Created by Anatoly Yakovenko and a group of former Qualcomm engineers, cryptocurrency Solana has become one of the most discussed projects in the crypto industry within just a few years. Thanks to its Proof-of-History algorithm and high transaction processing speed, Solana offers users high throughput and low fees, making it an attractive alternative to Ethereum. In this review, we'll examine Solana's technological features in detail, its strengths and weaknesses, and evaluate the prospects of the SOL token as an investment instrument. Those who read to the end will learn why Solana cryptocurrency attracts major investors' attention and whether you should include it in your investment portfolio.
Contents:
- How the High-Speed Solana Emerged
- Secret Ingredient: What Makes Solana Cryptocurrency So Special?
- What is SOL? Unveiling Solana's Economic Secrets
- Why Can't Solana Be Mined? Understanding Network Features
- How to Become a Solana Cryptocurrency Owner
- Where to Store Your SOL
- What Solana Enthusiasts Don't Tell You
- What's Next for Solana?
- Conclusion
How the High-Speed Solana Emerged
To understand why Solana cryptocurrency was created, we need to examine the challenges decentralized applications faced at the time of its emergence. Initially, blockchain technologies were developed with the expectation that internet decentralization would eventually create equal conditions for users worldwide.
However, high fees and slow transactions became barriers to cryptocurrency development and widespread adoption. This created the need for solutions to these problems based on a network oriented towards mass adoption. But what makes it fundamentally different from the existing Bitcoin and Ethereum blockchains?
The key difference is that Solana works much faster. Transaction processing speed in its network is just 400ms compared to 10 seconds for Ethereum and 10 minutes for Bitcoin. Thus, the Solana network can process up to 710,000 transactions per second, which is 30 times more than what the VISA payment system can handle.
However, such capabilities of the new blockchain haven't been tested yet. There simply hasn't been such load. Currently, the record stands at 50,000 transactions per minute, but the network's potential is impressive.
Secret Ingredient: What Makes Solana Cryptocurrency So Special?
Who is behind the development of such a perfect distributed ledger?
The high-performance blockchain protocol was created by a group of engineers led by Anatoly Yakovenko, who previously worked at renowned companies like Qualcomm and Dropbox. He managed to assemble a team of specialists who developed a blockchain that overcame the limitations of existing platforms at that time.
Solana's key features became the fundamentally new Proof of History consensus mechanism and parallel transaction processing, which enabled such high throughput. But that's not all. Another feature of this protocol is its low transaction cost. An operation costs just a hundredth of a cent. Additionally, it attracts users with its minimal requirements for validators - network nodes that confirm transactions and add them to the blockchain, maintaining a single and reliable registry of all operations.
What is SOL? Unveiling Solana's Economic Secrets
Now it's time to discuss this project's tokenomics. Let's recall that "tokenomics" refers to the economic model describing the rules for circulation and distribution of digital assets (tokens) within a blockchain project. In simple terms, it's a set of rules that determine how tokens are created, distributed, used, and influence the entire project's economy.
The Solana network uses the SOL coin. It is used for transaction payments and is utilized throughout the blockchain ecosystem. SOL is considered a deflationary token because for some time, 100% of SOL tokens received as transaction fees were destroyed, thereby reducing their total supply. Currently, only 50% of tokens received as fee payments are burned. Now the reward rate decreases every few days. Eventually, the number of coins in circulation should reach the initial 500 million.
According to the analytical platform SOLSCAN, at the time of writing this review, 582,262,219.89 SOL coins were available in the Solana network.
Why Can't Solana Be Mined? Understanding Network Features
Due to its unique operating algorithm, mining SOL, similar to how it happens in Bitcoin blockchain and other cryptocurrencies, is fundamentally impossible. Here, creating new blocks doesn't require solving complex mathematical problems. Instead, the Solana network uses special timestamps based on verifiable delay functions (VDF). Essentially, these VDFs are regular mathematical functions that require a certain time to compute, and their results are easily verified.
