📖
Web3 Encyclopedia
  • Welcome aboard!
  • Source
  • 😀Evolution from Web 1.0 to Web 3.0
    • Web 1.0 Web 2.0 Web 3.0
    • Key Features
    • Current Limitations
    • Future of Web 3.0
    • Learn: What Is Web3?
    • Learn: Will Every Brand Have a Web3 Strategy?
    • Learn: Big Ideas in 2023
    • Learn: The Web3 Paradox: Why Scaling Usage Alone Won't Lead to Mass Adoption?
    • Learn: Is Web3 A Marketing Buzz or Tech Revolution?
    • Learn: What is the relationship between blockchain and Web3?
    • Learn:Empowering Women in Web 3.0: The Role and Contributions of Women in Blockchain, DeFi, and dApp
    • Learn: Web 3.0 and the Future of E-Commerce
    • Learn: 12 ways ecosystem projects can attract more developers
    • Learn: How Web3 is Impacting Education?
    • Learn: Web3 And The Future Of Digital Advertising
    • Learn: Web3’s impact on personalization, trust and engagement
    • Learn: Web3-Powered Identity Management -- Unlocking the Benefits of Decentralization
    • Learn: Why Web2 companies fail in Web3 while others made it?
    • Learn: To Identify or Not in a Web3 World?
    • 🤫[Insider Series] McKinsey x Web3
    • TL;DR 👀
  • 💲Blockchain Fundamentals
    • Why is Blockchain So Popular?
    • Introduction to Blockchain
    • Blockchain Misconceptions
    • Blockchain vs Bitcoin, Database, Cloud
    • Consensus Mechanism
    • Public and Private Keys
    • Hash Functions and Cryptography
    • Sharding
    • Types of Blockchains: PoW, PoS and Private
    • Understanding Cryptocurrency
    • Coins vs Tokens
    • Blockchain Trilemma
    • Legality
    • Learn : Google’s Cloud Based Blockchain Node Service
    • Learn: How Blockchain, Digital assets, and Web3 Unlock Financial Inclusion Globally
    • Learn: Will Chinese-Made Crypto Soar Higher?
    • Learn: What Does MiCA Mean for Crypto in Europe?
    • Learn: Unraveling the Intricacies of Blockchain Forensics and Asset Tracking
    • Learn: Promising blockchain use cases in healthcare industry
    • Learn: The Role of Blockchain in Authenticating and Provenance Art
    • Learn: Blockchain-Based Digital Identity: Benefits, Risks, and Implementation Challenges
    • Learn: The Future of Energy Supply Chains
    • Learn: Revolutionizing smart contracts and cryptocurrency
    • Learn: Nigeria goes blockchain
    • Learn: A Game Changer for Online Gaming?
    • Learn: Is blockchain technology ready for high-storage applications?
    • Learn: Will Blockchain Technology Mark a Turning Point in Fraud Prevention?
    • Learn: Why ZK-rollups need data availability?
    • Learn: How will generative AI disrupt blockchain?
    • Learn: A New Blockchain for Generative AI?
    • TL;DR 👀
  • 🏟️Web3 Utilities
    • Decentralized Applications (dApps)
    • Cross-chain Bridges
    • DAO
    • Artificial Intelligence
    • Learn: Is Community-building Essential for Web3 Startups?
    • Learn: ‘Decentralization Theater’
    • Learn: Crypto and AI- A yay or nay combination?
    • Learn: Dissecting the DAO
    • Learn: What is motivating Lido DAO to rise?
    • Learn: How to Turn Your Community Into a DAO?
    • Learn: The Key to Decentralized Decision Making
    • Learn: How Web 3.0 can disrupt the supply chain industry?
    • TL;DR 👀
  • 🪙Bitcoin
    • What is Bitcoin
    • Bitcoin's Blockchain Technology
    • UTXO Model and Transaction Fees
    • Bitcoin Mining and Mempool
    • Learn: What is bitcoin mining?
    • What are Hard Forks and Soft Forks
    • What is SegWit and the Lightning Network
    • Bitcoin Ecosystem
    • Can Bitcoin be Destroyed? Game Theory and Network Attacks
    • Learn: Crypto token supplies explained
    • Learn: What is crypto tax-loss harvesting, and how does it work?
    • Learn: Can Crypto Go Green? How to Invest in Eco-Friendly Cryptocurrencies
    • Learn: Why Did FTX Collapse? Here’s What to Know.
    • Learn: How Sam Bankman-Fried swindled $8 billion in customer money?
    • Learn: How much is Bitcoin worth today?
    • Learn: The Costs of Running a Bitcoin Node In Nigeria
    • Learn: Has 2022 Left Any Crypto Positives?
    • Learn: How Crypto Exchanges Can Be Free of Risk?
    • Learn: Greed, Lies and FTX: Is Crypto a Force for Good or Evil?
    • Learn: Is Crypto a Cultural Movement?
    • Learn: What are the consequences of crypto’s ongoing regulatory process?
    • Learn: Beyond the Crash and Embracing NFTs?
    • Learn: Understanding crypto bag holders and their mindset
    • Learn: Inscriptions: Just A Fad, Or A Real Threat To Bitcoin Becoming Decentralized Money?
