Solana (SOL) Cryptocurrency: Faster than VISA. How to buy SOL?

Solana is a famous blockchain platform for smart contracts and decentralized applications. It is a basic layer protocol or blockchains, such as Bitcoin or Ethereum. Among the new large blockchains, Solana is one of the most promising.

The incentive to create this popular blockchain platform for smart contracts and decentralized applications appeared in 2017 against the scaling problems in Bitcoin code and Ethereum code. The project was launched on crypto exchanges in 2020, attracted multi-million dollar funding from venture funds, and the SOL cryptocurrency showed a return of more than 5000% in 2021. The Solana blockchain is very fast (thanks to the innovative Proof-of-History algorithm): 50,000 operations per second, 2500 times faster than Ethereum and 20 times faster than VISA. The project is named after the famous beach in California Solana Beach-apparently the rest is excellent.

Intro of the project.

The idea to create a new blockchain came to Qualcomm engineer Anatoly Yakovenko in 2017. At that time, there was a lot of excitement in the crypto market, which clearly showed the problem of scaling Bitcoin and Ethereum. Anatoly had extensive experience working with data compression algorithms and developed an innovative timestamp called Proof-of-History. Thus, it allowed us to create one of the fastest blockchains in the industry – it may process tens of thousands of transactions per second. For comparison, Bitcoin – only 3-5 per second. Official website of the project – solana.com

The project creators describe it as an operating system using the blockchain. The project focuses not on the distribution and marketing of cryptocurrencies, as in Bitcoin, but on developing blockchain technologies and tools for creating Dapps (decentralized applications), as in Ethereum. In our opinion, the second approach has more prospects in the future.

It launched the first test blockchain in 2018, and the SOL cryptocurrency will be released on exchanges in 2020. The project quickly gathered a large community around it: the number of subscribers on the official Twitter has exceeded one million and is growing faster than that of Ethereum

If the current growth rate is maintained, Solana will overtake Ethereum in this indicator at the beginning of 2023. It is even though the Solana network is still running in beta.

Who develops the project?

There are two companies:

• Solana Foundation is a non-profit organization headquartered in Zug, Switzerland. It promotes, decentralizes, and secures the network, attracts investments and sponsors community projects;
• Solana Labs is a technology company based in San Francisco, California. Works on developing the Solana ecosystem. Directly responsible for the development and improvement of the blockchain.

The scheme is already familiar with Ethereum and Cardano: the blockchain platform is officially registered in Switzerland (a country friendly to crypto companies). The primary development team works through a partner company. Solana Labs employs several dozen people who previously worked at Qualcomm.

The history of Solana.

“For a whole week, I was like possessed,” – from Anatoly Yakovenko’s story to his associates about the moment when he realized that he could build the arrow of time. Anatoly Yakovenko is an experienced engineer who spent 13 years at Qualcomm, most recently as a senior HR manager.

At Qualcomm, he worked on wireless technologies, such as CDMA (Code Division Multiple Access) chipsets, which allow multiple transmitters to send information simultaneously over a single communication channel.

In 2016, he moved from Qualcomm to Mesosphere, which created an optimized IT infrastructure for enterprises. Then, in 2017, he joined Dropbox to continue working on accelerating and improving the efficiency of distributed systems.

Therefore, when cryptocurrency began to gain momentum in 2017, turning people into millionaires and creating congestion in the network, Yakovenko was perfectly prepared for the new challenges.

In October, he had an epiphany – blockchains have the same problems as communication networks, which can have the exact solutions.

Imagine a similar Proof-of-Work puzzle using the same SHA-256 hash function. What if, instead of solving these puzzles on a massive scale and using as much power as necessary to find the answer as quickly as possible, you make this thing slow, recursive and make it run on a single-core, on a single thread? In this way, you can make her prove that it takes a certain amount of time, that is, that there is an unavoidable delay before any action. And he realized that he had this “arrow of time”.

The concept of the “arrow of time” was both critical from a technical and a practical point of view. It allows you to achieve synchronization between nodes without the need for trust.
Today, Solana’s technology motto reads: “A reliable clock makes it easy to achieve network synchronization. Thanks to simple synchronization, the network can run incredibly fast.”

