Solana is a public, open-source blockchain that supports smart contracts, including non-fungible tokens (NFTs) and a variety of decentralized applications (dApps). Native to Solana’s blockchain is the SOL token which provides network security through staking as well as a means of transferring value.
Solana was created in 2017 by Anatoly Yakovenko alongside current Solana board member and Chief Operations Officer Raj Gokal. Yakovenko, now Solana Lab’s CEO, came from a background in system design and wanted to apply his knowledge toward a new blockchain paradigm that enabled faster processing speeds.
Quick facts:
Solana is a proof-of-stake cryptocurrency with smart contract capabilities including DeFi dApps and NFTs.
Solana boasts a theoretical throughput of 65,000 transactions a second with near zero fees.
The boom in the DeFi and NFT spaces have pushed fees on Ethereum extremely high causing crypto users to seek other options like Solana.
Solana has been at the center of controversy in the crypto industry as skeptics claim its transaction speed are only possible because the chain has sacrificed decentralization.
The founders aimed to create a brand new blockchain that could scale to global adoption. At the time, blockchain transaction speeds were limited to around 15 per second, a throughput that paled in comparison to Visa and Mastercard’s ability to process roughly 65,000 transactions per second. Yakovenko and Gokal sought to make a new blockchain that could meet demand at a global scale.
Solana now boasts a theoretical peak capacity of 65,000 transactions per second and has become one of the most highly used blockchains today due to its speed and cheap transaction costs.
Like almost any blockchain system today, Solana is still very new and not without controversy.
Solana’s blockchain
Solana runs on a hybrid protocol of proof-of-stake (PoS) and a concept Solana calls proof-of-history (PoH). Proof-of-stake is an algorithm that lets a blockchain maintain accurate information across all of its participants.
Proof-of-stake
With Proof-of-Stake, cryptocurrency owners pledge, or “stake,” their coins to a validator.
A validator is a computer running the blockchains software with its own copy of the blockchain. These validators are the equivalent of miners in a proof-of-work blockchain like Bitcoin’s.
Instead of competing with other computers to complete complex puzzles like in Proof-of-work, validators are chosen to add the next block of transactions based on how large their stake is (how many coins they have pledged to the network), how long they have staked for and a number of other criteria.
The idea is to measure the level of commitment network participants have and reward them for their dedication. The larger the stake relative to circulating supply, the more decentralized and secure the network becomes.
What is proof-of-history?
Proof-of-history is a method for proving that transactions are in the correct sequence and found by the right leader.
Solana’s blockchain is broken into slots or periods of time where a validator ingests transactions and produces a block. In this system, leaders are chosen ahead of each slot in order to save time.
A node (or validator) is chosen to be a “leader” of a slot through the proof-of-stake mechanism based on the quantity of SOL held. Each validator is responsible for continuing a count or tally of the passage of time, known as a proof-of-history sequence, and the next block of transactions for the slot they have been chosen for.
How proof-of-history works
Validator A is assigned to slot one and spends five seconds finding the next block.
Validator B is assigned slot two and takes five seconds to find the following block, amounting to the passage of 10 seconds.
Validator C is assigned to slot three and takes five seconds to find a block. By the end, a total of 15 seconds have passed.
It takes each validator the same amount of time to complete this process. We know validator C is assigned to slot three and because each block takes the same amount of time, we know that slot three should only begin at the 10-second mark. Therefore, validator C cannot start before or after the tally has reached 10 seconds.
Because this tally of the passage of time can be seen by all validators, and the slot leaders are chosen ahead of time, everyone knows when a leader is supposed to begin. If there were a fourth validator (validator D) chosen as the leader for slot four, all parties would know that validator D is only allowed to begin at the 15-second mark.
Why use proof-of history?
This system lowers latency and increases throughput because slot leaders can stream transactions to the rest of the validators in real-time rather than waiting to fill an entire block and send it at once.
