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What is Solana, and what does it offer?

What is Solana, and what does it offer?

06 Apr, 2022 - 4 min read

Solana is a public blockchain platform with a cryptocurrency called SOL. Solana has been in the news for its fast transaction time and low fees.

Solana is a decentralised blockchain with a rapidly growing ecosystem of DeFi and NFTs. The Solana crypto coin, SOL, is among the top 10 cryptocurrencies by market capitalisation.

Solana has emerged as a strong competitor to Ethereum, claiming to offer faster speed, lower fees, and a more sustainable protocol. Ethereum sometimes has a network congestion problem, leading to high fees and low speed. It is based on a proof of work protocol, which consumes more energy. On the other hand, Solana uses a combination of two protocols that require less energy - proof of history and proof of stake, to offer a more sustainable alternative.

According to Solana, a single Solana transaction takes 1837 Joules of energy, less than two searches on Google, and a fraction of the energy required to charge a mobile phone. In contrast, a Bitcoin transaction requires almost seven billion Joules.

Solana news

Solana has made headlines from time to time for a variety of reasons. In late 2021, when the prices of many major cryptocurrencies fell, the Solana price increased substantially. This unusual price movement attracted the attention of crypto traders, investors, and other stakeholders. Solana was in the news again in December 2021 when former First Lady of the United States, Melania Trump, announced that she would launch a Solana NFT.

The appreciation in the Solana crypto price may possibly be explained by the fact that the platform is supported by FTX, one of the world’s leading digital asset exchanges. FTX has also launched various projects based on the Solana platform. Many experts and investors are bullish, and Solana price predictions generally reflect their confidence.

The fastest blockchain in the world?

Solana claims to have been the fastest blockchain in the world for some time now. In tests carried out in February 2022, the Solana coin was found to be the fastest among mainstream cryptocurrencies, hitting speeds of 50,000 transactions per second (TPS). The tests were conducted by the Federal Reserve Bank of Boston in partnership with MIT’s Digital Currency Initiative.

So it’s not surprising that Solana is a strong challenger to Ethereum, which has a TPS of only about 13. But Solana will have to fight hard to retain this position and is already facing challenges from competitors such as Bitgert.

The speed of a blockchain depends on its block time - the time it takes the nodes (also called miners or validators) to verify transactions within a block and produce a new block. Solana claims to have an ultra-fast block time of 400 milliseconds.

Solana staking

Solana uses the term ‘validator’ for those who operate network nodes. If you become a validator, you provide computing resources, secure the ledger, and can earn SOL. You earn a transaction fee and an inflation rate. Transaction fees are participant-to-participant transfers. The inflation rate is fixed for the year. It started at eight per cent in 2021 and will reduce by 15 per cent each year until it reaches 1.5 per cent.

To get started as a validator, you need to read the technical requirements mentioned on the Solana website. You can get more information and community support from their validator community on Discord.

You can also earn from Solana staking. Once you own SOL, you can stake some to validator nodes to help increase their voting weight. For this, you need to create a stake account on Solana. Then you can delegate tokens to validators on the network and earn rewards. The amount you earn from Solana staking is calculated based on the current inflation rate, the amount of SOL you staked, the validator’s uptime, and the fee.

Disclaimer

This article is over two years old, last updated on April 6, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent cryptocurrency articles.

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Jodie Humphries

Personal Finance Editor

Jodie Humphries is an experienced Personal & Home Finances Editor for RateCity with expertise in financial topics, including credit, loans, superannuation, mortgage and housing, insurance, telecommunications, and more. For over a decade, Jodie's journalism and editing career has seen work published at both Finder and Sharesight, and as one of RateCity's chief contributors, Jodie spends her time working on ways to make personal finances within reach of everyone in Australia.