After just five months of working at Dropbox, Anatoly Yakovenko quit creating his blockchain. By November 2017, he had written and published a Solana whitepaper, “Solana: A New architecture for high-performance blockchain”.

Then he went into fundraising.

At that time, no one was sure that it would work. Many projects at the time we’re competing for the right to be the next big blockchain. Some venture capital investors have already been involved with projects like Dfinity, Polkadot, Tezos, and Cosmos, all of which had a lot of buzz around them and had a lot of funding.

Some crypto funds were still interested in the project, but the crypto markets began to collapse regarding funding. As a result, all potential Solana backers have vanished.

Fortunately, the leading developers of the project were motivated not only by money. They want to create calm and innovative things on the edge of modern technological capabilities. So while other blockchains launched before Solana promised to give everyone a ride on the rocket, they were painstakingly developed.

It all started with the team.

Raj Gokal, Chief Operating Officer of Solana Labs, who previously worked with medical technology, joined the project in December 2017. Then, at the beginning of 2018, to turn the idea into a product, Anatoly Yakovenko invited two of his former colleagues from Qualcomm to the project, Greg Fitzgerald and Stephen Akridge.

He started with the C programming language, but Greg convinced him to switch to Rust. In February, Greg began working on a prototype, and by the end of the month, he released his first release. Steven noted that they could increase throughput by processing signature verification on GPUs. The project’s co-founders registered a “Loom” company but quickly changed the name to avoid confusion with an Ethereum-based project called the Loom Network.

They renamed the company Solana after Solana Beach in March, where Anatoly, Greg, and Steven surfed together at Qualcomm in San Diego.

So, the Solana team had a budding blockchain but no money in the bank.

In April 2018, Solana attracted its first sponsors: Ramtina Naimi of Abstract Ventures, Chris McCann, and Edith Jung of 500 Startups (Chris and Edith then co-founded Race Capital). So, for example, McCann knew Anatoly Yakovenko is a talented IT specialist since his time at Greylock when he was an active member of the Greylock infrastructure engineers community. He said that back in 2018, crypto activists complained that CryptoKitties were clogging up the network. And then Anatoly said, “I think I can fix this. It’s pretty simple” Many then created L1 blockchains, which were forks of Ethereum. Anatoly has invented a completely new technology to solve this problem.”

The result now looks like one of the most successful venture capital investments of all time (along with Race’s seed investments in FTX in 2019, which are currently valued at $18 billion). According to a Binance Research report, the Solana team raised $3.17 million by selling 16.23% of its tokens for $0.04 per token during the seed sale.

It is estimated that this $3.17 million has now turned into $5.8 billion. That’s 1,838 times revenue in just over three years – an unheard-of 820% IRR.

Solana may have the best technology of all blockchains on the market, but the best technology needs a strong community of developers and users. Solana has a solid and passionate community. Instead, you can recognize them by the “Pit Viper” sunglasses on their avatars and the symbol ◎, instead of the letter “O”. But the project needed something that would open its way to the mainstream.

There were even arguments about why it doesn’t make sense to launch the Solana NFT project. For example, Ethereum could own the culture, and Solana could hold high-frequency trading.

Note that immediately after the launch, the price of Solana’s native token, SOL, increased from $45.24 to $79, then slightly decreased to $73.50. As a result, the market capitalization reached $21.2 billion (capitalization for tokens in circulation), and the fully diluted (capitalization for all tokens) market capitalization was $37.1 billion.

ХотTo makes it clear to them, we’re not trying to say that Solana is the best blockchain, an Ethereum killer, or a platform that will rule the crypto world. We like Ethereum. ETH makes up a significant portion of the crypto portfolios of numerous crypto investors. Most of the community’s interaction with cryptocurrencies, NFT, DeFi and DAO, occurs in Ethereum. Ethereum is where the most professional people spend most of their time in the crypto world.

Many people believe that their product is one and only. However, we believe that every successful first-or second-tier project should focus on what it does best and interact with projects that are strong at other things.

Tribalism is intense in the crypto world. For example, suppose some magical Internet money makes someone a multi-millionaire or billionaire. In that case, they will protect this project until they die and try to increase its value by attracting other people to it.

