Know a bit about Solana
Solana is a decentralized blockchain. It is developed in enabling scalable user-friendly applications and it utilizes SOL in making payments for transactions. Moreover, the blockchain supports over 50, 000 transactions per second without sacrificing decentralization. Solana has performed over 86 million transactions since it was launched in 2017.
The censorship of Solana is resistant. This is because its network is spread in over thousands of independent nodes. Solana is also low cost and it ensures that its transactions remain less than $0.01 for users and developers.
The uses of Solana Tokens (SOL)
The first use is staking. Just like other blockchains, Solana is well secured through a consensus mechanism. As a trader, if you want to secure crypto by being a validator then you can stake some SOL. In addition, you may lock it up in earning money and securing the network.
The second one is paying for the transaction fees. Even though Solana’s fees should be cheaper than other cryptos, it charges fees for sending and running smart contracts. Smart contracts are developing blocks of more complicated applications in Solana. The apps may include music streaming or finance.
Why is Solana Unique
When Bitcoin was invented 13 years ago, the aim was to solve a tricky problem. It solved the problem of making it a possibility for strangers across the world to financially transact through the internet. However, that is not enough because even banks can do that. With Bitcoin, there were no intermediaries as well as other payment processors including Mastercard and Visa to help with the transactions.
Blockchain is the technology making decentralized payments possible. However, initially, Blockchain had a limitation as compared to centralized networks. The limitation is being slow. For instance, by August 2021, Ethereum could only process 15 transactions in one second. This is less compared to the Visa network which processes about tens of thousands of transactions per second.
The aim of Solana was to provide a solution which the previous blockchains have not been able to provide. It aims at making the cryptocurrency network more scalable and faster. In addition, Solana uses clever technologies such as “proof of history” which is a novel mechanism.
Developers may use Solana for different issues including minting, trading, and selling non-fungible tokens (NFTs). Additionally, it develops decentralized finance (DeFi) platforms including decentralized crypto exchanges. Solana also builds blockchain games such as Web3 games.
The Way Solana Works
The main aim of developing Solana was scalability. This is accomplished by the unique hybrid protocol that it has. The protocol uses both Solana’s proof-of-history algorithm and the proof-of-stake consensus mechanism.
Proof of History verifies blockchain transaction order as well as the passage of time between them. The transaction timestamps are built on the blockchain. Also, since the time stamp is built in, all the validator nodes do not need to communicate with each other in confirming the transaction times.
Proof of Stake refers to a way of validating blockchain transactions. However, in this form of validation, the validators are chosen based on the tokens which they have staked. After confirming the new blocks, a validator gets rewards and the block is added to the blockchain.
Solana is advantageous as it is fast. Also, the proof of history that it introduced assists in optimizing the process of the transaction. Moreover, it reduces the work that validators should do. This enhances short processing times.
The Process of Buying Solana Tokens
In purchasing Solana Token also known as SOL, you should first open an account with a crypto exchange. Some of the exchanges that may allow you to purchase and sell SOL are Kraken and Coinbase. However, for some, you can purchase and sell Solana and pair them with Tether which is a stablecoin. The exchanges which pair Tether and SOL are KuCoin and Binance US.
Purchasing Solana involves three steps and the first one is choosing a crypto exchange. An exchange is a platform that enhances trades of crypto. It serves as an intermediary between the sellers and buyers. When choosing a crypto exchange, you should choose one that provides low trade fees and account minimums. You can choose one by selecting from the leading crypto exchanges.
The second step is buying SOL. After having an account, you should fund it. This can be done by a debit card, bank account, or existing crypto holdings. Also, some of the cryptos give you the chance of purchasing cryptos using a credit card. After the account is funded, you can place the first order. This is done by typing in Solana’s ticker symbol—SOL—. After that, you will input the amount that you would like to invest.
After purchasing SOL, the third step is storing it. You will choose one of the storage methods among the many that exist. The hardware wallets are physical devices resembling a flash disk. As compared to the other storage options, it is not connected to the internet or a network. They are more secure and also known as cold storage. Also, there is a paper wallet in which you store private keys on a piece of paper. The other wallets are crypto exchanges and software wallets.
The Differences Between Solana and Ethereum
Solana and Ethereum are competitors. Thus, when Solana was introduced in 2017, it was believed to be the killer of Ethereum. Initially, when Ethereum launched, in validating its transactions, it utilized Proof of Work (PoW)consensus. Even though PoW is common, it is not energy efficient. This is the reason Ethereum shifted to Proof of Stake (PoS) which Solana uses along with the proof of history algorithm.
The main difference between Ethereum and Solana are processing of transactions. Solana can process over 50, 000 transactions per second. Currently, Ethereum processes 15 transactions per second. However, after an upgrade, it may be able to process over 100, 000 transactions per second. Therefore, currently, Solana is the one on top in terms of speed.
The Advantages of Solana
Solana ensures composability between projects. The users are not required to deal with several shards or even layer-2 systems. Besides, it processes over transactions in one second. This means that it is fast as compared to the other blockchains.
Moreover, Solana has low fees, about $ 0.01. Using a proof of history has enabled this technology to get high levels of scalability as well as other breakthrough innovations. Lastly, it has many users and this has made it continue keeping its fees low.
Solana also has a good impact on the environment. Ethereum and Bitcoin have been criticized for their negative influence on the environment. High computing power is needed in mining and verifying transactions in Bitcoin using PoW. It generates about 60 million tons of carbon dioxide yearly. Therefore, Solana’s PoH and PoS verification process s less energy efficient. This makes it a greener alternative as compared to Ethereum and Bitcoin.
The Disadvantages of Solana
According to some of the investors, Solana is not so decentralized. In addition, setting up hardware for Solana is very costly. The stability of Solana is another limitation. This is because it only has a smaller community of users. Also, as compared to Ethereum, it has a short track record. This issue may make investors not rely so much on its network stability.
As compared to Ethereum, Solana has fewer projects. SOL has about 350 projects in its network which includes gaming applications, NFT projects, and decentralized finance. More investors are choosing Ethereum over Solana because its more popular. This is despite the fact that Solana has low fees and processes transactions fast.
Inflation also affects Solana. When cryptos were introduced, one of the aims was to utilize them in hedging against inflation. Even though most of digital currencies have a hard cap on the number of coins that will exist, this blockchain does not have a fixed number. For instance, Bitcoin is capped at 21 million. Developers commenced increasing SOL tokens supply by 8%. This means that inflation rate will reduce by 15% till its 1.5%. After that, it will stop reducing.
