Solana is a high-performance blockchain designed for decentralized applications and cryptocurrencies. It was the 3rd largest blockchain in 2021 and was once dubbed “the Ethereum killer”, thanks to its scalability and transaction speed per second.

It's known for its speed and scalability, making it a popular choice among developers for building decentralized applications (DApps) and other blockchain-based projects such as NFTs.

Over the years Solana has proven to be a go-to for both on-chain developers and now even web2 entities looking to utilze blockchain technology. 

But Solana has not been without its controversy, whether related to the network’s infrastructure and downtime, or the market trends and less than decentralized tokenomics of the native token, SOL. 

In this guide we cover Solana in more detail, the unique features  of the  network, the controversy around it and its timeline, along with the different use cases associated with the blockchain. 

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Understanding Solana: The Breakdown

The story of Solana begins with Anatoly Yakovenko, a former software engineer at Qualcomm. In 2017, Anatoly set out to tackle some of the most pressing issues facing blockchain technology: scalability and speed. 

At the time, popular blockchains like Bitcoin and Ethereum were struggling with slow transaction processing times and high fees, making them impractical for many real-world use cases.

Anatoly's vision was to create a blockchain platform that could handle thousands of transactions per second while maintaining security and decentralization. To achieve this, he and his team designed a unique consensus mechanism known as Proof of History (PoH). 

PoH is a cryptographic clock that timestamps transactions before they are added to the blockchain, allowing Solana to achieve remarkable throughput without sacrificing security. 

Be sure to read on to learn more about PoH. 

In March 2020, the Solana Mainnet was launched, marking a significant milestone in the project's development. Solana's Mainnet demonstrated its capabilities by consistently processing thousands of transactions per second, far outstripping the performance of many other blockchains.

Solana's rise to prominence didn't stop there.

Its ecosystem quickly attracted developers and projects seeking to build high-performance DApps, decentralized exchanges, and various DeFi applications. The Solana Foundation also played a crucial role in supporting this growing community, providing grants and resources to foster innovation.

One of the key factors contributing to Solana's success was its ability to offer a seamless experience for developers. Solana's compatibility with popular programming languages such as Rust and Python. 

Over time, Solana's native token, SOL, gained significant value, reflecting the growing interest and adoption of the Solana ecosystem. The project's innovative technology, scalability, and the dedication of its team helped it become a major player in the blockchain space.

Solana has emerged as a prominent blockchain platform. It offers the speed and scalability necessary to drive the future of decentralized applications and the broader blockchain ecosystem.

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Solana’s Unique Consensus Mechanism

For a blockchain to function smoothly, there must be a consensus among all participants (nodes or computers) regarding the order and validity of transactions. 

Without consensus, chaos would reign, and transactions could be tampered with.

Most blockchains rely on traditional consensus methods like Proof-of-Work (PoW) or Proof-of-Stake (PoS). While these methods have served their purpose, they come with their own set of challenges, such as slow transaction times or potential centralization issues.

Solana's innovation lies in its use of Proof of History (PoH), a novel concept that timestamps events and transactions before they are added to the blockchain. PoH serves as a historical record, providing a verifiable order of events. This significantly enhances the network's scalability and speed, as nodes can quickly process transactions based on the established history.

It also uses PoS traditionally found on Ethereum’s network, but is able to incorporate PoH also

To understand PoH, imagine a library with a special timestamp machine. 

Whenever someone wants to add a book to the library's catalog (equivalent to a blockchain transaction), they must obtain a timestamp from this machine.These timestamps are generated at regular intervals and embeds them in the blockchain and act as irrefutable proof of when each transaction occurred.

Why is PoH so Powerful?

Solana's Proof-of-History offers a range of advantages:

• Speed: Transactions on Solana occur swiftly due to the precise order maintained by the timestamp machine.

• Security: The chronological order is verifiable, making it extremely challenging for anyone to manipulate the system.

• Scalability: Solana can process a high volume of transactions per second thanks to its efficient consensus mechanism.

The blockchain requires decentralization, security and scalability, all of which are answered by the PoH consensus mechanism. 

While being reliant on PoH, Solana further utilizes Proof-of-Stake consensus set out by Ethereum. A Byzantine Fault Tolerance (BFT) mechanism called Tower Consensus is used to power PoS which leverages PoH. Latency is reduced on the network by using Tower Consensus for a source of time prior to completing consensus. 

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Is Solana Truly Decentralized?

Solana distinguishes itself with its unique architecture. It employs a proof-of-history (PoH) consensus mechanism combined with a delegated proof-of-stake (DPoS) system. This approach enables Solana to process thousands of transactions per second while keeping fees low.

However, the central debate around Solana's decentralization often centers on its DPoS aspect.

Validator Centralization

In Solana's DPoS, network validators are chosen to produce blocks and confirm transactions. Critics argue that the relatively small number of validators (currently around 100) could lead to centralization, as a handful of powerful validators may dominate the network.

