Decentralized applications (DApps) are one of the most important blockchain technology use cases. We have seen how DApps have evolved a lot in recent years, creating games like Cryptokitties or have become the basis of DeFi. But blockchains like Ethereum are not prepared to support a large number of transactions, generating congestion in the network. Solana (SOL) is a blockchain designed exclusively for DApps that aims to be an alternative to Ethereum.
What is Solana? (SOL)
It is a next-generation blockchain project based on open source that seeks to drive the development of next-generation DApps. Solana (SOL) seeks to offer a highly scalable, secure and decentralized platform as possible. You also want potentially thousands of nodes without the need for expensive, power-hungry hardware.
Solana is based on the third-generation Proof-of-Stake (PoS) consensus. It integrates a unique mechanism to create a system of trust and security to determine the time of a transaction called Proof-of-History (PoH).
Solana's blockchain technology has been developed from the ground up to be especially scalable. The developers want to show that when different algorithms are combined to generate a blockchain, a system is created that reduces the bottleneck that ends up saturating the network. A high performance network is achieved even when generating a large volume of transactions.
The Solana Labs project, which brings Solana to life, was founded in 2017 by Anatoly Yakovenko. His proposal for this blockchain is to create a new transaction verification system called Proof-of-History (PoH) that provides the ability to support thousands of transactions per second. For its financing, an ICO was launched in 2017 that managed to raise more than 25 million dollars. Solana's mainnet was launched in March 2020 and is currently in beta.
What is SOL?
Like any other blockchain, Solana has a native cryptocurrency named SOL that works as a utility token. The SOL token is necessary for the payment of transaction fees and to deploy and interact with smart contracts.
SOL tokens are burned in an integrated deflationary process. In addition, SOL holders can become validators of the network. At the same time, SOL makes use of the SPL protocol, a Solana blockchain token standard similar to ERC-20 on Ethereum.
There are two use cases for the SOL token:
It allows you to pay the commissions of the transactions carried out on the network or of the smart contracts.
Staking the tokens thanks to the proof-of-stake consensus mechanism.
Different DApps are currently being developed within Solana that develop new uses of the SOL token. Chainvote is developing a DeFi voting mechanism that enables corporate governance using SOL tokens for voting.
Solana Features:
What is Proof-of-History (PoH)
Any transaction or event on the Solana blockchain generates a hash based on the SHA256 encryption algorithm. This algorithm takes an input and generates a unique output that is very difficult to predict. What Solana does is use the output hash of a transaction and use it as input for the next hash. What it does is introduce the order of transactions in the next output.
What this hashing mechanism does is generate a long chain without interruptions of transactions. This allows generating a clear and verifiable order of transactions that a validator then adds to a block. Through this mechanism it is no longer necessary to generate a timestamp as it happens in Bitcoin, Ethereum, Litecoin, etc.
Each hash in turn requires a certain time to complete. This element also allows validators to verify, very quickly and easily, how much time has passed.
Proof-of-History (PoH) therefore presents great differences with respect to the PoW consensus of Bitcoin or Ethereum. These two cryptocurrencies aggregate the transactions in blocks without the slightest order. What miners in PoW do is add a timestamp, which is the time and date it was generated in a block, according to the clock of each blockchain. The timestamp can vary by node and may even be false, which forces nodes to verify that the timestamp is valid.
By hashing transactions, validators have less information to process in each block. Using a hashed version of the latest state of a transaction reduces commit times for new blocks.
Indicate that PoH is not strictly speaking a consensus mechanism, but rather a solution that saves time and resources to confirm transactions. It really is a plugin that adds to the proof-of-stake consensus that makes it easy to randomize the next validator. It allows nodes to validate the order of transactions in less time, making the network faster.
How does Solana work?
This project makes use of Proof-of-Stake (PoS) consensus with a plugin called "Tower CBFT". Through this mechanism, distributed networks are allowed to reach a consensus that prevents the attack by the Byzantine Generals (BFT).
