Solana (SOL) has lately become one of the best performing and fastest growing altcoins in the crypto sphere. The altcoin has surged over 3200% since August 2020. And it currently ranks as the 16th biggest cryptocurrency in the market with a market capitalization of over 7B USD, having grown by 33% in the last week alone.
In this article, we will focus on fundamentals and explain in short what is Solana and how does it work? Also, how does it differentiate vs. other similar altcoins and what is Proof-of-History?
The Solana project was first launched in 2020 by the Solana foundation with headquarters in Geneva, Switzerland. Greg Fitzgerald and Anatoly Yakovenko being the founding members.
Solana is described as ‘a web-scale blockchain that provides fast, secure, scalable, decentralized apps and marketplaces. The system currently supports 50,000 TPS (transactions per second) and 400ms Block Times’, making it one of the fastest blockchains technologies in the world. Surpassing transaction speed-wise the Ethereum giant.
The Solana mission statement is to enable an ecosystem of decentralized applications designed for a very wide use cases. Crypto Lending Apps are one of the most predominant solutions operating on Solana, which currently support crypto assets worth billions of dollars. Furthermore, the Solana blockchain supports stablecoins (e.g. Tether) and wrapped assets. As of August 2021, over 700M USD worth of USD coin has been issued on Solana platform, which is an amazing growth for a company that was only established in 2020.
In terms of operating method, Solana uses both Proof-of-History (PoH) agreement combined with Proof-of-Stake (PoS) consensus algorithm. Due to its hybrid model – Solana attracts both short-term and instutional investors to its ecosystem.
Proof of History is a new method that we have not previously encountered in E-Club Trading articles referring to cryptocurrencies. In short, Proof-of-History is a sequence of computation that can provide a way to cryptographically verify passage of time between two distinct events. One of the most challenging topics in distributed systems is the sequence of time. And it can be argued that Bitcoin’s proof of work algorithm most important feature is functioning as a decentralized clock for the system. At Solana though, Proof-of-History provides a solution for the time sequence, having built a blockchain system around it. All at the same time maintaining the high security of transactions.
SOL is the native token for the Solana network. It works in such way that users pay transaction fees in SOL when transferring funds or interacting with smart contracts. SOL token is based on the SPL protocol (very similar to ERC20 used by Ethereum) developed specifically for DeFi applications.
Valuation-wise – Solana has recently most obviously benefited from the increasing popularity of decentralised finance and NFT. Nevertheless, the competition in this space is gearing up. Cardano is implementing smart contracts and Ethereum is continuously innovating and improving its ecosystem. It is fair to say that SOL has still a long way to catch-up with its pear rivals, but more industry pundits are saying that it has a good chance of surpassing Ethereum in the future due to its amazing blockchain innovations. It remains to be seen how it will evolve, but definitely an altcoin to have on your radar!
With innovative regards,
E-Club Trading team.