As validators keep the count of time, they can stamp each incoming transaction with a time, or proof-of-history value, so the other nodes can order transactions within a block correctly even if they aren’t streamed in chronological order. The other nodes can then verify these transactions as they come in rather than having to review an entire block of transactions at once.
What makes Solana different?
Solana parts ways with other blockchains in the way consensus is formed among the nodes. While proof-of-history has its benefits, there are some concerns around Solana’s voting mechanism and whether or not it causes centralization.
With Solana, nodes must vote on blocks and their transactions’ legitimacy in order for them to become part of the chain. Nodes send votes to the leader and the leader is then responsible for tallying the votes themselves and signing off on the block.
In a typical blockchain, validators are chosen via proof-of-stake. They then create the next block of transactions and broadcast this to all the other nodes in the network. The rest of the network then audits the new block against their version of the ledger. Each node then checks its version of the ledger and the new block against all other nodes in the network. From here, nodes individually choose whether to agree that this new block is legitimate or not.
The process continues until a majority of nodes have agreed on one new version of the chain. While it is time-consuming, letting nodes come to an agreement without an intermediary tallying votes has been core to decentralized blockchains since Bitcoin was created.
Solana tokenomics
There are currently 315,100,273 SOL coins in circulation with a total supply of 511,616,946 without an established maximum supply.
The SOL token has two use cases. One is staking, where token holders can stake their SOL and receive rewards. The other allows users to use SOL as payment for fees associated with running smart contracts or other transactions.
Additionally, Solana distributes a fixed amount of inflation-based rewards across its weighted validator set that secures the Solana network. Each staking reward is weighted by the number of tokens that are staked. Yield is proportional to the number of tokens staked measured against the total token supply. Solana launched with an inflation rate of around 8%, which is expected to decline by 15% each year, a downward trend that will decrease until the rate reaches 1.5% annually, where it will remain. Issuances are anticipated to be sent to validators, with 95% of issued tokens toward validator rewards and 5% reserved for operating expenses.
Token distribution
Data from Messari shows that nearly 50% of Solana’s initial token allocation went to insiders, like venture capital firms. Only a fractional amount went to the public.
Initial token allocation major blockchains. Source: Messari
Solana investors
Solana investors include some of the most prominent venture capital firms in the crypto space: a16z, CoinShares, Alameda Research, Coinfund, and Parafi Capital. The reputation and size of its investors and the money they have provided have helped to boost Solana’s presence in the industry.
Solana network statistics
Solana’s network allows for a theoretical throughput of 65,000 transactions per second, a significant jump from Bitcoin’s seven transactions per second and Ethereum’s 15 transactions per second. (TPS). Combined with high gas fees on ETH’s blockchain, Solana offers a much lower barrier to entry, helping to increase its user base rapidly.
Transactions on Solana cost a fraction of the price of other blockchains, averaging at $0.00025. Solana attracts users worldwide due to its low costs and increased throughput capability.
Solana currently has 1,469 nodes in its ecosystem, with over 74% of the tokens circulating supply staked to the network generating rewards.
Solana’s DeFi
Solana’s (decentralized finance) DeFi ecosystem currently has over $8.6 billion in total value locked among its various platforms. This puts Solana in sixth place behind other chains like Ethereum, Terra, Avalanche and Fantom.
Solana’s leading platforms are the decentralized exchange Serum, the open liquidity mining platform Quarry and the Solana staking platform Marinade Finance.
Solana’s praises
As DeFi and non-fungible token (NFT) ecosystems have boomed in the last two years, Ethereum’s network has become overwhelmed and extremely expensive to use. Solana’s chain offers what Ethereum’s base layer currently cannot – fast transactions at little to no cost.
For this reason, activity on Solana’s chain has quickly grown in both the creation of decentralized applications (dApps) and transactions. While Ethereum still has over $125 billion locked within its ocean of dApps, Solana is growing exponentially.
