Solana is the world’s fastest programmable blockchain. It boasts one of the fastest-growing crypto ecosystems, hosting over 400 DeFi, NFT, and other Web3 projects. The blockchain’s native digital asset, Solana (SOL), now ranks as the fourth-largest cryptocurrency with a market capitalization of roughly $72 billion.
In 2017, developer Anatoly Yakovenko conceived Solana as an open-source blockchain solution to resolve long-standing scalability issues inherent to the Proof of Work (PoW) consensus mechanism used by Bitcoin and Ethereum. Yakovenko recruited technologists from Google, Intel, Qualcomm, and Twitter to design his vision of a high-performance, low fee network, and the San Francisco-based Solana blockchain made its debut in 2020.
Solana is rapidly gaining traction and drawing the attention of the crypto community by delivering against Yakovenko’s value proposition of the network being truly scalable. The platform is attractive to solutions-oriented decentralized app developers with growing user bases seeking a faster, cheaper transacting alternative to Ethereum. Solana’s blockchain performance suggests the platform is ready to support increasingly complex, inventive applications. We’ll examine how Solana’s pragmatic Proof of History (PoH) protocol is challenging Ethereum’s market share dominance, even as the Ethereum network readies for the transition to ETH 2.0 and completes the transition to Proof of Stake (PoS).
Proof of History: Solana’s Defining Blockchain Innovation
The developers at Solana Labs set out to create a decentralized, open-source network to attract blockchain developers in need of a scalable network. Solana’s PoH is not a consensus mechanism––it is a ‘clock’ that enhances the performance of Solana’s Proof of Stake (PoS) consensus mechanism. PoH streamlines blockchain data management and improves PoS’s time agreement protocols. Solana is capable of processing an unprecedented number of transactions per second due to PoH’s non-linear data distribution and validation protocol.
In PoH, the chain uses a Verifiable Delay Function to assign a secure ‘hash’ and ‘count’ to incoming transactions and events. Think of these hashes and the accompanying count as a cryptographic timestamp on a redeemed event ticket. Network validators use these unique security identifiers to non-sequentially sort and order events. The network chains these historical records together, creating a proof of order relative to the unique assigned identifiers.
With a secure cryptographic timestamp, individual Solana validators can now verify transactions in any order and at a later point in time. This directly alleviates network congestion and frees the blockchain to process an average of 2,298 transactions per second (TPS)––Ethereum processes roughly 15-45 TPS. However, Solana has been tested and proved capable of reaching 50,000 TPS. Additionally impressive are the network’s 400-millisecond new block confirmation times. To put this feat into perspective, Ethereum block creation times currently average about 15 seconds.
The market performance and enthusiasm surrounding Solana––and the network’s native digital asset SOL––correlates with the blockchain’s allure as a practical alternative to Ethereum. As the popular Ethereum blockchain transitions to PoS, network congestion and high gas fees (during this period of transition) sharply contrast with Solana’s present performance. Eth2 is expected to improve these performance metrics for Ethereum.
The Rise of Solana
Solana developers believe efficient time agreement is one of the most difficult problems to solve in any distributed network. Thus, the Solana blockchain is based on PoH as their data management solution to complement existing PoS protocols. The network’s core innovations have dramatically streamlined the network’s communication overhead and reduced latency costs.
Anyone who holds SOL can stake their tokens on Solana to help secure the network and earn rewards. The cost to transact on the platform is low, especially in relation to increasing spikes in Ethereum’s gas fees. PoH improved upon PoS protocols to such a degree that SOL stakers can charge ultra-low gas fees of around $0.00025 per transaction. Solana demonstrates that an ultrafast, scalable blockchain with lower transaction costs is a reality, not a distant promise.
Anatoly Yakovenko identified innovation opportunities in Ethereum’s lengthy transition to Eth2. Solana is a Layer 1 blockchain that delivers against performance promises that Ethereum labors to deliver. As more DeFi developers and users recognize the benefits of building and transacting upon the Solana blockchain, the market capitalization of Solana is expected to continue rising.