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Solana is like a high-speed bullet train in the world of blockchains. While traditional blockchains like Bitcoin or Ethereum are more like slower commuter trains—good for secure and steady travel—Solana is designed for speed and efficiency.
Just as a bullet train can handle a higher volume of passengers while maintaining speed, Solana processes thousands of transactions per second with low fees, making it ideal for high-throughput dApps (Decentralized Applications).
Solana achieves this speed through its unique Proof of History mechanism, which acts like a highly synchronized clock system, keeping transactions orderly and efficient, just like a bullet train runs on a precise schedule to avoid delays.
If you want to get into the nerdy details about Solana as a blockchain, this section is for you.
Solana is a smart-contract blockchain that uses proof-of-stake (PoS) as its consensus mechanism. Too complicated? Okay, let’s break that down.
Make sense now?
Each “block” in the “chain” contains transactions and data, and just like real chains, they’re linked. Think of the Solana blockchain as an operating system on the internet that can run multiple programs at the same time.
Anatoly Yakovenko, the founder of Solana, first proposed the idea in 2017 with its first block being created in March 2020.
Fast forward to today, Solana has become one of the most widely used smart-contract networks along with Ethereum. There are plenty of other smart-contract networks out there at the moment but Solana and Ethereum are the biggest players by a big stretch.
If we already had a robust smart contract platform in Ethereum, why did we need Solana? The most simple answer is that Ethereum was too slow and too expensive.
Obviously there is a more complicated answer that Solana’s infrastructure is more robust as it uses proof-of-history (PoH) on top of PoS, it is able to scale with both hardware and software but what you need to know is that Solana can do pretty much everything Ethereum does but at a fraction of the cost.
Going back to the bullet train analogy earlier, Solana is quiiiick. The faster the blockchain, the more transactions it can process, higher the transactions per second (TPS). TPS is a commonly used term in the crypto world which talks about how efficiently a blockchain can process transactions. Higher the TPS, more efficient the blockchain.
Currently, Solana has a theoretical TPS (transaction per second) of 50,000 (which is already incredibly high). After it introduces Firedancer, the most awaited upgrade on Solana, it will be able to handle 1 Million TPS! Holy milk, that’s wild. If interested, you can view Solana’s current TPS here.
In short, Solana was founded to build a network that is fast, cheap and easy to use.
The Milk Road website (what you’re currently reading) is hosted on a server somewhere in the world. If someone trips over the server’s power plug, no more Milk Road for anyone.
But what if there was no centralized server? What if you could run programs on a network of computers? That’s exactly what Solana does.
Developers deploy programs called smart contracts to the network where they live forever. Seriously, they can’t be deleted. That’s why you’ll see versions on dApps, like Jito is currently on version v1.18.22.
If you spend enough time in crypto, you’ll run across the phrase, “code is law,” which refers to the smart contracts being the final arbiter of whether something happens or doesn’t.
The transactions from these smart contracts are stored on the blockchain. Blockchains are a lot like databases, a way to store information.
But here’s one big difference: Someone can delete a database or change its contents. Blockchains are designed to be immutable, meaning the records in each validated block of transactions never change. As new blocks of transactions and data are built and validated, they’re added to the chain.
Surely all of this can’t be free, right? That’s where $SOL comes in, the native currency used on Solana.
Here’s your chance to impress your friends: The term Solana is often used interchangeably with the cryptocurrency that powers the network. That’s not quite accurate — the fuel for the Solana network is $SOL.
$SOL is money in the Solana world. Solana is the network itself.
Think of it like a country. The country is the USA but the currency used is $USD. Similarly, the network here is Solana and the currency used is $SOL.
To make any transactions on the Solana network, you need to pay gas fees in the native currency - in this case, $SOL.
We previously touched upon proof-of-stake (PoS) and consensus mechanisms earlier in the article but we’re going to dive deeper into them here.
There are essentially two broad types of consensus mechanisms: proof-of-work (PoW) and proof-of-stake (PoS).
To put it simply, PoW is the old-school way of doing it - uses more energy and hence is more expensive while PoS is cheaper and more efficient. Bitcoin, Litecoin, and Dogecoin still use proof-of-work but both methods use financial incentives (or disincentives) to validate and secure transactions on the blockchain.
Let’s focus on proof-of-stake. In PoS, computers on the network check transactions to be sure they conform to the protocol’s rules. Each validator (also called a node) puts $SOL at stake.