It is most interesting to delve into how it fits together when studying crypto technologies. How do certain chains complement each other, and why do others compete? Why do people choose this or that chain where they spend their precious time and Internet money? Today, the number of people who spend their time and money in the Solana ecosystem constantly increases.

The interoperable platform war unfolds before our eyes, which is just the beginning. Several major projects will come out of it as winners, and we think Solana will be one of the first.

In crypto technologies, everything is changing at an incredible rate. Therefore, in our opinion, it is time to understand why Solana fully deserves to analyze in detail how the project works, what it is suitable for, and what the future may hold for it. Ultimately, the success or failure of Solana comes down to two questions… So, first things first.

Solana Orbit – the power of humans.

When people started buying SOL and became familiar with Solana’s speed and low fees, it drew their attention to the platform.

But the main reason is that narratives rule the crypto world. It is a global intersubjective game of “who gets cold feet first”. To launch a new blockchain or app, you must convince people that other people will also use the product. The best blockchain technology in the world will be useless without people building something based on it. So the fact that many people have seen others create something on Solana has played into the project’s hands.

It’s all about people. Despite all the talk about technology, decentralization, and lack of trust, the success of any crypto project largely depends on people:

• If the project manages to attract the right people, it will provide it with the necessary reputation;
• The main goal is to convince as many people as possible to start creating something based on your protocol;
• Then developers step in, which should attract and properly stimulate users.

Fortunately, Solana attracted the right people, such as Anatoly Yakovenko, Sam Bankman-Fried and a16z.

Crypto technology is a world of self-fulfilling faith. To create trust, you need the right people. If all this is supported by technology, the project will have every chance of success.

A technology that provides high throughput and low costs is critical, but everything depends on introducing technology in the crypto world.

When I asked Bill Swo, a veteran of the crypto world and an investor at Bitcoin Revolution Capital, what he thought of Solana, he told me: “This project is a prime candidate for the role of a dominant blockchain because of what it builds and the people behind it”.

We have reviewed what the Solana team creates, but people are an equally important ingredient. To gain momentum, Solana needed to be believed in the project.

In the first days of the project, whenYakovenko, the core team, and an army of validators and volunteers developed, tested and optimized the technology. He also looked for partners to create good products based on Solana.

He had grandiose ambitions: to completely rebuild the New York Stock Exchange (NYSE) or NASDAQ on the blockchain from the very beginning. “Not just transactions or the order book,” McCann explained, “but the whole system. Data, execution, literally everything”.

McCann helped Anatoly contact representatives of the exchanges. But, unfortunately, they were highly sceptical about the project.

Decentralized exchanges (DEX-for example, Uniswap) at that time had low bandwidth and an inconvenient interface. Nevertheless, people had to use them for trading cryptocurrency pairs because there was no alternative, but it wasn’t even close to meeting the needs of traditional finance.

NASDAQ processes approximately 500,000 transactions per second (including orders placed but not executed), most of which come from machines, not people. Back then, decentralized exchanges could only dream of such a thing.

However, in July 2020, the first turning point occurred in the history of Solana: the FTX crypto exchange announced that it was going to build its DEX, Serum, based on Solana.

The exchange itself wasn’t as crucial as those behind it. There are many decentralized exchanges, and Sam Bankman-Fried is the only one.

Sam Bankman-Fried is something of a cult figure in the crypto world. In the case of Serum, the Solana team not only received a new project but, in fact, attracted one of the most influential people in the world of cryptocurrencies.

Sam Bankman-Fried is an experienced trader. He spent the beginning of his career at Jane Street Capital. The teams he formed at Alameda Research, his trading firm, and FTX include many people from the world of finance-stock analysts, engineers, and traders. They were more concerned about whether the project would handle a large volume of transactions than the issues of centralization and decentralization.

Bankman-Fried was given a demo version called Break Solana.

Bankman-Fried was impressed. The FTX team was one of the few people in the world who could fully appreciate the potential of Solana, namely:

• If you have a system that is fast enough to support full-fledged central limit order books, there is a chance that DeFi can potentially win 25% or even 50% of the global financial sector.

