top of page

Solana (SOL): Opening cryptocurrencies to the masses.



With its native scalability, the Solana (SOL) blockchain is inherently fast and operates more cost-effectively than many other established blockchains.



SUMMARY


Solana (SOL) was founded in 2017 with the aim of scaling censorship resistance and increasing transaction throughput by an order of magnitude, at a much lower cost than other blockchains such as Bitcoin or Ethereum. Solana was developed as a decentralised protocol and includes an innovative proof-of-history (PoH) timing mechanism that is implemented before and supports the proof-of-stake (PoS) protocol structure. The result is an ultra-fast blockchain that can process more than 50,000 transactions per second without relying on layer 2 systems or sharding and can grow as the protocol's usage grows.


CONTENT

  • Native scalability of the Solana blockchain

  • A new blockchain architecture: proof of stake and proof of history

  • Proof-of-stake consensus algorithm with the SOL token

  • SOL Token Structure and Economics


NATIVE SCALABILITY OF THE SOLANA BLOCKCHAIN


The problem of scalability has plagued many cryptocurrencies almost from day one. Blockchain ledgers and decentralised payment networks offer users decentralised security - but the more decentralised security they offer, the longer it can take for new transactions to be verified and added to the blockchain. These networks face the challenge of ensuring sufficient transaction speed as the number of users and transaction volume grows while maintaining the security and decentralisation of the network.


When we talk about scalability and throughput, we refer to how many transactions can take place per second (this capability is called Transactions per Second (TPS)). With a high number of transactions per second, time becomes a critical factor for efficiency. Each computer (or node) that processes transactions on a decentralised blockchain network has its internal clock that it operates by. With thousands of nodes around the world, there are bound to be slight variations from the local system clocks. This becomes problematic when the decentralised network needs to reach a consensus on which transactions have taken place and in what order. The problem of timestamp synchronisation is present in both proof-of-work (PoW) and proof-of-stake (PoS) consensus mechanisms.


When transactions take place, they are timestamped according to the local system clock. Then, when other nodes verify the transactions, the messages about their confirmation or rejection are also timestamped. The inherent discrepancies between local system clocks (even for nodes acting in good faith) ultimately pave the way for attacks where bad actors can try to take over a cryptocurrency network with fake transaction transmissions that closely resemble the real timestamps - for example, "fake stake" attacks (or "resource expansion" attacks) in the case of PoS and denial-of-service (DoS) attacks in the case of PoW. To ensure that transactions have not been tampered with and that money is only spent once, a lot of time and computing power needs to be spent on checking the accuracy of the timestamps in a PoW or PoS system.


If all the clocks in the decentralised network are synchronised, it takes much less time to check transactions because the individual nodes do not have to spend as much computing power checking the different time stamps. This synchronisation allows the network to optimise speed. As a result, the Solana blockchain is inherently fast and scalable - and enables greater energy efficiency and higher security due to the low computing power and tamper resistance of the synchronised timestamps. Solana's efforts to increase transaction speed rely on a semi-centralised structure in which a node leader is elected and all nodes agree to adopt a universal time source.


The mechanism built into Solana to synchronise time between nodes helps the network achieve a theoretical peak capacity of 65,000 transactions per second at present. Although this figure is supported by a test network and not a real-world implementation, even a speed of 50% of the capacity of Solana's test network would be a groundbreaking achievement for the blockchain space. Measured against today's transaction speeds, 65,000 transactions per second is about 10,000 times faster than Bitcoin, 4,000 times faster than Ethereum and 35 times faster than Ripple - and even about 2.5 times faster than Visa. The protocol is theoretically designed to scale with Moore's Law, meaning its capacity doubles every two years due to improvements in hardware and bandwidth. In other words: As computers get faster, Solana gets faster.



A NEW BLOCKCHAIN ARCHITECTURE: PROOF-OF-STAKE AND PROOF-OF-HISTORY


Most existing blockchains largely ignore the role of time in their function. Each node stamps transactions and messages about their confirmation or rejection exclusively according to its local clock and sorts out the discrepancies later. This becomes problematic when the decentralised nodes of a network need to reach a consensus on the validity of transactions and the order in which they occurred.


Traditional consensus methods require all nodes to communicate with each other to determine that time has passed. Each node upvotes or downvotes a particular block to indicate that the block is valid or invalid, respectively. For a block to be considered valid by the network, a certain number of upvotes must be counted. Therefore, if a local clock generates a timestamp that differs greatly from the time used by other validators, this can cause a delay in confirmation time or even rejection of the block.


Since nodes must communicate back and forth to determine timing, a significant amount of computing power and time must be spent determining the correct timing of messages and transactions. The longer it takes to reach consensus, the slower the process of adding new blocks becomes, as the next block cannot be verified and added to the blockchain until the current block is confirmed.


Without a trusted time source, discrepancies between the clocks of individual devices can become a recurring and significant problem, where there is no guarantee that each node or network participant will quickly or accurately verify the authenticity of a message.


Solana's blockchain protocol is designed to provide verifiable timing while still maintaining many decentralised properties without relying on a "central clock". The project uses the so-called Proof-of-History (PoH) consensus method to add the element of time to the Solana blockchain ledger. PoH is designed to cryptographically verify the passage of time between two events. It links messages from nodes about the validity of blocks together to create a relative chronological order of events that does not depend on local clocks or timestamps.


To achieve this, a network node is selected as a leader and tasked with creating a PoH sequence. This leader orders the messages to be as efficient and high-throughput as possible. The ordered output is sent to replication nodes called validators, which are responsible for checking the consensus algorithm. At any given time, there is a leader in the network who is selected through PoS elections. Solana's PoS system is based on a Byzantine Fault Tolerance (BFT) mechanism called Tower Consensus. Tower Consensus uses PoH as a global time source before reaching consensus to reduce latency.


Any validation node can be elected PoH leader. If the PoH generator fails, the validation node with the next highest voting power is selected to replace the original leader.



PROOF-OF-STAKE CONSENSUS ALGORITHM WITH THE SOL COIN


SOL is the native coin of the Solana blockchain. The validators who process transactions and run the network, as well as the leaders who generate PoH sequences, are selected based on how much they contribute to the overall success of the network, i.e. how much SOL they have staked. The nodes with the highest stakes are likely to be selected to validate and add transactions to the blockchain, earning the associated rewards. This structure ensures that those who run the network have a strong incentive to ensure that the network functions optimally and without failures.


Users who only have a small amount of SOL can also delegate their SOL to a larger validator. This way they can receive some of the validator's rewards even though they do not have enough SOL to become a validator themselves. This method of delegation also provides an incentive for people with low SOL ownership to support the Solana network.


Solana's incentive system increases the overall security of the network, as many people are financially invested in its proper functioning. It also discourages malicious and rogue actors from attacking the Solana blockchain, as they have to put in a stake to become an active network participant.



SOL TOKEN STRUCTURE AND ECONOMY


In addition to being eligible to become a validator or leader, SOL can be used to generate staking rewards, pay transaction fees on the Solana network and for PoS voting to control the network.


Initially, 500 million SOL tokens were minted. Of this, 12.5% was retained by the founders, 1.6% was sold at auction, 35.4% was allocated to closed investors, 38% was designated as community tokens and 12.5% is held by the Solana Foundation, which is governed by an independent board in Geneva, Switzerland. The Foundation's funds are used for programmes, marketing, grants and the continued development and support of Solana. Solana transaction fees are paid in SOL and burned (or permanently destroyed) to reduce the overall supply and thus maintain a healthy SOL price.

Comments


bottom of page