Since its creation in 2017, Solana has become the sixth most used DeFi platform in value locked. There is currently almost $8.6 billion locked in various DeFi dApps on Solana, most of which accrued in 2021 alone.
Solana’s speed and low cost make it easy to use compared to other blockchains, adding to its appeal to both beginner and advanced crypto users.
Solana’s criticisms
Although Solana has quickly grown in popularity with its low-cost transactions as crypto users seek faster and cheaper platforms outside of ethereum, it has received criticism for a number of reasons.
Uncertainty around SOL Supply
In November 2021 accusations swirled that Solana lied about the total circulating token supply and had created millions of new tokens. Justin Bons, the founder and chief investment officer of the crypto fund manager Cyber Capital, made a series of tweets calling out Solana and what he believed to be a “long series of lies, fraud & deception” by SOL.
In the Tweets, he claimed that Solana’s team initially stated that SOL’s circulating supply was just 8.2 million tokens but that they had, without notifying the community, loaned an additional 13 million tokens to a market maker.
In response to the allegations Solana’s founder, Anatoly Yakovenko, wrote a Medium post to explain the additional coins. Yakovenko said that the tokens were provided to a market maker in order to provide liquidity in the aftermarket
“The Solana Foundation agreed to lend the market maker ◎11,365,067 tokens for a 6 month period. The problem: we did not disclose this information to the public, as well as the size and nature of the loan, during the CoinList auction and subsequent Binance listing,” said Yakovenko in his Medium post.
While the purpose of the coins seemed reasonable, many community members were concerned with the lack of transparency and the foundation’s willingness to release an excess of tokens into the marketplace, an act that could have drastic effects on SOL investors.
Centralization of Solana
Some opponents of Solana argue that a number of its aspects result in a centralized system. Roughly half of the token supply is owned by venture capitalist firms and other insiders. While some see this as counter to the philosophy of a decentralized network, others view their involvement as a necessary evil to fund blockchain adoption.
Additionally, just 19 nodes hold over a third of the cumulative stake and therefore validate over a third of transactions. On top of that, over 37% of staked SOL was held by validators run on Amazon Web Services as of Sept. 2021.
The hardware requirements and amount of SOL a validator must own to maintain a node are significant and likely push more individuals who wish to participate toward other solutions like AWS.
Solana’s staking system
The nature of Solana’s staking system has also led to centralization concerns. SOL rewards are proportional to the number of tokens staked. If a node were to split their stake between two validators to have two votes, they would get the same rewards and have to pay double the voting fee.
For this reason, stakers and validators seek to hoard tokens under fewer validators to win more blocks instead of spreading tokens and propagating the network. This process also creates a large barrier to entry to become a Solana node as small validators receive small rewards relative to the fees paid for a server and voting costs.
While this is true, young blockchains are almost always centralized to some extent until they grow to a certain level. Solana is a relatively young blockchain and may very well become significantly more decentralized over time.
Solana node and validator requirements
Technically, anyone can become a validator on the Solana network and there is no strict minimum of SOL required, though running a validator does cost money. Solana nodes are required to vote each day on new blocks. To cast votes validators must spend SOL and one day’s worth of voting costs 1.1 SOL or $133 per day at current prices. This translates to over $48,000 a year.
Hardware requirements may cost up to $6,000 or more to start a node so those who wish to become a validator should prepare to make an investment.
Outages
Solana’s network has come under fire for a number of network issues, some of which were complete network shutdowns. One such instance was in Sept. 2021 when the network was offline for 17 hours due to “resource exhaustion.”
The network has had a series of issues that haven’t seemed to spook many investors given the increase in Solana’s usage and price over time. That said, many skeptics worry about the network not being sufficiently decentralized given that a small group of developers could make a unilateral decision like shutting down the network.
It’s important to note that Solana is a newer blockchain and that most blockchains, including Bitcoin and Ethereum, have experienced brief moments of downtime.
