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Solana is a Layer 1 blockchain with smart contract capabilities which uses a proprietary consensus mechanism based on Practical Byzantine Fault Tolerance. The project began in 2017 and launched in March of 2020 by the Solana Foundation and Solana Labs Inc. Solana’s CEO is Anatoly Yakovenko, a former engineer with chip maker Qualcomm Inc. He co-founded Solana along with two other ex-Qualcomm engineers and Raj Gokal, an entrepreneur who previously worked in the digital-health sector. Solana is billed as a solution to the scaling issues of Bitcoin and Ethereum - aka an "Ethereum killer".
The Solana Protocol is designed to facilitate decentralized application (dApp) creation. The main goal of this is to improve the scalability through the introduction of a proof-of-history (PoH) combined with a proof-of-stake (PoS) consensus algorithm.
Proof of History
Solana’s Proof of History technology is a novel approach towards the scalability problem. While Proof of Stake is the go-to consensus for most current Layer 1 blockchains, Solana takes a somewhat different approach to achieve scalability. Rather than building blocks on top of one another using block height as a consensus-based “clock” that maintains the correct order of transactions, Solana validators use a sequential hashing function to each maintain their own clock and timestamp blocks. This circumvents the necessity for validators to wait until blocks are propagated throughout the whole network. Contrary to what the name suggests, though, proof of history is not a consensus mechanism. Solana uses Proof-Of-Stake to validate its blocks.
Essentially, each Solana validator maintains its own “clock” that verifies the order of the event and hashes the passage of time. Therefore, it creates a sequence of hashes that are all achieved through a verifiable delay function. Yakovenko described it in 2018 as “a way to encode time as data.”
In other words, Solana can process transactions as they come as opposed to waiting for a block to be filled, which can be a lengthy process. This enables Solana to be more scalable, processing more transactions than some other blockchains.
According to the developers, Solana is capable of processing up to 60,000 transactions per second, with an average block time of 400 ms without any sharding, making it a good choice for projects that need a large transaction volume with minimal latency. Note that, 60,000 TPS is a far cry from what Ethereum and even Bitcoin, Visa and XRP combined can offer.
Popularity, funding and ecosystem
Two years after its founding, Solana was able to land $20 million in a Series A funding round led by Multicoin Capital.
Solana has become very popular among investors in 2021 and the value of the SOL coin has risen to all-time highs, repeatedly. In early September 2021, SOL price increased by 400% in just 30 days. The surge in interest is due to the fact that a lot of applications are being developed on its blockchain due to its high throughput. In fact, there are currently 339 projects launched on Solana.
On May 12 2021, three funds, Gate.io, Coin DCX, and BRZ, were set to put $60 million into projects that are built on the Solana blockchain in emerging markets.
In June 2021, according to a WSJ post, the company received $314 million funds from Polychain Capital and Andreessen Horowitz, a notable venture-capital corporation in Silicon Valley. The transaction was made through the purchase of Solana’s SOL digital tokens.
Solana wants to have a major impact in the South Korean market. On June 3, The Solana Foundation launched a $20 million fund to further the ecosystem’s expansion throughout South Korea with the blockchain fund known as ROK Capital.
Solana has also been the go-to platform for projects like Raydium 1, Oxigen 2, and the Pyth Network 3.
Joining the NFT trend
Solana is slowly trying to grab a share of the non-fungible tokens (NFTs) market, which have been all the rage in 2021 as artists, investors, collectors, traders and celebrities have begun to dabble in this blockchain-based movement. The majority of NFTs are still transacted over at the Ethereum network, but Solana catches up. According to some, Solana is a better fit for NFTs because it is faster, cheaper and easier than Ethereum.
With literally hundreds of dApps being developed on the Solana blockchain as a response to its high throughput, the potential for continued growth is apparent. In the future, even Ethereum-based dApps could see value in switching to this blockchain or developing separate dApps that run on SOL as well.
Explore the Solana blockchain: statistics, validators, and token metrics about the overall ecosystem in the Solana Beach Dashboard.