spotlight_solana
CEX.IO Spotlight: Solana
Jan 13, 2022

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Key info (January 13, 2022):

  • Circulating Supply — 311,778,051.50 SOL
  • Total Supply — 511,616,946 SOL
  • Sector — Smart Contract Platforms
  • Token Type — Native
  • Token Usage — Payments & Staking
  • Consensus Algorithm — Delegated Proof-of-Stake (Tower BFT)
  • Genesis Block Date —March 16, 2020
  • ATH — $260.06
  • ATH Date — November 6, 2021

Overview

What is Solana?

Solana is an open-source and base-layer blockchain protocol. Created by Anatoly Yakovenko in 2017, Solana strives to provide developers with a scalable platform for decentralized applications (dApps).

Solana’s timestamp feature, aka Proof of History (PoH), solves the “source of time” issue in proof of work and proof of stake-based blockchains (like Bitcoin). The PoH mechanism categorizes transactions according to when they enter the network.

Solana also uses a Delegated Proof of Stake (DPoS) consensus algorithm to secure the network. DPoS networks provide more incentives for smaller investors to decide which nodes can confirm blocks.

Solana developers claim that the network can support over 50,000 transactions per second (TPS) while maintaining block times of 400 milliseconds. As of December 2021, Solana has 2,000 – 3,000 TPS and 0.5 – 0.55 seconds block time, according to Solana Beach.

Additional design goals include lower transaction costs, maintaining thousands of nodes while remaining fast and scalable. Solana also aims to support all LLVM-compatible smart contract languages.

Solana’s History and Founders

Before creating Solana, Yakovenko worked for Qualcomm and Dropbox as a software engineer. Leveraging his extensive experience in compression algorithms, Yakovenko explained in his 2017 White Paper how he could solve scalability by speeding up PoW and PoS blockchain networks. 

Yakovenko would team up with his Qualcomm colleague Greg Fitzgerald to build a blockchain network that used PoH as its core. In February 2018, they published the Solana whitepaper and released the internal testnet.

Solana is a trustless and distributed protocol that uses a mix of new and old scalability solutions to solve the throughput problems existing in the Bitcoin and Ethereum networks. 

Initially, the project was called Loom. The founders decided to rename it to Solana to avoid confusion with the Loom Network, an Ethereum-based layer 2 project.

Alongside Greg Fitzgerald, Eric Williams, Yakovenko created Solana Labs, Inc. Today, Solana Labs is the main contributor to the Solana Network.

Solana raised over $25 million pre-launch funding on various private and public token sales, including $20 million in a Series A round led by Multicoin Capital, Foundation Capital, NEO Global Capital, and other investment firms. 

The Solana network went through multiple permissioned testnet phases until the so-called Mainnet Beta was eventually released in February 2020. The initial beta network featured only basic transaction capabilities and smart contract support but did not include any staking reward. Recently, Solana developers enabled staking in the network but it has yet to officially leave this beta period. 

Solana Network Features

According to Solana Labs, the Solana network is built on eight innovations

  • 1. Proof of History
  • 2. Tower BFT
  • 3. Turbine
  • 4. Gulfstream
  • 5. Sealevel
  • 6. Pipelining
  • 7. Cloudbreak
  • 8. Archivers

Proof of History

In blockchain networks, nodes can’t trust the timestamp on messages received from other nodes, so agreeing on the time and sequence is one of the biggest challenges in distributed networks. Solana solves this issue using a cryptographically secure source of time across the network called Proof-of-History. Proof of History is a Verifiable Delay Function (VDF) that requires a specific number of sequential steps to evaluate but produces a unique output that can be publicly verified. Since nodes can trust the timestamp in the Solana network, this allows them to create the next block without coordinating with the entire network.

Tower BFT

Tower BFT is specifically designed to take advantage of the synchronized clock and it is used to achieve consensus on network transactions. Each time a node votes on a particular fork, they commit to a certain amount of time where they are locked out from voting on an opposing fork. This locked period grows exponentially if they continue voting on the same fork. Nodes can observe and examine timeouts of all the other validators in the network to see what fork can be valuable to support.

Turbine

Turbine allows Solana to facilitate the seamless transportation of data to nodes on the blockchain. Turbine is a separate but connected protocol that transmits blocks independently of consensus. Turbine breaks data into smaller packets along with erasure codes before sending them out. A similar propagation technique is used in a BitTorrent network.   

Gulf Stream

In Solana architecture, every validator knows the order of upcoming leaders (block producers), so clients and validators forward transactions to the expected leader ahead of time. This allows validators to execute transactions rapidly, switch leaders faster, reduce confirmation times, and reduce the memory pressure on validators from the unconfirmed transaction pool.

Sealevel

With Sealevel, Solana can support parallel transaction execution in a single shard. Sealevel is a transaction processing engine that allows the network to process thousands of smart contract calls at once. It can be achieved because Solana transactions describe all the states a transaction will read or write while executing. This not only allows for non-overlapping transactions to execute concurrently but also for transactions that are only reading the same state to execute concurrently as well.

Pipeline

For sub-second confirmations, it’s not enough to form consensus quickly but you also need a fast validation. And Solana uses pipelining infrastructure for this, making different hardware responsible for separate steps of data processing. 