Proponents, on the other hand, contend that Solana's validator set can be expanded over time, and decentralization is a process, not an immediate state. They argue that the network's architecture is designed to be scalable and can accommodate more validators as the ecosystem grows.

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Tokenomics and Voting Power

Another point of contention is the concentration of voting power among a few large token holders and validators. Critics claim that this concentration could undermine the democratic nature of the blockchain's governance, potentially allowing a select few to make critical decisions.

Proponents argue that the governance mechanisms can be improved over time, and decentralization is not solely dependent on the initial distribution of tokens. They emphasize the importance of active community engagement to ensure that power is evenly distributed.

Although it has powerful tokenomics, over the years discussions have arisen on whether or not they can be considered questionable. 

PoH consensus relies on centralized nodes for staking, making it not as decentralized as other blockchains. Trusted validators must maintain the ledger, but this then leaves the power in the hands of the few.

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Network Security

A central argument against Solana's decentralization is that the network's security might be compromised if a small group of validators collude or face external pressure to compromise the network.

Proponents counter that Solana's security is strengthened by its high transaction throughput and its ability to withstand various attacks, such as Distributed Denial of Service (DDoS) attacks. Additionally, they believe that as the network grows, it will become more resilient to such threats.

The debate over whether Solana is truly decentralized is far from settled. While many have pointed to the potential centralization of power with those on the network the debate is still an open conversation. 

Solana's path toward greater decentralization will likely depend on the ongoing development of its governance and validator ecosystem, along with government legislation set in place over crypto-based assets.

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Solana’s Offerings for Developers

The Solana network is a blockchain developer’s playground.

It boasts a robust infrastructure that can be utilized for a number of use cases. It’s an added bonus that popular developer languages like Python can be integrated into Solana for a seamless experience. 

So what does Solana offer developers?

1. Fast and low-cost transactions: Solana is renowned for its lightning-fast transaction speeds and low fees. It can process 710,000 TPS on a standard gigabit network and 28.4 million TPS on a 40-gigabit network, making it ideal for applications requiring quick and cost-effective transactions. 

Compared to Visa which can process up to 24,000 transactions per second it’s really powerful. Fees cost 1.15% to 3.15% of the transaction amount. 

2. Decentralized Applications (dApps): Solana provides a robust platform for developers to build decentralized applications. dApps can utilize Solana's high-speed infrastructure to offer users a seamless and efficient experience.

3. DeFi (Decentralized Finance): The DeFi space has embraced Solana due to its speed and cost-effectiveness. Users can participate in lending, borrowing, and trading activities on Solana-based DeFi platforms with minimal fees.

Examples include:

• Serum Exchange (Crypto exchange)
• RAYDIUM (Automated Market Maker)
• SOLFARM (Yield farming)

4. NFTs (Non-Fungible Tokens): Solana has gained traction in the NFT space, with artists and collectors using it for minting, buying, and selling NFTs. The low fees and fast confirmation times make it a preferred platform for NFT enthusiasts.

Some top NFT collections on Solana are: 

• STEPN
• EV.io
• Last Haven
• Mad Lads
• Claynosaurz

Solana as a network continues to grow, no matter the conditions and incentive on crypto. As time has progressed, the blockchain has become more than just finance. We now see gaming and NFTs becoming a hot topic, and with how powerful these DAOs and dApps are, it is necessary to have the power of a blockchain like Solana behind them. 

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Solana’s Native Token and the Tokenomics

SOL is the native cryptocurrency of the Solana blockchain. It's used for various purposes within the network, such as:

• Paying transaction fees 
• Staking
• Governance
• Participating in the platform's decentralized applications (dApps).

Solana coin has a maximum supply capped at 489,843,360 tokens and its current circulating supply is 411,018,580 SOL. It is a deflationary cryptocurrency meaning that when transactions are performed and fees are paid, tokens are in turn burnt or destroyed so the supply decreases. 

In turn, the value of SOL token can increase in the future due to scarcity. 

The initial distribution of SOL tokens was through private and public sales, with a percentage reserved for ecosystem development, partnerships, and the Solana Foundation. Ongoing token supply is determined by the network's inflation and validator rewards.

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The Value of SOL Token Over Time

Many readers will be wondering about the Solana coin and how it has performed over the years. 

Solana’s value has definitely increased as time as progressed, but it hasn’t come without uncertainty!

Data from CoinMarketCap shows that Solana is the sixth most popular cryptocurrency by market capitalization, sitting at $24,168,042,517 in total.

Let’s breakdown SOL’s history and where it stands today in 2023. 

Solana Token’s Beginning

SOL was offered via public offerings on the CoinList platform on March 24, 2020, which saw 8 million tokens made available. 1.6% of the total supply was made available via an initial coin offering (ICO). 

Back then the going rate for 1 SOL was sold for $0.22. Once it hit exchanges 1st July, the starting price was $0.9511 showing nearly a x5 in price from the get go for early investors. 

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How Has it Panned out For Solana?