    • Learn: How Bitcoin Ordinals Can Change the Future Of Mining?
    • Learn: What is a supernet?
    • Learn: Bitcoin Miners Celebrate 10 Years Since First ASIC, What Changed Since Then?
    • Learn: Bill Vs. CBDC – Why This US Congressman Wants To Block The Fed From Issuing A Digital Dollar?
    • Learn: Why Bitcoin Will Blow People’s Minds In 2025?
    • Learn: How the Howey Test Sheds Light on Cryptocurrency's Regulatory Gray Area
    • Learn: Cryptocurrency vs AI: A Complex Debate
    • Learn: Where the U.S. Government Went Wrong in Regulating Crypto?
    • Learn: The Nostr Privacy Paradox
    • Learn: Do algorithmic stablecoins have a future as centralized coins are under scrutiny?
    • Learn: Is Bitcoin Set To Revolutionize The Financial World With Its Superior Purchasing Power?
    • Learn: What is Shibarium, and what does it mean for Shiba Inu?
    • Learn: What is a crypto dusting attack?
    • Learn: Is the Adoption of Central Bank Digital Currencies (CBDCs) the Future?
    • Learn: How Artificial Intelligence Could Revolutionize Crypto?
    • Learn: What’s next for EU’s crypto industry as European Parliament passes MiCA?
    • Learn: Why the EU Has MiCA and the U.S. Has Securities Law Confusion?
    • Learn: Six New Projects Looking to Mitigate Bitcoin Mining’s Energy Footprint
    • Learn: Who on Crypto Twitter chose not to pay for a blue checkmark?
    • Learn: What is the wash-sale rule in Crypto?
    • Learn: What is Pepecoin and can it flip memecoins Dogecoin and Shiba Inu?
    • Learn: Can you recover stolen Bitcoin from crypto scams?
    • Learn: What the ‘anti-mining bill’ means for the crypto industry in Texas?
    • Learn: Does the US have a crypto ‘tax loophole’ problem?
    • Learn: How users can stay protected?
    • Learn: How Crypto Revolutionize Cheaper and Faster Transactions?
    • Learn: Can NFTs and CFDs be BFFs?
    • Learn: A PR expert’s tips for memecoin projects
    • Learn: Why politicians aren't convinced about the Digital Euro?
    • Learn: How A 90-Year Old TA Theory Predicted The Sudden Bitcoin Boom?
    • Learn: Social Trading Platforms and CFDs: A New Paradigm in Investment
    • Learn: How could the Chinese economic crisis impact Bitcoin and crypto?
    • Learn: How do they compare: Bitcoin IRA vs. traditional IRA?
    • Learn: Why Tokenized Assets Are Safer During a Banking Crisis?
    • TL;DR 👀
  • 🛢️Ethereum
    • Bitcoin vs Ethereum
    • What can Ethereum do?
    • What is Ether (ETH)?
    • What's Unique About ETH?
    • What are Smart Contracts?
    • Energy Consumption?
    • Ethereum Virtual Machine (EVM)
    • Pros & Cons of Smart Contracts
    • Decentralized Applications (dApps)
    • Ethereum Token Standards (ERC-20, ERC-721 and ERC-1155)
    • Evolution of Ethereum
    • How to Get Your First Ethereum
    • Learn: Next Ethereum Upgrade — Shanghai Upgrade
    • Learn: Tipping Scale for Crypto Adoption: Usability vs. Accessibility
    • Learn: Major Publicly Traded U.S. Bitcoin Miner Files For Chapter 11 – Impact On The Market?
    • Learn: 5 altcoin projects that made a real difference in 2022
    • Learn: How Tether Can Be a More Stable Stablecoin?
    • Learn: Are the Ethereum Killers Still Deadly?
    • Learn: What Ethereum Tech Trends Are Weathering the Bear Market?
    • Learn: How Ethereum’s token burns are making it a deflationary cryptocurrency?
    • Learn: A few things to know about Ethereum's Shanghai Upgrade
    • Learn: The Role of Enterprise Ethereum
    • Learn: Understanding Layer 2 Scaling Solutions for the Ethereum Network
    • Learn: The Battle of Giants: Bitcoin vs Ethereum
    • Learn: Cryptography, Smart Contracts and Distributed Networks
    • Learn: The Memecoin Grift and How It Threatens Ethereum Culture
    • Learn: What Is Ethereum’s ‘Data Availability' Problem, and Why Does It Matter?
    • TL;DR 👀
  • 👛Wallet
    • What is a Blockchain Wallet?
    • Hardware / Software Wallet
    • How to Get Your First Cryptocurrency
    • Setting up Metamask Wallet
    • Learn: How to connect the Avalanche network to MetaMask?
    • Learn: How to pass on your crypto when you die?
    • Learn: What are hierarchical deterministic (HD) crypto wallets?
    • Learn: Pros and Cons of Digital Wallets
    • Learn : How Web 3.0 Wallets Are Redefining Digital Asset Security?
    • Learn: Open source: Buzzword or real security for crypto wallets?
    • TL;DR 👀
  • 🌕New & Rising Protocols
    • Binance
    • NEAR
    • Solana
    • Fantom
    • Polygon
    • Cardano
    • Polkadot
    • Cosmos
    • Harmony