Validation pipelining can be compared with a universal washer that can do 3 separate things at the same time — wash, dry, and fold laundry. So after finishing the first stage (wash), laundry moves to the second stage (dry), and then to the third one (fold). To optimize the process, the new laundry is added to the washer when the previous laundry moves to the next stage. So it is possible to make three loads of laundry simultaneously. 

pipeling_solana

Source: Solana blog

Cloudbreak

Cloudbreak ensures that data is simultaneously read and written across the network. Cloudbreak was designed to optimize for concurrent reads and writes spread across a RAID 0 configuration of SSDs. Each additional disk increases the number of concurrent reads and writes programs can perform, adding storage capacity available to on-chain programs. 

Archivers

Archivers are used to download data from the blockchain into its distributed ledger storage. Archivers do not participate in consensus. A decentralized network of archivers stores small parts of the blockchain state. This “state” is also broken into many pieces and erasure codes. The network may ask the Archivers to prove that they’re storing the required data. For Archivers, Solana refers to Proofs of Replication (PoRep), which are borrowed from Filecoin. At the moment, Archivers are not implemented and are on the long-term roadmap. 

Solana Native Token

Utility

The Solana network has a native token called SOL. Fractional SOLs are called lamports. A lamport has a value of 0.000000001 SOL.

At the moment, SOLs have two main use cases within the network:

1. Transaction Fees — users can use SOL for payments within the network and interacting with smart contracts

A fixed portion of each transaction fee (initially 50%) is burnt, the remaining fee goes to the current network leader processing transaction. Transaction fees are set by the network cluster based on recent historical throughput.

Solana has its equivalent of ERC-20 tokens called SPL tokens. The Token Program allows developers to create fungible and non-fungible tokens (NFT) within the Solana network.

2. Staking — users can stake SOLs to receive the reward and help secure the network.

Solana uses a Delegated-Proof-of-Stake (DPos) consensus algorithm, meaning that users can receive staking rewards by delegating their coins to validators or becoming validators themselves. The more coins delegated to a validator for staking, the more often this validator is selected to validate new transactions. The more transactions the validator writes, the more staking rewards the validator and its delegators earn.

Token distribution

The Solana project had five different funding rounds and four of them were private sales. These private sales began in April 2018 and finished in January 2020. The public ICO took place shortly before Mainnet Beta’s launch in March 2020. 

The remaining tokens from the initial SOL supply were held by Solana Labs developers, the Solana Foundation that help fund development and balance validator voting power, and a “community reserve” to fund community and developers initiatives. “Community reserve” is also managed by Solana Foundation.

So the initial distribution of SOL tokens was:

  • 15.86% to Seed Round investors
  • 12.63% to Founding Sale investors
  • 5.07% to Validator Sale investors
  • 1.84% to Strategic Sale investors
  • 1.6% to ICO investors
  • 12.5% to team members
  • 12.5% to the Solana Foundation
  • 38% to the Community reserve fund
solana_tokens_destribution

Source: Messari

Solana Ecosystem and Partners

The Solana ecosystem started to form actively after the Mainnet Beta launch in March 2020. Solana also organized a hackathon to attract developers for creating dApps, and some of them were launched on IDO. The Solana ecosystem has seen a significant surge of activity in 2021. 

In October 2020, the Solana website stated about 14 projects building on the network but now it stated about over 400 projects. Most DeFi projects on Solana were deployed in the autumn of 2021.

DeFi

Decentralized Exchange (DEX) is the leading sector in the Solana ecosystem. They take over 50% total value locked (TVL) in Solana protocol and ecosystem. Solana DEXs use AMM, order book, and hybrid systems. 

Also, the Solana ecosystem has multiple platforms for yield farming, lending/borrowing, IDO, and derivatives. Mango Market, the biggest derivative platform in the Solana ecosystem, has $180+ million deposit value and $40+ million borrow value.

Stablecoins

In April 2020, Solana partnered with Terra to launch a TMON stablecoin. And since then, stablecoin projects gradually started joining the Solana ecosystem. At the moment, over $5 billion worth of stablecoins circulating inside the ecosystem.

Oracles

The top oracle projects, Chainlink and Band Protocol, are actively used by Solana-based projects. In the Solana network, there are also native oracle projects such as Pyth, Switchboard, and Gravity.

NFTs

The Solana ecosystem includes multiple NFT marketplaces, collectibles, and infrastructure projects. NFT collectibles have the most TVL in Solana’s NFT market. The biggest Solana NFT projects in terms of TVL are SolMokey and Degenerate Ape.

solana_ecosystem

Source: Solanians

Find out more about Solana

Whitepaper

Code review

Solana documentation

Solana established itself as a fast network but the network’s decentralization is still the subject of active debates inside and outside the community. Also, crypto enthusiasts claim that Solana is relatively expensive in terms of running a node and becoming a validator compared to many other networks. Solana developers continue working on onboarding more validators and improving network features for developers and the community. But still, Solana has evolved a lot in recent years and it helped the project get a large fan base. 

On CEX.IO, you can find multiple options to earn with Solana. You can buy, trade, and stake SOL without a lock period, so you can withdraw or add more funds whenever you want. You can even trade SOL when you participate in staking. 

Illya Otychenko
Illya Otychenko

Illya Otychenko is a writer, content strategist, and market analyst located in Kyiv. Illya discovered crypto back in 2015, and remains passionate about the industry.

Illya’s experience includes writing and researching online brokers, ICO trackers, and crypto firms. Presently, Illya is a content writer and community manager for CEX.IO. Outside of the office, Illya enjoys hiking, reading books, and playing video games.