Using these functions, a sequence of unique digital fingerprints - hashes - is formed, where each depends on the previous one. The entire process takes a specific time, and the resulting sequence becomes proof that this time has passed and the block has been created. This algorithm dramatically increases the speed of creating new blocks and the entire network's throughput. The absence of need for powerful equipment to solve complex mathematical problems makes Solana blockchain operation much more efficient and less energy-intensive.
How to Become a Solana Cryptocurrency Owner
You can acquire the digital asset of the Solana distributed network, as well as exchange it for other cryptocurrencies or fiat money on one of the most popular cryptocurrency exchanges, Binance. Here, a huge number of assets and earning methods are available, including staking. Remember that Solana cryptocurrency staking is activated through a staking pool. You delegate your SOL coins to this blockchain's validators, providing them to support network operation, and in return receive rewards in the form of new SOL tokens. This procedure very much resembles opening a regular bank deposit, only instead of interest on the deposit, you receive cryptocurrency.
Where to Store Your SOL
After you've bought your first SOL coins, the question arises of where to store them. The simplest, but far from the best option is to use an exchange wallet. It has several disadvantages: centralization, limited capabilities, risk of account blocking, and possible problems with withdrawing funds. Therefore, it's better to store Solana cryptocurrency on a non-custodial wallet like Solflare.
This convenient web wallet allows you to store and transfer tokens to validators for staking, exchange SOL and SPL coins directly in the interface, and interact with various DeFi projects and decentralized applications based on the Solana blockchain. For additional protection of your assets, you can connect Solflare to a Ledger Nano S hardware wallet. The wallet itself is available as a mobile application for iOS and Android operating systems.
What Solana Enthusiasts Don't Tell You
Now let's talk about the disadvantages of Solana cryptocurrency. Four years after this network's launch, it still experiences periodic operational failures. In February 2024, on the project's official website in the "Uptime" section, a significant "Major outage" mark appeared. The massive failure in the Solana network lasted almost five hours and led to the downtime of projects worth $1.7 billion.
During such periods, the network's throughput notably drops, but this isn't the only problem. It also sharply decreases when several complex applications are launched simultaneously. Also, we can't say that the Solana protocol is absolutely decentralized. Compared to Ethereum, Solana cryptocurrency is significantly more centralized. The project's social media posts calling for validators to restart their nodes during outages also raise questions.
Furthermore, questions arise about the organization of Solana network validators themselves. The fact is that many of them deploy their nodes on Amazon Web Services (AWS) cloud platform. Has anyone thought about what would happen to the Solana network if the platform serving about 60% of all validators decides to intervene? And this problem isn't unique to Solana blockchain. Many networks face a similar situation - total dependence on cloud services. Therefore, all talks about decentralization seem more like a myth, a fairy tale for adults, rather than reality. In any case, behind a decentralized application stands a centralized domain and hosting that you buy. Therefore, the idea of decentralization in our centralized world isn't fully implementable yet.
What's Next for Solana?
In the long term, Solana cryptocurrency shows growth. In October 2020, it traded around $3 per coin, but a year later exceeded $200, indicating high cryptocurrency market interest in this network.
According to Binance cryptocurrency exchange experts, by the end of 2024, the average annual price of Solana cryptocurrency will be around $250 per coin, with peak prices expected above $300.
These favorable forecasts are based on this cryptocurrency's leading positions in the decentralized finance market thanks to high transaction processing speeds unavailable to Bitcoin, Ethereum, and many other cryptocurrencies. Cryptodaily news site experts share approximately the same assessments. In their opinion, in the next year 2025, Solana's average annual price will be in the range of $250-$340.
Conclusion
Solana cryptocurrency is a very promising coin associated with one of the most innovative blockchain platforms offering high transaction speed and scalability. However, Solana has high volatility and is subject to the risk of sudden price declines. High staking rates make it attractive for investors seeking passive income, but this increases dependence on price dynamics.
In conclusion, we can say that Solana cryptocurrency represents an interesting investment instrument for those ready to accept increased risks. Its technological advantages and active ecosystem development create prerequisites for SOL's value growth in the long term.
See also:
How to buy cryptocurrency with rubles or dollars
Is cryptocurrency necessary in the modern world?
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