    • Cronos
    • Optimism
    • Terra
    • Who Will Win the L1 Wars?
    • Learn: New Layer 1 Blockchains Are Expanding the DeFi Ecosystem But No Eth Killers Yet
    • Learn: Is an Increased Focus on Layer-2 Scaling and ZK Technology Justified?
    • Learn: What Are the Stakes in the SEC vs. Ripple Case?
    • Learn: What is The Graph, and how does it work?
    • TL;DR 👀
  • 📈Decentralized Finance (DeFi)
    • CEX vs DEX
    • CeFi vs DeFi
    • Algorithmic Stablecoins
    • Airdrop
    • Liquidity Pool
    • Impermanent Loss
    • Swapping
    • Wrapped Token
    • Arbitrage Opportunities
    • Staking
    • Yield Farming
    • Total Value Locked (TVL)
    • Gas Fees
    • Lending & Borrowing
    • Useful Tools
    • Activity: Uniswap & Pancake Swap
    • Learn: Automated Market Makers (AMMs) in DeFi
    • Learn: Crypto Moving towards ESG: What Is Regenerative Finance (ReFi)
    • Learn: What Is dYdX? Understanding the Decentralized Crypto Exchange
    • Learn: It's A Wrap - DeFi in 2022
    • Learn: Why DeFi should expect more hacks this year?
    • Learn: The Security Challenges of DeFi
    • Learn: The Promising Future of Decentralized Social Media on Web 3.0
    • Learn: Can CBDCs, Tokenized Deposits, Stablecoins and DeFi Coexist?
    • Learn: The Increasing Popularity of DeFi and Its Potential to Disrupt Traditional Finance
    • Learn: The future of DeFi is ReFi
    • Learn: DeFi aggregation
    • TL;DR 👀
  • 🙈Non-Fungible Token (NFT)
    • What are NFTs?
    • Case Study
    • Storage
    • Who are the Players?
    • NFT Marketplace
    • NFT Useful Resources
    • Activity: Mint Your Own NFT
    • Learn: How You Can Prevent Hackers From Stealing Your NFTs?
    • Learn: What Is an NFT Floor Price?
    • Learn: Should Bored Ape buyers be legally entitled to refunds?
    • Learn: China’s view of NFTs different from rest of the world’s
    • Learn: NFTs IRL: How Digital Collectibles Are Forging Offline Experiences
    • Learn: How NFT Brands Can Cut Through The Noise
    • Learn: How Web3 disrupts the music sector?
    • Learn: Unlockable content in NFTs
    • Learn: Why Meta Matters in NFTs?
    • Learn: Should NFT Marketplaces Become Centralized?
    • Learn: Hermès vs. MetaBirkins: The NFT Case That Could Have Major Trademark and Artistic Consequence
    • Learn: What are phygital NFTs, and how do they work?
    • Learn: What is NFT ticketing and how does it work?
    • Learn: Why Solana NFT marketplace is seeing less active users?
    • Learn: NFTs and Intellectual Property
    • Learn: How AI Is Changing Artistic Creation and Challenging IP Laws?
    • Learn: The Future of NFTs: Exploring Dynamic NFTs and Their Versatile Use Cases
    • Learn: NFTs in the event and ticketing industry
    • Learn: What is NFT rarity, and how to calculate it?
    • Learn: What happens to your NFTs when you die?
    • Learn: Dogecoin-Like Spike in Milady NFTs After Elon Musk’s Tweet, But Will It Last?
    • Learn: What are NFT royalties, and how do they work?
    • Learn: How developers aim to store crypto inside NFTs?
    • Learn: Generative Art NFTs: What Are They & Why Are They So Popular?
    • TL;DR 👀
  • 💗Metaverse
    • What is the Metaverse?
    • Metaverse Economy
    • Metaverse Companies
    • GameFi
    • Learn: Are We in the Metaverse Yet?
    • Learn: Can the Metaverse exist without blockchain?
    • Learn: Can the Metaverse Facilitate Sustainable Growth of Defi Systems?
    • Learn: What is the role of biometrics in the metaverse?
    • Learn: Can metaverse be the future court?
    • Learn: Metaverse Fashion Is on the Rise, but for Whom?
    • Learn: Sustainability in the Metaverse: Challenges and Opportunities
    • Learn: How To Build A Responsible Metaverse?
    • Learn: What is a VTuber, and how do you become one?
    • Learn: How proof-of-identity provides human experiences?
    • Learn: The “Metaverse” Next Frontier for Business: Impact And Challenges
    • Learn: The 5 Biggest Misconceptions About The Metaverse
    • Learn: Why culture and ownership are critical to the metaverse?
    • TL;DR 👀
  • 👾Career in Web3 (coming soon)
    • Developers
    • Moderators
    • Community Managers
    • UI/ UX Designers
    • Digital Fashion Designers
  • 🌱Sustainability (Coming Soon)
    • Industry Effort
    • Co-author
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On this page
  • What is Solana?
  • What makes Solana unique?
  • How does Solana work?
  • The Solana (SOL) Token
  • Solana vs Ethereum
  • The downsides of Solana
  1. New & Rising Protocols