As Solana co-founder Yakovenko said to his community on Reddit, “If it takes 2 years to build, it will take 2 years to stabilize.”
Much of the innovation in the tech sphere in the recent past has come from the philosophy of “move fast and break things,” an internal motto used by Facebook and a concept where things should be built quickly and issues should be worked out later in order to not stifle innovation.
While it’s true that this model produces results quickly, it can also have a profoundly negative impact on the users of products and services built with this mentality, especially services that deal with finance and people’s money.
While no users lost coins during Solana’s outages, the value of SOL dropped from roughly $191 to $123 in September as investors dumped the coin on the news of its outage.
How to stake Solana
Staking allows holders to earn rewards for helping to secure the network. They delegate their tokens to validators who process transactions and run the network, which follows a shared-risk, shared-reward financial model. The more stake that is delegated to a validator, the more often that validator will be chosen to write new transactions to the ledger and the more rewards it earns.
SOL can be staked on some exchanges as well as with personal wallets. While staking on an exchange is a great option for beginners, using a personal wallet and choosing a stake pool yourself helps to spread tokens across the network and further decentralize it. Using a hardware wallet like Ledger or Trezor is the best practice for keeping your private keys safe.
Wallets that you can stake Solana on include:
SolFlare
Sollet
Phantom Wallet
Math Wallet
Atomic Wallet
Exodus Wallet
Zelcore
Exchanges that you can stake Solana on include:
Binance
Kraken
FTX
Crypto.com
Where to buy Solana
Solana can be purchased on the following centralized exchanges:
Coinbase
Kraken
FTX
Binance
Crypto.com
BitMax
Solana can be purchased on the following decentralized exchanges:
Solana’s roadmap
Solana has several exciting developments that are coming online or have just been announced.
Solana Pay will allow merchants to accept USD Coin and other tokens using Solana’s speed and low cost. The new product came as a result of Solana’s partnership with Checkout.com, Citcon, and FTX and Phantom integrations.
Coachella, one of the world’s most famous music festivals, which will take place in Q2 2022, also announced an NFT collection built using Solana. Some of the NFTs have real-world value that include lifetime festival passes, guest passes, VIP passes, and other special perks that have not yet been announced.
Frequently asked questions
How much does SOL cost?
Where can you buy Solana?
Solana can be purchased on almost all popular exchanges.
What consensus mechanism does Solana use?
Solana uses proof-of-stake as well as a protocol known as proof-of-history.
How many transactions can Solana do per second?
Solana has a theoretical throughput of 65,000.
How much is the average transaction fee on Solana?
As Editor of Evergreen Content at Blockworks, Luke Conway oversees the creation of comprehensive educational guides on all things crypto to help users navigate the space. Before Blockworks he worked as an associate editor for Investopedia, managing broker reviews and a cryptocurrency news desk.
Today, Tulip Protocol made the announcement that they have integrated Chainlink Price Feeds in order to better secure their yield aggregating platform that is running on the Solana mainnet. The team had previously stated their intention to integrate Chainlink Price Feeds, and at this point, the connection has been completely put into action. Chainlink is the premier decentralized oracle network in the world, safeguarding tens of billions of dollars in smart contracts. It has diversified its offerings across other blockchains, notably Solana, Fantom, Polygon, BNB Chain, and others.
In a recent blog post, the team behind the Tulip Protocol explained that they had integrated Chainlink to provide users with more confidence that leveraged positions will be liquidated equitably using extremely accurate price data and that the protocol will continue to be completely collateralized at all times.
According to Tomasz Wojewoda, Head of Global Sales at Chainlink Labs:
“We’re pleased that Tulip Protocol has integrated Chainlink Price Feeds on Solana, helping secure its yield aggregation protocol with highly robust, decentralized market data. With the high-throughput performance of Solana and the strong security guarantees of the Chainlink Network, Tulip Protocol is able to empower users with a performant and secure platform.”
