
- Exodus Wallet
Despite its flaws, Solana is a strong blockchain that has caught society’s interest. Despite some hurdles, it appears to be on the right track to expansion, backed by some of the industry’s top names. It is a coin worth checking out.
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