It started the year at less than $ 2 and today it is trading at more than $ 150 per unit. It is Solana (SOL), the altcoin that grew more than 10,000% in 2021, jumped again this week and is on everyone’s lips but what is SOL? How does solana, the crypto of the moment, is it work?
Founded by Anatoly Yakovenko in 2019, Solana (SOL) is the native currency of the open source and decentralized blockchain Solana. While the idea and initial work on the project began in 2017, Solana was officially launched in March 2020 by the Geneva, Switzerland-based Solana Foundation.
Similar in characteristics to Bitcoin and Ethereum, it also has some peculiarities that differentiate it from its “older sisters”. Solana is a new generation altcoin and offers many features that Bitcoin does not have, such as allowing people to do Decentralized Applications (DApps), NFTs, and more.
Yes, Ether (as on the Ethereum blockchain) does the same. But Solana can claim (thanks to the blockchain he has created) that his software is easier to produce and use, plus everything is very scalable and faster compared to Ether.
Also, it works using something called Proof of History (PoH), as opposed to Proof of Stake (PoS) like Ether 2.0, or Proof of Work (POW) like Bitcoin uses and used to use Ether.
Why is the PoH or Spanish history test important? Proof of History is a new way for computers to create blocks that make up a chain of blocks. But let’s go over the differences between these mining methods.
In Bitcoin, there is a Proof of Work (POW) system, in which nodes (computers or mining equipment, basically) compete to solve the crypto puzzle, or mathematical problem, thus proving that they have done X amount of work before be able to add a block to the chain.
Proof of Stake chooses the node at random, but with a bias towards who has the largest stake, meaning that not everyone is wasting energy trying to win the race (this saves a lot of energy). They both rely on great communication between computers, which is time consuming.
The history test (PoH) does not. It just uses a series of timestamps so everyone knows what’s going on. That lack of time between computers translates into higher speed. Solana relies on a unique combination of proof of history (PoH) and proof of stake (PoS) consensus mechanisms.
Solana can create a block in about 400 milliseconds. Ethereum takes about 10 seconds and Bitcoin about 10 minutes.
Solana managed 400,000 transactions per second before he started having problems but he learned his lesson and the network have improved since then. Before Ethereum 2.0, Ethereum was at 30 transactions per second, but now it has the potential to do 100,000, while Bitcoin does around seven. Solana is now even faster than Visa when it comes to transactions per second. Visa can carry out about 24,000 transactions per second. This means that:
Solana is very fast and can handle a lot of volume.
Speed is very important for scalability. If a (crypto) currency is to be in widespread and global use, it has to be accessible, fast, and robust. Solana seems to tick all the boxes, especially in relation to today’s big players like Bitcoin and Etherum. This is one of the reasons its value has soared recently.
Today, when SOL trades above $ 150 ($ 153 at the time of writing), the questions investors are asking are: Is Solana a bubble? Will explode? Will it continue to rise?
As we discussed at the beginning, SOL started 2021 with a price below $ 2. Today it is the fifth most valuable cryptocurrency on the market. If someone had invested USD 500 in January of this year, today they would have more than USD 37,500. However, specialists assure that it is very likely that it will continue to rise. Compared to BTC, ETH, solana is still a cheap cryptocurrency.
The Solana protocol is intended to serve both small users and business customers. And with its blazing fast processing times, Solana caught the attention of institutional investors. With the promise that those who use it will not be surprised by the increase in fees, the protocol is designed in such a way that it has low transaction costs while, at the same time, ensuring scalability and fast processing.