Solana's implementation of a BFT resistance adds a global source of time to the blockchain through a second novel protocol called Proof-of-History (PoH).
Tower BFT makes use of this synchronized clock to reduce processing power requirements to verify transactions. This is possible thanks to the fact that it is not necessary to calculate the timestamp of the previous transactions. A mechanism that allows Solana to outperform other blockchains.
It is not the only difference between Solana and the rest of the blockchain. The ability to parallelize transactions is also added, which is called Sealevel. This mechanism allows the execution of smart contracts in parallel, thus optimizing the need for resources and reducing time. Solana enables horizontal scaling across GPUs and SSDs, allowing the platform to scale to meet network demand.
In addition, in Solana the mempool that is used in Bitcoin, Ethereum and other cryptocurrencies is eliminated. What you do is distribute the transactions among the validators, even before they have finished validating the previous batch of transactions. Thanks to this, the speed of confirmations is maximized and the number of transactions that can be handled simultaneously and in parallel is increased. This element is called the "Gulf Stream".
A look at the ecosystem in Solana.
There are over 400 applications created in Solana at the time of this writing, and because things are changing rapidly at Cryptolandia, please understand that this information can quickly become out of date. A great follower of this ecosystem made us a small diagram of the great ecosystem that surrounds Solana today.
Advantages and disadvantages of Solana.
Advantage:
Solana can process a staggering 50,000 transactions per second with exceptionally low fees (less than $ .01).
Solana has achieved high levels of scalability by taking advantage of the Proof of History and several other groundbreaking innovations.
With billions of users on board, Solana has achieved economies of scale and kept application fees extremely low.
Solana ensures compatibility between projects. Users don't need to deal with multiple shards or Layer 2 systems.
Disadvantages:
Many implementations are still awaiting release in the Mainnet beta version.
The satisfactory hardware configuration for Solana is relatively more expensive.
Solana has been criticized for not being decentralized enough.
DeFi in Solana:
Cost of the transaction
Ethereum's transaction cost has impeded user adoption of DeFi. As we all know, if a user wants to earn fee income continuously by adjusting their liquidity provision range in Uniswap V3, they have to pay gas fees which can affect their income margins, especially during periods of high network traffic. When gas is around 30 Gwei, the transaction cost that provides liquidity is around $ 60 (assuming the price of Ether is $ 3,000).
On the other hand, Solana's cost to complete a transaction is 0.000005 SOL, which is equal to 0.05 cents. The large difference in transaction costs makes this advantage self-explanatory.
At present, the actual TPS of Solana's mainnet has reached dozens of times that of Ethereum.
Solana can provide such low transaction fees because its design throughput reaches 50k / s. It can support a large number of requests at the same time, without increasing transaction fees to limit user requests.
Long-term scalability support:
The intuitive improvement that scalability brings to users is lowering transaction fees and increasing transaction confirmation speed. For an underlying chain network, scalability means that it can support more applications and higher frequency applications.
So for an app, one of your concerns should be development / maintenance costs and user experience.
Also, it appears that whatever scaling solutions you end up importing, it is unlikely that there will be a single monolithic instantiation of that scaling solution (i.e., a single accumulation of optimism, for example). The future of Ethereum scale will be mixed ... Organizations at scale simply cannot afford to bet on the wrong tech stack. The opportunity cost of getting it wrong and the explicit cost of later migrating / bridging are enormous. I contend that the only blockchain protocol that can answer this question, or will be able to answer this question in the next 24 months, is Solana.
When designing and implementing the protocol, developers don't want to devote the limited energy of the entrepreneur team to tedious tasks like bridging (most DeFi entrepreneur teams aren't big), and you don't want to give users a user experience that is separate from Layer 1 and Layer 2, so Solana is a good consideration for them. If possible, leave expansion and concurrency to the underlying chain.
Network value:
Solana simply has a higher capacity. Why is this important? As an ecosystem adapts to more projects overall, we can expect the potential volume of each DeFi project to increase as well.
