I do not know how we got this far into writing blog posts on cryptocurrency topics without hearing of Solana. I mean, I definitely have heard of it, but wow, I am surprised we haven’t covered it yet, and probably for good reasons, though.
If you search what Solana is, you’ll get no good article that simply just goes over everything that Solana has to offer.
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We will explain what Solana is, some of the crazy unique technological improvements that they have over Ethereum. Finally, we will get into some tokenomics that you could use to make a price prediction.
Why is Solana Amazing?
Before we get into the technical stuff of Solana, let’s talk about why it’s fantastic and who created it.
Anatoly Akavenko is the man behind the very first white paper. One of the things you need to know about him is that he’s pretty intelligent and worked at the company Qualcomm for about a decade.
I tried reading the white paper, and it is quite technical with a few understandable sentences here and there. But his blockchain is named after the Solana beach that he really appreciated.
Why Solana’s Price Has Skyrocketed?
Let’s get into why Solana’s price has skyrocketed in the past few months.
First of all, Solana has a block time of 400 milliseconds which means they are swift, especially when you compare that to Ethereum’s block time of 10 seconds or bitcoins 10 minutes.
Also, Solana boasts that they can handle up to around 710 000 transactions per second, which is 30 times the amount that visa currently handles.
Although they’ve never actually been able to go past 50 000 in the past, this doesn’t mean they can’t do 710 000 it just means they haven’t tried.
The Solana network is fast, it’s monstrous, and it’s also cheap.
I would say that it’s comparable to the Matic network with transaction fees around 100th of a penny.
What Makes Solona Fast and Cheap?
Next up, let’s get into what makes them so fast and very cheap.
We must first explain their consensus mechanism, which is a fancy way of saying how everyone agrees on what the blockchain should be.
They don’t use proof of work, and they don’t really use proof of stake. Anatoly actually described a new system called proof of history in his white paper.
It’s basically proof of stake, but it adds in the particular variable of time. You need to know that proof of history is not a consensus mechanism, but it integrates time into the blockchain data.
We use something called timestamps to place a specific date and time on the blocks, and we do this so that it allows for a high-speed sequencing of validators.
So that they know their order to submit blocks without having to communicate back and forth.
One big problem that other blockchains have is that they have to agree on the time. We’ll take this for granted, but computers have to be constantly going; what time is it? Since they can’t do things like look at their phone or even the sun to determine it on other blockchains.
The nodes, which is a fancy word that means computers on the network, have to chat back and forth back and forth until they agree on a time, and they have to do this before submitting a block.
In the computer world, this chatter can take up a lot of time. Solana fixes this using proof of history to have everyone timestamp their blocks and use cryptographic proof so that they don’t have to wait on everyone to agree on the time,
Basically, we can agree on the organization of the data in the blocks after the fact. Meaning we don’t have to wait for other validators to check and approve our work.
Let’s use one of the famous example. Think about it like this, if you want everyone in your family to send you a letter and you want them to do it one day after the other, you have to first send a letter to them, and then they have to send all their letters to you.
The time that both of your letters are in the mail is a long period of time. What if next time you saw them you just said, hey, send me a letter at 4 pm on January 3rd. That way, you would know that it’s coming in, and you wouldn’t have to waste time or resources asking them to.
Long story short, you could set it up so that your uncle sends a letter on January 3rd, your aunt on January 4th your, cousin on January 5th, and then your grandma on January 6th.
We want to read these letters in order, but the issue is that they each use different mail providers like Ups and FedEx.
Sometimes they take different amounts of time, and also, your uncle is on a work trip, so he’s a few thousand miles away. By having them all send their letters on the days that they’re supposed to, they may not arrive in the exact order, but they wrote the time that they actually sent their letters in the letter so you can organize them when you get them.
Basically, proof of history allows nodes just to keep throwing a bunch of blocks at us, and since some people have faster internet than others, we can assume that they’re telling the truth about their sending date and then organize them after we get them.
Then add them to the blockchain.
Now, a little bit more goes into proof of history, but honestly, it deserves its own blog post, so make sure to subscribe to our newsletter if you haven’t already.
