Solana is a blockchain network that supports the crypto currency SOL, along with decentralized applications such as smart contracts. Solana is known for its fast transaction speeds and low transaction processing costs. As an open-source blockchain platform, Solana is used by developers of non-fungible tokens (NFTs), decentralized finance applications, and other software projects.
Continue reading to understand what Solana is and how the Solana blockchain works. Discover what you need to know about SOL before investing.
What is Solana?
Solana is a blockchain platform that supports various decentralized applications, including its native digital currency SOL. More than 400 projects are already hosted on the Solana platform, including:
– Other cryptocurrencies like Tether (USDT), Terra (LUNA), and Chainlink (LINK), along with over 100 other cryptocurrencies
– Decentralized finance projects, including lending and centralized trading
– Centralized internet applications (also known as Web3)
– Non-fungible token marketplaces
– Music streaming
– Gaming
Note: Solana’s ability to support its own tokens and other cryptocurrencies, along with blockchain projects, makes it a direct competitor to Ethereum, the largest and most popular blockchain.
The Solana blockchain uses a Proof-of-History (PoH) protocol that relies on trusted clients rather than miners to process transactions and mint new cryptocurrency. The Proof-of-History method processes transactions in the blockchain network using timestamps provided by various trusted clients.
Unique Features of Solana
Solana is designed to ensure that the costs of using the network are always less than one cent per transaction, with new blocks confirmed at more than twice a second. Solana’s ability to maintain the speed of the network is based on its use of the Proof-of-History protocol.
According to Solana, it can process hundreds or thousands of transactions per second at an average cost of $0.00025 per transaction. This is in contrast to Bitcoin, which sometimes may take up to 90 minutes to process and confirm a transaction, and Ethereum, which at one point had many transactions costing 0.068219 Ethereum per transaction as processing fees.
Take a look at the brief table below to learn more about Solana:
– Actual launch date of Solana: 2017
– Number of Solana coins that have been traded / total supply (as of January 18, 2022): 511,616,946 / no maximum supply
– Unique feature: Fast and low-cost transactions
How is Solana Staking or Validation Process?
You can earn SOL coins by participating as a validator or liquidity provider for the Solana network. Participating as a validator requires advanced computing power, while delegating your SOL tokens to create liquidity requires that they are not moved or sold.
Solana’s network validators require computing devices with 12-core processors, 128 GB or more of RAM, and at least 1.5 TB of solid-state storage. You can also create a virtual machine via a cloud platform, provided you have the appropriate technical knowledge.
Validators in accordance with the “Proof-of-History” operating protocol use a system of timestamps and hashing verification to add new blocks to the blockchain. Validators add blocks synchronously, which are later synchronized across the Solana network.
The Solana blockchain requires validators to have voting rights within the Solana network. While validators can participate without a minimum SOL balance, leveraging what is known as the Solana voting account – a prerequisite for validators – can cost up to 1.1 SOL a day.
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Note: In addition to powerful equipment or voting rights, you can earn SOL currency by staking your Solana tokens – committing not to trade or sell them. The exact process of staking your SOL tokens varies depending on the digital wallet or exchange provider you are using.
How to Invest in Solana
If you want to invest in Solana, you can buy SOL currency directly through a cryptocurrency exchange. Here are the basic steps to invest in SOL:
– Choose a cryptocurrency exchange: Solana is supported by many major cryptocurrency exchanges, including Binance, Kraken, and Coinbase. You can search for and select the exchange that suits you.
– Create a funded account on the exchange: You will typically need to verify your identity and provide your personal information to create an account on the exchange. To make any purchases, you will also need to fund the account using fiat currency such as the US dollar.
– Start the process to purchase SOL: Using the desktop or mobile platform of the exchange, the next step is to start the process to purchase SOL. After entering the purchase details, double-check that all information is entered correctly – then click or tap the buy button to complete the transaction.
– Store your SOL securely: You need a digital wallet to store your SOL. This wallet can be hosted by the exchange or it can be a non-custodial wallet that you hold independently. Exchange wallets are usually the most convenient, while other types of digital wallets are generally more secure.
Key Solana Events
Key events for Solana include:
– The project was published to GitHub and officially named Solana in March 2018
– The launch of the Solana network with a capacity supporting at least 250,000 transactions per second from June to July 2018
– The Solana network was attacked by bots creating a large volume of fake transactions for the purpose of flooding the network in September 2021. This prompted a complete restart of the Solana network after experiencing an outage.
Source: https://www.thebalancemoney.com/solana-explained-5216271
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