Without a doubt, the funding indicators in Ethereum (and its Layer2) / BSC have shown greater advantages today. The former has brought together a host of innovative early decentralization and DeFi projects, and the latter has benefited from the huge user base of its related CEX. However, what factors will change the status quo? The potential value of the network that Solana can capture.
The value of the network is generally considered proportional to the square of the number of users on the same network. Solana, being considerably scalable, promises a higher user load capacity provided by the strong underlying chain, so the potential value of the network is greater and potentially will have more room for combined growth for DeFi projects. built into your chain.
Decentralization:
Decentralization provides a credible foundation for DeFi. Currently, ethernodes.org registers 3,982 Ethereum nodes (excluding unsynchronized nodes), and the number of consensus nodes shown on Solana's website is 969. The number of nodes does not fully represent the degree of decentralization, but the number of nodes reaches this level, which already has the trust base required by most DeFi, and the number of consensus nodes in Solana is also increasing rapidly.
Solana's parallel programming model:
Solana introduces a programming model that is different from EVM-compliant blockchains, which performs stateless transaction execution and greatly improves parallel transaction processing capabilities. EVM compliant blockchains can be considered as a single threaded operating system, transactions can only be processed serially one by one, but not in parallel. In Solana, the transaction execution logic is completely decoupled from the data storage state and the transaction execution process is stateless. The execution logic (Solana Program) of the transaction is placed in the executable account, while the data status exists in separate accounts. Each transaction is accompanied by the account that must be read and written for this execution. , This batch of transactions can be processed by Solana in parallel,
In Solana, a Dapp will not block the operation of other Dapps while the Dapp is busy. Even within this Dapp, transactions between users will not affect each other, as long as a reasonable account allocation is adopted.
You can experience the benefits of this programming model through a Token design example. Like ERC20, Solana also has its own token standard called SPL. Since all SPL compliant tokens use the same logic, only one account is needed to store the execution logic (token_program) in Solana, and then this program can be used to issue new tokens. Each token has a corresponding account (TokenMint) to store the basic information (supply, minting authority, etc.), and then each token holder is also assigned a corresponding token account to record the information of the holders.
In such a token model, the data storage is separate. As such, even if there are 10,000 transfer transactions to process, as long as the accounts involved in the transaction are different, they can be processed in parallel at the same time.
Solana DeFi Ecosystem Potential
After a period of rapid development, the Solana DeFi ecosystem has grown to some extent, including AMM DEX, CLOB DEX, AMM for Stables, Decentralized Stablecoin, Oracle, Lending Protocol, Derivatives, Launch Pad, Yield Farming and Management of assets, etc. the potential of the DeFi combination at Solana.
Verdict: Is Solana Really The Best?
Clearly, DeFi at Solana still has room for development and room for improvement. For example, the scale of the Rust language ecosystem needs to be improved, the user experience to be improved, and even the acceptance and empowerment of the value of $ SOL in the ecosystem. But, in essence, these problems can be solved. Which gives developers long-term confidence in the core and promoters of the ecosystem, the practical and disenchanted style, and a broader vision, not just for competing with Ethereum: building the scale of a centralized Wall Street.
At the same time, Solana can also open the space of imagination for the new DeFi innovation cycle: from the perspective of the history of technological development, product and mechanism innovation will be formed under certain constraints and frameworks, just like the PoW mechanism. Ethereum has incubated the birth of AMM. Solana's PoH consensus mechanism, concurrent programming model, and Unix-like operating system chain account system will provide a new foundation and room for advancements in product innovation when all DeFi innovations in the market are exhausted. EVM compatible chain. Therefore, if the Solana DeFi ecosystem can successfully form a showdown with Ethereum in the next few years, there will be a high probability that there will be a different development path than the current EVM-compatible chains, and there will also be innovative product mechanisms. adapted to the characteristics of the underlying chain.
In summary, what we have seen, what we have experienced in the current development and our cognition and judgment about the future, we believe that in Solana, where decentralization is fully adhered to, the path of technological evolution is clear. The strategy does not seek quick success and instant profits, more and more developers will create long-term value together.
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