Oh, by the way, of course, in this analogy, our aunt, uncle, cousin, and grandma were actually all just different people sending in blocks, and we can use math to find out that our uncle actually wrote his letter in January 3rd.
Another exciting thing is that Solana has like 25 blocks being validated by 25 people at once.
This is how they’re actually able to surpass Visa by such a significant factor. Speaking of how they’re similar to the proof of stake, I liked Solana because there are no requirements to be a validator.
Before I explain this, if you don’t understand proof of stake, you definitely should check out our post on understanding some of these subsequent terms.
To compare Ethereum 2.0, you must take around 32 Ethereum, which is equivalent to approximately 100 000. On Solana, you only need to hold a tiny amount of the coin and pay a fee to vote each day.
There is a catch, though; the voting fee is the only thing I don’t like right now; it’s about one Solana per day. Around 70 000 dollars a year. This seems ridiculous, but I mean, almost a thousand people are doing it right now. Maybe they know something that I don’t.
Next up, let’s talk about something that no other big blockchain has tried yet. It’s called sea level.
Technically, this is just a fun term to describe that validators can actually run smart contract code in a parallel way.
If you’re not a developer, let me explain it in simple terms.
Let’s say you have to do the dishes, you have to switch the laundry, and then you have to sweep the floor. A human would have to do each one of these things in order because they’re only one human. We call this a serial task—one after the other in terms of Solana.
The word parallel means you can do them all at the same time. It’s like if you could make two more copies of yourself and actually do the dishes, switch the laundry, and sweep the floor all at the same time.
That is essentially what Solana can do processing their smart contracts.
Something else I caught on their website was this quote describing how they are not bottlenecked by software or ideas but bottlenecked by hardware.
“Every time Nvidia doubles the number of SIMD lanes, our network will double in computational capacity.”
To me, it’ll be interesting to see how bitcoin and Ethereum handle the supercomputers that we have in 10 to 50 years from now.
One more thing before we get into the tokenomics of SOL is that you should know that Solana has vastly different smart contracts than Ethereum.
Ethereum uses a virtual machine-type system to run its solidity code, while Solana uses the rust programming language.
Rust is a very low-level language meaning it’s much more powerful, but it does require more work to create things.
One downside to this is that developers can’t just copy and paste their dapps and projects as many other blockchains can from the Ethereum network.
Everything must be coded from scratch. However, they will have more power than Ethereum smart contracts.
Finally, let’s get into tokenomics as I know many people read ou posts to get an idea of how a coin or project works so that they can invest in it.
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The coin on the Solana network is the SOL coin, and it is used for transaction fees and is used all over the blockchain ecosystem.
From as far as I can tell, Solana is both inflationary and deflationary. It’s deflationary because, for a long time, 100 of all transaction fees were burned, and now it’s around 50 percent that is burned.
But it’s also inflationary because they recently approved an inflation schedule where staking rewards payout around 8 percent. Still, they do get cut every few days by a very, very small amount until the final staking rewards hit 1.5 in 10 years.
In terms of the total supply, they initially started out with around 500 million tokens, and of course, it will keep increasing due to the proof of stake rewards.
Also, there are four private funding rounds before their initial ICO on the topic of early distribution. Those four funding rounds and their ICO sold around 36 percent of their supply and at a meager price too.
I mean, they were selling these things for about 25 cents each while the price currently sits at $200.
Another 13% of the tokens went to the project’s founders, another 10% went to the Solana foundation, and the remaining 39% went to fund community initiatives that are also currently held through the foundation.
Some weird thing that I found out was that there was a Solana wallet holding like 13 million tokens, and nobody knew why. So they just burned a bunch of them, definitely worth noting.
One more thing worth mentioning is that solana actually went down for around six hours in December of 2020.
Honestly, to me, this is a little scary because a decentralized protocol should never go down. It means everyone participating in the network had the same bug.
This problem did absolutely nothing to the price, though. It seems nobody panicked sold due to this news.
Lastly, Solana is still in the beta stage. So if you’re an investor or want to develop a dapp for them, you should definitely know that.
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Thank you guys so much for reading. I hope you enjoy this article. I really hope that you learned something, and most of all, I hope to see you in our future blog posts.