Back in the early days of crypto, when Bitcoin (BTC) and Litecoin (LTC) were the only power players on the market, users were quite satisfied to only use crypto as a means for facilitating digital cash transactions or trading on crypto exchange platforms. However, when Ethereum (ETH) was launched in 2015, the crypto community realized that digital currencies and blockchain technology could do much more than just transfer cash. Ethereum introduced smart contracts, decentralized apps (DApp) and open-source programming resources based on the ETH blockchain, which enabled countless developer teams to launch their own tokens and crypto projects. Basically, smart contracts became the new normality on the crypto market.
The last couple of years saw an exponential increase in the number of innovative blockchain networks that offer many of the same functionalities as Ethereum, but at much higher speed, efficiency and at lower costs. One of these projects is the Solana (SOL) blockchain, which was launched just a few years ago in 2019 and it’s already firmly established among the top 20 cryptocurrencies by market cap and trading volume. The Solana blockchain is also integrated with the Zelcore wallet, and users can import any Solana based token into the app.
Let’s take a detailed look at SOL and find out why it is trending on the market.
The Solana Project
Solana was launched in 2019 by telecommunications expert and crypto enthusiast Anatoly Yakovenko, who named the project after the Solana beach in California, where he spent most of his career before launching SOL.
The idea behind SOL was to solve scalability issues associated with massive blockchains like Ethereum, because one of the major problems of the ETH network is the fact that it can’t accommodate high network traffic at fast speeds and reasonable fees. In fact, everytime there’s high traffic on the Ethereum network, the gas fees skyrocket and users enter so-called gas wars, where people are trying to outbid each other by placing exponentially higher transaction fees in order to get their transactions processed. The result of this is that ETH transactions are usually very expensive, which is a big entrance barrier for users in developing countries who would like to participate in the crypto ecosystem.
Solana tackles these issues with a highly scalable blockchain architecture based on the Proof of Stake (PoS) consensus mechanism, which enables SOL to handle high transaction volumes in a very short period of time, without consuming much computing power, which means that the transactions on the Solana network are much cheaper compared to Ethereum.
How Does the SOL Blockchain Work?
Instead of using the popular Proof of Work (PoW) blockchain mechanism pioneered by Bitcoin and Ethereum, Solana is based on an entirely different mechanism. PoW blockchains require a lot of computing power and produce a lot of electronic waste in the form of used mining hardware. This of course has a negative impact on the environment and climate change, because each transaction on PoW blockchains needs to be processed by miners and their computers which use huge amounts of electricity.
Instead, Solana is based on the Proof of Stake consensus mechanism which requires users to stake their SOL tokens in order to participate in the blockchain as transaction validators. The users stake their tokens as a guarantee that they will only validate legit transactions, because if a network node validates the transaction of a bad actor, all of the SOL that was staked by that node would automatically be lost. This way Solana ensures that only legit transactions are approved and the staking mechanism doesn’t require miners or huge power consumption, which makes it environmentally friendly. Users that stake their SOL get awarded with a percentage of the transaction fees.
Additionally, each transaction is time stamped, enabling the network to automatically place each data block in the appropriate part of the network, without the possibility of a cyber attacker changing the location or destination address of a transaction.
Solana offers many of the similar features as the Ethereum blockchain, but at much lower costs and higher efficiency thanks to it’s PoS blockchain, which eliminates the possibility of network jams due to high traffic, since all transactions are approved by the staking mechanism, automatically.
It’s quite common for an Ethereum transaction to cost several tens of dollars. In times of high traffic the network fee can even rise to several hundreds of USD. In sharp contrast to these fees, a standard transaction on the SOL blockchain is just a few cents. Additionally, the transaction speed on the Solana network is astonishing. The blockchain can process 65,000 transactions per second, while a single transaction only takes a couple of seconds to get validated and processed to its destination.
Smart Contracts and DApps
Solana enables developers to conduct cheap smart contracts that can be used to develop all sorts of decentralized apps (DApps). Even though Solana is such a young cryptocurrency, it already has a huge ecosystem of DApps in the field of decentralized finance (DeFi), decentralized exchanges (DEX), virtual marketplaces and yield farms. A key aspect of the SOL ecosystem are DeFi platforms that enable users to stake their SOL coins, as well as various other tokens built on the Solana blockchain and earn passive income through staking their assets. Zelcore wallet users can also browse and access any Solana based DApp through the built-in Solana Wallet adapter on link.zelcore.io.
The Ethereum blockchain is the original birthplace of NFTs and some of the largest NFT markets are focused on the ETH blockchain, but since Solana entered the NFT scene, more and more NFT marketplaces are popping up on the SOL network. The main advantage of NFT trading on Solana are the much lower fees compared to the ETH chain. There’s no such thing as skyrocketing fees during NFT public sales, which are known to have extremely high fees when happening on the Ethereum network. The NFT trading volume on Solana is rapidly increasing, along with the number of marketplaces, which is a sure sign that SOL is here to stay on the NFT scene.
Solana isn’t the only high speed proof of stake blockchain on the market that’s exploding in popularity. The Cardano (ADA) and Algorand (ALGO) blockchains are also attracting a lot of attention along with high trading volumes so it definitely remains to be seen how will SOL tackle the competition, especially if we take into account that Ethereum is also shifting to the Ethereum 2.0 proof of stake protocol.