If the other validators on the network catch one of the nodes approving blocks that don’t follow the protocol, the $SOL staked by that node can be slashed, meaning the network takes away part of the stake.
These validators don’t work for free. They earn rewards for validating blocks. And the entire community can participate. $SOL holders can stake their $SOL with a validator service to earn a yield from staking rewards.
Okay, so now that we understand that smart contracts are just programs that run on the network, what can you actually do with them?
Short answer: So much! Long answer: 👇
If you want to swap some of your $SOL stack for another token you’ve been investigating, you can do that with a decentralized exchange (DEX) like Milk Road Swap or an aggregator that compares prices like Jupiter. Read up on DEXs first—they’re not hard to use, but you’ll want to learn the ropes before you set sail.
Where do the tokens on DEXs come from? Traders like you. You can earn a solid return by providing tokens to a pool that other traders use for swaps. Again, you’ll want to learn about considerations like impermanent loss before you start randomly clicking buttons.
Solana staking is the process of locking up some of your $SOL tokens to help validate blocks and secure the Solana network. In return for securing the Solana blockchain, you earn $SOL as a reward.
One of the ways to stake your Solana is via liquid staking — lock up your $SOL to secure the network and receive a liquid staking token (LST) in return. You can then use these LSTs on other DeFi platforms to earn additional yield.
The most common platform for liquid staking on Solana is Jito in which you receive $JitoSOL as your LST.
Kamino, MarginFi and Solend are the biggest names on Solana for this category. The premise is simple. You deposit a supported asset like $SOL or $USDC to earn interest from borrowers. Often the returns are about 2% to 3%, but they can spike higher.
| Decentralized Application (Dapp) | Category | Total Value Locked (TVL) - as of writing |
|---|---|---|
| Jito | Liquid Staking | $2.2B |
| Kamino | Lending & Borrowing | $1.6B |
| Raydium | Decentralized Exchange | $1.5B |
| Jupiter | Decentralized Exchange | $1.4B |
| Marinade | Liquid Staking | $1.3B |
These ratios compare the performance of $SOL directly to the performance of $BTC and $ETH, instead of the U.S. dollar. Since most tokens generally move in the same direction, comparing these directly can give you a better sense of how $SOL is performing versus the OG crypto. Additionally, an outperformance from $SOL in this ratio can indicate that an altcoin-season may be coming.
Even though Solana is a proof-of-stake (PoS) network, it has an additional consensus layer called proof-of-history (PoH). This might get technical so proceed at your own risk.
Proof of History (PoH) on Solana is a way to record the order of transactions using timestamps. It creates a verifiable timeline of events before they're confirmed by the network. This process helps speed up transactions because validators don’t have to constantly communicate to agree on the order, making Solana faster and more efficient.
Solana’s Firedancer is an additional validator on Solana that is estimated to bring Solana’s maximum theoretical transactions per second (TPS) from 65k to 1M. Frankendancer (testnet of Firedancer) has already achieved 1M TPS in test conditions.
In development since Q3 2022, Firedancer is by far (we repeat, by far) the most important upgrade to happen on Solana.
The price of Solana ($SOL) is based on supply and demand. Demand is typically dependent on macro conditions, interest in the crypto sector and catalysts in the Solana ecosystem. On the supply side, as more and more $SOL is staked, there will be less $SOL to buy on the open market.
No, Solana is not an Ethereum network. Even though both these networks support smart contracts, Solana is a standalone blockchain platform that doesn’t rely on Ethereum at all.
The most common way to buy Solana ($SOL) is through a centralized exchange like Gemini. These exchanges let you buy $SOL or other cryptocurrencies with fiat money, such as US dollars, and you can explore a list of option here.You can also choose to buy $SOL on various decentralized exchanges like Milk Road Swap or Jupiter.
It’s generally a good idea to move your $SOL off centralized exchanges and into the safety of a wallet you control.Crypto wallets let you send and receive crypto but also open up a world of decentralized apps you can use with your wallet. If you have a large amount of crypto, you may want to consider cold storage.
Solana is decentralized, meaning the community votes on proposals for improvements to the network. This means that there’s no one person or organization that controls Solana.
Solana and Ethereum are often seen as competitors but it’s never easy to compare the two directly.Ethereum has been around for ages and aims to scale with the introduction of various L2s. Solana, on the other hand, is newer, faster and cheaper but doesn’t have as many use-cases as Ethereum. Both are considered to be “blue chip” cryptos and often move together in market upswings and downswings.
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