On 11th June 2021 it peaked at a staggering $260, which showed strong incentive at the time. However, 2021 was the last bull run and due to a number of different societal and economic factors it could be hard to hit that all time high price again.  The price of Solana at the time of publishing this article is $57.

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Solana and FTX

Last year saw the rise and fall of the infamous crypto exchange, FTX. Unfortunately for Solana and their token, FTX had a substantial amount of SOL in their portfolio, along with their users’ funds being somewhat lost in the void. 

It was found that FTX held around $1.16 billion in SOL. When news came out on FTX and their dodgy doings, Solana’s price along with other cryptocurrencies faced correction as many panic sold and were without their assets. 

This was back in November 2022, more so recently a court hearing has been passed to allow FTX to sell off their remaining crypto. Many are speculating what this will do to Solana, both positively and negatively. 

FTX can only sell $100 million worth of crypto per week once the plan is in action, which may act as collateral if prices were to be swayed. 

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Solana and Visa

Amidst FTX, Solana and their token have proven to be a formidable force. 

Visa has decided to choose Solana to process their blockchain transactions. Visa processes thounsands transactions a second and thanks to the innovative infrastructure from Solana, they will be able to handle their needs and much more. 

In contrast, Solana processes 65,000 tps. 

Thanks to high throughput, low costs, and significant node presence Solana network is the definitive choice for one of the world’s leading payment processor. Could we see an upcoming surge in price and usage within the Solaa ecosystem thanks to this mainstream partnership.

The past few years have been a test for Solana’s token, SOL. Once being a triple figure crypto, Solana’s price is not a fraction that it once was. 

Despite the correction, there’s a lot going on via the network that the token can benefit from. 

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Benefits of Solana

If you are a blockchain enthusiast or want to know more about the industry, it is good practice to know the benefits of your desired blockchain. 

Solana’s advantages  make it shine in the world of blockchain. Here are some of the most notable ones to know about!

• Scalability: The unique consensus mechanism allows it to scale horizontally, making it highly scalable compared to many other blockchains. This scalability is crucial as the demand for blockchain applications continues to grow.

• Speed: Solana's processing speed is a game-changer. It reduces the time required for transactions and Solana smart contract execution, making it an attractive option for developers and users.

• Cost-effective: The low transaction fees on Solana make it an excellent choice for microtransactions and other cost-sensitive use cases.

• Developer-friendly: A developer-friendly environment is offered, along with support for multiple programming languages, making it accessible to a wide range of developers.

It is clear why 350 projects have chosen Solana as the network to build, scale and host their decentralized applications on! 

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Drawbacks of Solana

While an innovative blockchain, Solana of course has drawbacks that should be addressed. Doing so allows you to understand it more and have somewhat of an unbiased opinion on the network. 

• Centralization concerns: Some critics argue that Solana's design, which emphasizes speed, may compromise decentralization. This is a topic of ongoing debate in the blockchain community.

• A learning curve: While Solana offers many benefits, it may have a steeper learning curve for developers unfamiliar with its unique architecture.

• Ecosystem immaturity: Although Solana has grown rapidly, its ecosystem is still developing, which may limit the number of dApps and services available compared to more established platforms like Ethereum.

• Competition: Solana faces stiff competition from other blockchain projects, each with its unique strengths and features.

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Our concluding thoughts on Solana

In conclusion, Solana is an exciting blockchain project that has quickly gained attention in the crypto and blockchain space. 

Its unique combination of speed, scalability, and low costs makes it a powerful contender for the future of decentralized applications, DeFi, and NFTs. However, it's essential to consider both the benefits and drawbacks when evaluating any blockchain platform.

As with any investment or technology, it's crucial to do your own research before diving in. Solana's growth and potential are undeniable, but it's always wise to stay informed and keep an eye on developments in the rapidly evolving blockchain industry.

Whether you're a developer looking for a high-performance blockchain platform or an investor exploring new opportunities, Solana's strengths make it a name worth watching in the world of cryptocurrency and blockchain technology.

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Frequently asked questions

Is Solana decentralized?

Despite being apart of the blockchain, which is decentralized by nature, many have argued for against whether Solana is actually decentralized or not. There are a number of factors that have sparked this debate, for example:

• Validator centralization
• Voting power
• Network security

These factors at the current time seem to be controlled by a small group of validators via the networks delegated Proof-of-Stake consensus mechanism. Of course though this topic is up for debate, and it doesn’t deter developers from choosing to host and scale dApps via Solana!

When was Solana created?

Solana was first created in 2017 before the infamous bull run of 2021. Once the network had built a loyal online community of builders and investors, the Solana mainnet was later launched in 2020. 

Along with the mainnet being launched in 2020, Solana’s native token, SOL was also made available for investors in ICOs and open sales. 

Who founded Solana?

Solana was founded by Anatoly Yakovenko, who is a former software engineer at Qualcomm. His aim at the time was to overcome scalability and speed issues faced on the blockchain from previous networks.