Solana

PreviousNEARNextFantom

Last updated 2 years ago

What is Solana?

Solana is a highly functional open source project that implements a new, permissionless and high-speed layer-1 blockchain.

Created in 2017 by Anatoly Yakovenko, a former executive at Qualcomm, Solana aims to scale throughput beyond what is typically achieved by popular blockchains while keeping costs low.

Solana implements an innovative hybrid consensus model that combines a unique proof-of-history (PoH) algorithm with the lightning-fast synchronization engine, which is a version of proof-of-stake (PoS). Because of this, the Solana network can theoretically process over 710,000 transactions per second (TPS) without any scaling solutions needed.

What makes Solana unique?

It is widely believed that blockchains are built in such a way that forces developers to sacrifice one of the aspects in favor of the other two, as they can only provide two of the three benefits at any given time.

The Solana blockchain platform, however, has proposed a hybrid consensus mechanism that compromises on decentralization to maximize speed. The innovative combination of PoS and PoH makes Solana a unique project in the blockchain industry.

Generally, blockchains have greater scalability, depending on the number of transactions per second they can support, the more and better they scale. In decentralized blockchains, however, time discrepancies and higher throughput slow them down as they require more nodes to verify transactions, resulting in timestamps taking more time to process.

In a nutshell, Solana’s design solves this problem by having one leader node chosen based on the PoS mechanism that sequences messages between nodes. Thus, the Solana network benefits, reducing workload that results in increased throughput even without a centralized and exact time source.

Also, Solana creates a chain of transactions by hashing the output of one transaction and using it as the input of the next transaction. This history of transactions gives a name to Solana’s main consensus mechanism: PoH, a concept that allows for greater scalability of the protocol which, in turn, boosts usability.

How does Solana work?

The core component of the Solana protocol is Proof of History, a sequence of computations that provides a digital record that confirms that an event has occurred on the network at any point in time. It can be presented as a cryptographic clock that gives a timestamp to every transaction on the network, along with a data structure that can be a simple addition to it.

Moreover, PoH can be considered as a high-frequency Verifiable Delay Function (VDF), a triple function (setup, evaluation, verification) to produce unique and reliable output. VDF maintains order in the network by proving that block producers have waited enough time for the network to move forward.

As with many other blockchains, Solana uses a 256-bit secure hash algorithm (SHA-256), a set of proprietary cryptographic functions that output a 256-bit value. The network periodically samples the number and SHA-256 hashes, providing real-time data according to the set of hashes included on central processing units.

Solana validators can use this sequence of hashes to record a specific piece of data that was created prior to the generation of a specific hash index. The timestamp for transactions is created after this particular piece of data is inserted. To achieve claimed huge numbers of TPS and block creation time, all nodes on the network must have cryptographic clocks to keep track of events rather than waiting for other validators to verify transactions.

