What is Solana?

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With a marketcap of nearing 37 billion, a 24h trading volume of 2.4 billion and being the 8th biggest crypto currency in the world, Solana is taking over. My name is Rico Richardson, and in this blog post I’m going to tell you all there is to know about Solana.

Solana is a third-generation blockchain that supports an array of DeFi solutions, including the development of decentralized applications (DApps) and smart contracts. Unlike other blockchains, Solana uses a hybrid consensus algorithm that combines proof-of-history (PoH) with proof-of-stake (PoS), enabling the network to carry out up to 50,000 transactions per second. Solana is a layer two solution for Ethereum, which has a problem of becoming more and more congested and have a high gas fee. Hence the reason people are looking for alternatives. The founder of Solana is Anatoly Yakovenko. An ex senior staff engineer at Qualcomm which is the largest chip manufacturer of the world. In 2017 he decided to build Solana and in that same year 25 million dollars was raised in public and private funds. In March 2021, the mainnet of Solana was launched and it’s proof of history algorithm uses cryptography to establish a trustless source of time. It offers an immutable record of previous events on the blockchain and this facilitates the chronological storage of historical data. Through its pipeline infrastructure, Solana can also validate transactions faster and replicate the transaction information across nodes regardless of their hardware specifications. Right now, Solana can currently process over 50.000 transactions per second which is more than Bitcoin and Ethereum combined. Using a diverse set of technologies, the Solana network doesn’t need to rely on sharding or any other type of layer 2 solutions. Developers can build straight onto the blockchain, which is much more faster than Ethereum of Bitcoin.

Solana token

Solana also has its own token called SOL and over the past few months it started to gather a lot of interest from investors. Holders can stake the token in order to validate transactions through the Proof of stake concensus mechanism. It also enables users to receive rewards, pay gas fees and to participate in governance processes. There will be a total of 489 million sol tokens in circulation of which about 261 mil already have. Solana can be bought on about 100 exchanges like Binance, Bitfinex, Coinbase, Kucoin and many others. The entire list of exchanges can be found on the coinmarketcap page of Solana. One of the things I’ve noticed is that Solana goes its own way. During the crypto crash, Solana moved against the market. Last week we had another dip, and even though Solana dropped a little bit, it didn’t crash as hard and bounced right back again. Personally I hold Solana because I believe in the solutions it brings to the crypto market, and the eco system its creating.

What makes Solana unique

The things that make Solana unique are it’s scalability, it has very low fees in comparison to other crypto currencies. Because if you compare it to Ethereum than the transaction fees are more than 200 times less expensive. Solana is getting more and more adopted and has grown rapidly with a growth of 200% in August alone when it comes to locked value in smart contracts, and it has seen remarkable gains over the past few months with the hype around NFT’s being one of the drivers.

NFT’s are non fungible tokens. Fungibility refers to items that are replaceable for the exact same item. Which means that non fungible tokens cannot be replaced. There is only one of them. Think of an original Van Gogh or one of a kind legendary Pokémon card. NFT’s are the one of a kind assets in the digital words. Examples are crypto punks, Sol Bears, Pixel Dudes etc. The digital tokens can be thought of as certificates of ownership for virtual assets (such as in-app items and digital art) or physical assets (such as real-life paintings and even houses). So Solana being able to have NFT’s built on their platform, benefits from the increasing hype around them. The first major NFT project being launched on the Solana network was the Degenerate Ape Academy. Which is collection of NFT monkeys build on Solana with the cheapest one currently being 80 Sol and the most expensive one being one hundred and six thousand nine hundred and sixty nine Sol. Which would be around twelve thousand eight hundred to over 17 million. All these NFT’s can be found on Solanart.io which is still in Beta but already works. You can connect an SPL wallet, browse the collections and/or easily sell your NFT there. By the way, did you know a Solana Aurory NFT has just been sold for over 400.000? Incredible right!

Eco system

So like Ethereum, Solana is both a cryptocurrency and a building platform for running apps. The dex of Solana is Serum. It’s a decentralised crypto currency exchange built on the Solana blockchain. It’s one of the first major projects to be built on Solana and it interoperable with other crypto currencies like Bitcoin and Ethereum. Unlike other Dex’s, Serum features order book based trading like centralized crypto exchanges. Serum can handle roughly between 50 – 65.000 transactions, which is equivalent to the 50.000 of Solana. There are three fundamental mechanisms which underly the Serum Dex. The first is Solana’s SPL token standard, the second is Serum’s interoperability protocol and the third one is Serum’s SRM crypto currency token. I’ll make a dedicated video about Serum later on in which I tell you all about it. Crypto like USDT and USDC as seen on the Serum Dex are not ERC-20 tokens but SPL tokens. Any non-SPL token being used on the Serum DEX is wrapped for use on Solana-based protocols in the same way that Bitcoin is wrapped for use on Ethereum-based protocols.

Cryptocurrencies from other blockchains can be turned into SPL tokens and traded on the Serum DEX in two ways: using the FTX exchange or using the Metamask browser extension/wallet. In both cases, you will need the Sollet.io wallet which is also used to interact with the Serum DEX. The Sollet.io wallet is not a browser extension, nor does it require you to download any software. It is entirely web-based. You could get an extension as a wallet like Phantom or Solflare and in fact, that’s being recommended to you when going to sollet.io.

Staking

Computers that secure the network are called validators. This means that the participants stake their own SOL to become a validator, in exchange for a chance of earning new Sol and a small cut in fees. Staking can be done in several ways. You can stake your Sol on an exchange like Binance for instance. On Binance you have the option to stake your Solana for 30, 60 or 90 days with the APY being 9,2, 9,9 and 11,5% respectively. Another way to stake your sol is by using your wallet which will probably give you around 6% with the benefit of having your Solana available to you more quickly. Unstaking Sol from your wallet will take 2-3 days, so please keep that in mind because the crypto market is very volatile, and that means that when the entire market crashes and you have your Sol staked, you can’t bail out on time and will have to wait for the funds to be released. Which can then lead to a high loss of profits or funds.

And that’s all there is to know! Stay tuned for the next blog post!