Tulip Protocol Seeks To Take Advantage Of Solana
Tulip Protocol brings together lenders who receive a return on their deposits and borrowers who are interested in gaining access to leverage. Users who initiate leverage positions are responsible for maintaining a loan-to-value (LTV) ratio that has been previously established. The Tulip Protocol then uses the asset price data that is provided by Chainlink Price Feeds to verify that this ratio is accurate. If the value of the collateral falls below the threshold that was established by the protocol, then their position will be immediately liquidated to assist in guaranteeing that the lenders will be repaid.
Tulip Protocol intends to capitalize on Solana by giving users the ability to more regularly reinvest their income and grow their assets without having to pay exorbitant amounts of gas expenses. Chainlink oracles can now be natively integrated on Solana, making it possible for Solana-based applications to benefit from enhanced levels of security and transparency. Yesterday, OpenOcean made the announcement that they would be integrating Chainlink Price Feeds in order to help secure the limited order functionality on many chains. These chains include Avalanche, Ethereum, Polygon, Fantom, and BNB Chain.
According to Senx, Co-Founder of Tulip Protocol:
“We’re excited to be using Chainlink Price Feeds on Solana to help secure our yield aggregation platform. By leveraging the most secure and reliable on-chain data available, we’re able to provide our lenders and borrowers with greater assurances that liquidations are based on accurate price data, and the protocol will maintain a healthy loan-to-value ratio through all market conditions.”
Allowing Stakers To Benefit From Higher APYs
Natives of the blockchain as well as newcomers to the technology are beginning to understand that decentralization does not necessarily equate to a secure platform. Given that Web3 services are currently disclosing their susceptibilities to attacks from both within and outside the network, further initiatives should be undertaken to improve the safety of user assets. Fortunately, a growing number of blockchain businesses are beginning to add various levels of security to their services in order to solidify the trust of their existing customers and attract additional investors in the near and distant future.
Tulip Protocol is the very first yield aggregation platform to be built on Solana, and it features auto-compounding vault techniques. The dApp was developed to make use of Solana’s blockchain, which has a low cost and high efficiency, hence enabling the vault techniques to compound frequently. Stakeholders are able to reap the benefits of greater APYs as a result, without the need for active management.
On this week’s episode of “The Market Report,” Cointelegraph’s resident experts discuss the latest updates concerning the recent Solana (SOL) hack.
To kick things off, we broke down the latest news in the markets this week:
Bitcoin realized price bands form key resistance as bulls lose $24K, significant whale activity between $22,000 and $24,800 adds to the complexity of the current spot market setup. Bitcoin (BTC) consolidated lower on Aug. 9 after familiar resistance preserved a multi-month trading range. When will we finally break out of this price range and make the move towards $30K?
Institutions flocking to Ethereum for 7 straight weeks as Merge nears: Report, “Greater clarity” around the Merge has driven institutional inflows into Ethereum products, according to a CoinShares report. Is the ETH merge finally around the corner and will it bring new all time highs to ETH or has the price already been factored into the current price?
Circle freezes blacklisted Tornado Cash smart contract addresses, Crypto data aggregator Dune Analytics said that, on Monday, Circle, the issuer of the USD Coin (USDC) stablecoin, froze over 75,000 USDC worth of funds linked to the 44 Tornado Cash addresses sanctioned by the U.S. Office of Foreign Assets Control’s Specially Designated Nationals and Blocked Persons (SDN) list. Could this mark the end for Tornado Cash or is there a way they can redeem themselves?
Next up is a new segment called “Quick Crypto Tips,” which aims to give newcomers to the crypto industry quick and easy tips to get the most out of their experience. This week’s tip: Have some funds ready to buy further downturns.
Market expert Marcel Pechman then carefully examines the Bitcoin and Ether (ETH) markets. Are the current market conditions bullish or bearish? What is the outlook for the next few months? Pechman is here to break it down. The experts also go over some markets news to bring you up to date on the latest regarding the top two cryptocurrencies.