The Solana (SOL) Token

The SOL operation scheme is similar to that used in the Ethereum blockchain. Even though they function similarly, SOL holders stake the token in order to validate transactions through the PoS consensus mechanism. Furthermore, SOL is used to receive rewards and pay transaction fees while also SOL enabling users to participate in governance.

There will be more than 500 million SOL tokens released in circulation with the current total supply of Solana exceeding 511 million tokens — Solana’s circulating supply is just over half that. Around 60% of SOL tokens are controlled by Solana’s founders and the Solana Foundation, with only 38% reserved for the community.

If you would like to know where to buy Solana, SOL tokens can be purchased on most exchanges. The top cryptocurrency exchanges for trading in Solana are Binance, Coinbase, KuCoin, Huobi, FTX and others.

Solana vs Ethereum

Solana has received a lot of accolades for its speed and performance and has even been cited as a legitimate competitor of crypto industry leaders such as Ethereum.

In terms of processing speed, Solana is able to challenge Etheruem as it is supposedly capable of reaching a speed of over 50,000 TPS. Solana uses different consensus algorithms to avoid slow transaction confirmation. This feature makes Solana one of the fastest blockchains in the industry to compete with other industries outside of the crypto space.

Another Solana advantage is the network’s extreme cost-effectiveness, as the project implements new tokenomics for lower fees.

Solana
Ethereum

Launched

2020

2015

Token

SOL

ETH

Max. Supply

N/A

N/A

Platform

Open source

Open source

Smart Contacts

✔

✔

Decentralized Finance Applications (dApps)

✔

✔

NFTs

✔

✔

Number of dApps

More than 350

Close to 3,000

In addition, Hazim mentions it’s important to note that Solana Labs, Solana’s technology company, is working on several interesting products, including:

  • Solana Pay, enabling cheaper, safer and faster transactions.

  • Solana Mobile Stack, an Android toolkit that opens up the possibility for mobile expansion.

  • Solana Saga, Solana's very own mobile phone, is expected to launch in early 2023.

Also, it is worth noting that Solana’s blockchain, while implementing one of the variations of PoS, is more eco-friendly and sustainable. This is in contrast with Ethereum, whose current PoW model requires the use of tremendous computational power.

However, everyone in the crypto community is looking forward to the Ethereum upgrade to PoS. This next-generation evolution of Ethereum will consist of an execution layer (previously known as Ethereum 1.0) and a consensus layer (previously Ethereum 2.0). It could greatly increase throughput, improve scalability, lower transaction fees and stop unsustainable power consumption from its proof-of-work counterpart.

The downsides of Solana

If you’re still wondering if Solana is a good investment and whether you should buy it, the answer is up to you. Despite the visible advantages, Solana has its demerits like any existing crypto project.

First and foremost, although the Solana blockchain can compete with high-end blockchain projects, it is still vulnerable to centralization, as there are not many blockchain validators. Anyone on the network can become a Solana validator, but doing so is still difficult because it requires a lot of computing resources.

Along with this, the protocol still labels itself as a beta version of the mainnet, which does not negate the possible presence of bugs and errors.

Despite these issues, Solana is still one of the biggest ecosystems in the crypto industry and seems to be on the right growth path.

Source

Solana’s third-generation blockchain architecture is designed to facilitate smart contracts and (dApp) creation. The project supports an array of (DeFi) platforms as well as .

Solana blockchain was rolled out during the 2017 (ICO) boom. The project’s internal testnet was released in 2018, followed by multiple testnet phases leading to the eventual official launch of the main network in 2020.

Solana’s ambitious design aims to solve , a concept proposed by Ethereum creator , in its own unique way. This trilemma describes a set of three major challenges that developers face when building blockchains: decentralization, security and scalability.

PoH relies on PoS using the Tower (BFT) algorithm, an optimized version of the practical Byzantine fault tolerance (pBFT) protocol. The Tower BFT keeps the network secure and running and acts as an additional tool to validate transactions.

Solana’s cryptocurrency is . It is Solana’s native and utility token that provides a means of transferring value as well as blockchain security through staking. SOL was launched in March 2020 and has strived to become one of the top 10 cryptocurrencies entering the space by means of total market capitalization.

Compared to this enormous number, the current low scalable Ethereum model can only handle 15 TPS. Thus, Solana is thousands of times faster than Ethereum.

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decentralized application
decentralized finance
non-fungible token (NFT) marketplaces
initial coin offering
the blockchain trilemma
Vitalik Buterin
Byzantine fault tolerance
SOL
proof-of-work
Cointelegraph
Forbes