Is Solana (SOL) Ethereum killer? How Does Solana Work? Everything you need to know

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Solana, dubbed as Ethereum’s killer, is a promising new smart contract platform that is 10,000 times faster than Bitcoin and more than 3,000 times faster than Ethereum. Solana is all about speed, and when it comes to large-scale and complex decentralized applications, the speed really matters.

Defi has grown to become a $63.4B industry, and it’s very much reliant on the underlying smart contract platforms. If we talk about the big Defi projects alone, we have a total of 236 Defi projects in the ecosystem, and 218 of them are built on Ethereum. That’s a mind-boggling 85% market share.

However, due to Ethereum’s underlying scalability concerns, many of these large-scale Defi projects are looking for alternative smart contract platforms that offer more flexibility and transaction throughput. We do have promising Layer-2 scaling solutions built on Ethereum, but the technology isn’t mature and has a host of different problems, such as long lock-up periods, where in order to redeem your assets from the Layer-2, you might have to wait for up to 2 weeks!

Also Read: What is Audius? Can Audius Replace Spotify SoundCloud?

Solana is taking an entirely different approach by building a smart contract platform from scratch that leverages several breakthrough technologies to keep up with the rampant demand for large-scale Defi applications. It also offers a framework for the specialized Layer-2 solutions to be built on top of the Solana network.

What Is Solana?

What Is Solana

Solana is a smart contract platform that is highly scalable, secure, and supports thousands of nodes without sacrificing the transaction throughput. Solana is all about speed and robustness that will power the next generation of large-scale decentralized applications.

Solana was founded during the 2017 ICO boom and raised $25M in various private and public sale rounds. The Solana mainnet was launched in March 2020. To test out the mainnet stability over the long term, it was launched as beta and is still operating as a beta release.

Solana is deemed as the main competitor to Ethereum, and we can see that happening as many of the Ethereum-based Defi platforms are shifting towards Solana, and the ecosystem is snowballing. The Solana ecosystem now has over 231 DApps, including 74 Defi-focused applications and 23 decentralized exchanges.

How Does Solana Work?

The key distinguishing feature of Solana is Tower Consensus, which is a Proof of Stake (PoS) consensus mechanism based on Practical Byzantine Fault Tolerance (PBFT) that utilizes a second novel protocol known as Proof of History (PoH).

The Proof of History (PoH) enforces a global source of time (a global clock) across the Solana network, and it establishes a permanent time reference for all the records on the blockchain. Tower Consensus uses these references instead of computing the timestamps of all the previous transactions on the network.

Solana also has a transaction parallelization technology called the ‘Sealevel’ that allows a parallel smart contract runtime to optimize the computing resources. The parallel computation allows asynchronous execution of smart contracts that saves time and increases transaction throughput on the network.

With PBFT-based Proof of Stake and Proof of History, Solana can manage up to 50,000 transactions per second at its peak capacity. This level of throughput makes Solana 10,000 times faster than Bitcoin (max throughput 5-7 TPS) and more than 3,000 times faster than Ethereum (max throughput 15 TPS).

Solana’s average block confirmation time is 400 to 800 milliseconds, and the transaction fees are super low (0.000005 SOL which is less than one cent). Solana achieves this level of throughout and optimization without any scalability solution like sharding or Layer-2. All of this is available on the mainnet, making it one of the very few blockchains that achieve greater than 1,000 TPS on Layer-1 without any scaling solution.

Unlike other Proof of Stake networks, anyone can become a validator on Solana. There are no significant capital requirements to start with. All you need is a server that meets the minimum specifications. Becoming a Solana validator is a completely permissionless process, and you just need to maintain the basic hardware. As of today, there are a little over 1,000 validators on the Solana Network.

Solana Use Cases:

Some of the popular, DeFi , DApps, NFT, etc.. are already leveraging the power of the Solana blockchain ecosystem to built their tech stack
Few Popular Examples:

Solarians: are the first generative NFT built on top of Solana

Audius: one of the most popular music streaming platforms that puts the power back into the hands of content creators.

Tether: USDT is the largest stablecoin by market capitalization and is one of the most widely used stablecoins in the DeFi sector, has announced to migrate on Solana blockchain.

And there are hundreds of other crypto projects already active on Solana’s blockchain ecosystem and solana ecosystem rapidly growing faster.

Solana’s SOL Token & It’s Tokenomics:

Solana’s has a native gas token named ‘SOL’, which is consumed to facilitate smart contract operations and other transactions happening in its network. Solana was officially launched in March 2020 by the Solana Foundation with headquarters in Geneva, Switzerland.

Solana Tokenomics:

Coin Circulation:

The Solana Foundation announced that in total 489 million SOL tokens will be in circulation. Almost 260 million of these have already entered the market.

SOL token Market Stats:

At the time of writing, As per coinmarketcap, Below are few market stats:

Rank & Price:

SOL ranks 8 currently on the basis of market cap and has been trading at $100 at the time of writing, it touched the ATH of $101 on Aug 30th, 2021, Solana Market cap sitting at $28B and it’s 1 year Return 2363%

SOL Token Distribution:

The SOL coin distribution is as follows:
Seed Sale tokens comprise 16.23% of the total token supply.
Founding Sale tokens comprise 12.92% of the total token supply.
Validator Sale tokens comprise 5.18% of the total token supply.
Strategic Sale tokens comprise 1.88% of the total token supply.
CoinList Auction Sale tokens comprise 1.64% of the total token supply.
Team tokens comprise 12.79% of the total token supply.
Foundation tokens comprise 10.46% of the total token supply.
Community tokens comprise 38.89% of the total token supply.

Will Solana replace Ethereum?

Anything is possible in crypto given that things take place at lightspeed in this new asset class. For the moment, we do not see that happening any time soon given the current market cap of Ethereum. As for the future? Who knows? Anything is possible in crypto!

Conclusion

The native currency of the Solana network is SOL, which is used to pay all the transaction fees, execution of smart contracts, and rewards for all the validators on the network. Solana is undoubtedly one of the strong competitors to Ethereum as it boasts a robust architecture that can handle the scale required by NFT, DeFi applications and protocols.


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