After Marcel’s market analysis, our resident experts discuss whether your SOL is safe and the latest updates on the Solana hack. We also discuss why the network has been victim to so many hacks and downtimes. What exactly do these exploits mean for the Solana platform and if you should be worried.
Lastly, we’ve got insights from Cointelegraph Markets Pro, a platform for crypto traders who want to stay one step ahead of the market. The analysts use Cointelegraph Markets Pro to identify two altcoins that stood out this week: Radicle’s RAD and DigiByte’s DGB.
Do you have a question about a coin or topic not covered here? Don’t worry. Join the YouTube chat room, and write your questions there. The person with the most interesting comment or question will be given a 1 month free subscription to markets Pro worth $100!
The Market Report streams live every Tuesday at 12:00 pm ET (4:00 pm UTC), so be sure to head on over to Cointelegraph’s YouTube page and smash those like and subscribe buttons for all our future videos and updates.
Singapore, Singapore , Aug. 09, 2022 (GLOBE NEWSWIRE) — Today, the ZepetoX team (ZTX, ZepetoX.io) announced its foray into the web3 space, sharing its vision to build an open world that empowers creators and communities to build, play and earn.
ZepetoX is the crypto metaverse initiative jointly incubated by ZEPETO – Asia’s largest metaverse platform with over 320 million registered users – alongside leading global blockchain organizations including Jump Crypto.
As the sole blockchain project comprehensively backed by ZEPETO, ZepetoX will have exclusive ties to ZEPETO in terms of IP including technological, design, and content assets as well as bridges to facilitate user onboarding between the two platforms. ZepetoX’s blockchain development efforts will be advised by Jump.
“ZepetoX is our official venture into the blockchain industry. We feel that web3 opportunities should be advanced through a crypto-native approach, which is why we are excited to have Jump as a contributor to developing a new platform that would have exclusive connections to ZEPETO. Overall, we believe that ZepetoX can build the ideal web3 platform to not only bring blockchain to our existing users but also to expand our footprint in the blockchain space through various disruptive initiatives,” said Daewook Kim, CEO of Naver Z – the operating entity of ZEPETO.
“We are excited to support ZepetoX’s efforts aimed at onboarding new audiences into the rapidly growing crypto space. ZEPETO’s expertise and technological know-hows accumulated over the past years from building an immersive social platform will serve as a springboard for ZepetoX,” said Saurabh Sharma, Partner at Jump Crypto.
Building on the Solana network, ZepetoX will offer a web-based 3D open world with varying levels of gamification integrated as well as opportunities for users to monetize via ownership of digital assets and social interaction. Ultimately, ZepetoX aims to empower self-expression through customizable avatars and lands that can be equipped with NFTs from a rich collection of assets created by diverse creators, DAOs, or communities.
“I am thrilled to see IP powerhouses like ZepetoX choosing to build their metaverse on Solana,” said Anatoly Yakovenko, Co-Founder of Solana. “Projects like ZepetoX create new pathways for onboarding millions of users to web3.”
“Our global team brings a depth of crypto native experiences and our goal is to build on the foundation of ZEPETO to spearhead the adoption of blockchain among metaverse users, developers, and creators,” said co-CEO of ZepetoX, Chris Chang.
In the coming months, ZepetoX will launch its first land sale. The lands will be tradable on the ZepetoX marketplace, which will feature a variety of different NFTs as the open world project evolves. Further details on the sale will be available on the ZepetoX website in the coming weeks.
# # #
About ZepetoX: ZepetoX (ZTX) is a web3 company building an immersive content-driven platform for users to create, trade digital assets and enjoy social interaction. Founded in 2022, ZepetoX is the blockchain initiative of ZEPETO, widely regarded as the largest Asia-based metaverse platform boasting over 320 million lifetime users with over 2.5 billion virtual fashion items sold.
