Anne Sandager
2 days ago

Crypto Explainer: Solana

Solana, the high-speed and low-cost blockchain rivaling Ethereum.
Image by alfernec
Image by alfernec

Solana - the native coin of the world's fastest mainstream blockchain platform. If Bitcoin is like digital gold and Ethereum is akin to digital oil, Solana aims to be the express train in the crypto world, boasting one of the fastest transaction speeds and lowest fees. The network’s daily average transactions per second (TPS) reached a record high of 1,504 on April 6 according to DailyCoin. By comparison, the average TPS of Bitcoin is 7, and Ethereum about 30.

The incredible speed of Solana is due to its unique consensus mechanism called Proof of History (PoH). Unlike traditional methods that require every transaction to be validated by all network participants, PoH allows validators to process and stamp transactions quickly in a linear sequence, almost like a cryptographic timestamp . This reduces bottlenecks and increases throughput dramatically.

Fast transaction speeds are crucial for a variety of applications, particularly those involving real-time data or high-frequency trading. For decentralized finance platforms, gaming, and other applications where delays are a dealbreaker, Solana’s speed provides a significant edge . Users experience quicker transactions, which enhances the overall usability and appeal of the network .

Besides speed, Solana is also known for its low transaction costs. With fees often less than a cent, it’s a far cry from the sometimes hefty fees seen on other blockchains like Ethereum. This affordability makes it an attractive option for developers and users looking to conduct frequent transactions without worrying about high costs.

Unlike popular crypto currency, Ethereum, Solana runs its own unique system called the Solana Virtual Machine. Because of this difference, apps made for Ethereum or other EVM-based blockchains can't be directly used on Solana, which creates a significant challenge.

This situation is like a "chicken or the egg" problem: developers don't want to make apps without users, and users don't join without apps. Solana overcame this hurdle early on with help from Sam Bankman-Fried and his crypto exchange, FTX. They supported Solana by allowing trading, integrating stablecoins, and creating various applications on Solana.

Now, Solana operates successfully without relying on Sam Bankman-Fried and FTX. It has gained a lot of users and has a strong presence, especially in stablecoin issuance, similar to Ethereum.

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