FTX and Bankman-Fried realized that the Solana blockchain has potential and decided to create Serum.
So, it became known to everyone: “Solana is the most high-performance blockchain.”

The day before, on July 26, 2020, the price of SOL was $1.77. By August 30, it peaked at $4.78. Growth was 170% for the month.

More importantly, Frid’s blessing and involvement helped attract other developers. In November 2020, Solana held its first hackathon. It was attended by more than 1000 developers who built 60 projects.

It became clear that the Solana blockchain was a good fit for trading systems because the people who used it were traders.

In addition, the developers of the Solana platform received timely help from partners in writing the basic code.
Shortly before that, Armani Ferrante, a developer at Alameda Research, released Anchor, “an open-source platform for Sealevel that provides a range of user-friendly tools for developers”.

Anchor “reduced by 90% the amount of code that a developer needed to write to create a Solana-based product.” Solana uses the Rust programming language, but thanks to Anchor, building applications for Solana is more similar to programming in Solidity, the most popular language in Ethereum.

As a result, after two more successful similar events, the last of which was attended by 13,000 participants and 350 projects, Solana Labs announced in June 2021 that it had raised $314.159 million in funding from a16z and Polychain.

It seems counterintuitive to attract funding from venture investors when you already have a publicly-traded token and a market capitalization of more than $10 billion, but raising money from a16z, Polychain, Alameda, and other well-known people in this field was essentially a marketing decision. Traditional startups also attract a portion of funds from the best venture capital investors to ensure an influx of talent, partners, and customers.

People are just as important as technology. Tokens are just a way to enhance the network effect. Once network effects take effect, the blockchain takes on a life of its own. Well-known names and superior technologies attract investors and developers, attract users and other developers, and so on.

Thus, Bankman-Fried and a16z provided the platform with the necessary trust and served as an impetus that helped Solana break away from the competition.

However, the long-term success rate of the blockchain boils down to two questions:

1. Can the project attract developers?
2. Will developers be able to attract users?

So far, everything looks good. The project is gaining momentum.

Basic Questions.

Blockchains and crypto technologies are relatively young phenomena. As a result, they may seem strange and intimidating. But, according to many experts, crypto projects are subject to the same dynamics as any business.

So, before we explore the technology and learn something new, let’s simplify everything and formulate two main questions::

1. Will Solana convince developers to build their products based on the platform?
2. Can the products created by these developers attract users?

Once the technology is launched, the next step should be to “attract the next billion users”.
Although Coinbase has a user base of 56 million people, for mass adoption of crypto technologies, it is crucial that people “control their keys “using something like a Metamask or Phantom wallet. If you don’t hold your keys, you can’t live fully with cryptocurrencies. Unfortunately, now there are only a few million such people.

Cryptocurrencies, blockchains, and specifically Solana are still very young. Even the very idea of the project is only four years old.

Seed sale SOL.

According to Binance Research, the project has held five token sales over the past three years. In addition, in June, the project announced the raising of $314,159,265 (yes, it is a Pi number) from investors, including a16z and Polychain.

Although the value of the tokens in the a16z/Polychain round was not disclosed (at the then market prices, the total value of these tokens was $11.7 billion), they most likely received an impressive “discount” in exchange for a multi-year investment schedule. As a result, investors – including the community (via Coin list) and validators-have achieved “obscenely” good results.

So what happened? How did Solana succeed where other blockchains that had an advantage at the start failed?

First, the difference between Solana and these blockchains was, of course, speed and bandwidth. Not only in the blockchain itself but also in how the team developed and launched the project. The developers simply focused on what matters – making the platform faster than everyone else. They hired a bunch of experienced engineers and concentrated on development, and as a result, they made and launched the best product more quickly than others.

Solana’s growth took place in waves and tipping points fueled by people’s power and reinforced by technology.

How does Solana technology work?

From a technical point of view, Solana looks promising thanks to an innovative system architecture that provides much faster transaction processing speeds and lower costs compared to other blockchains.

Bitcoin processes seven transactions per second (TPS), and Ethereum can process 30 transactions per second (until Eth 2.0 dramatically increases throughput). Solana can currently process 65,000 transactions per second.

Currently, the cost of transactions on the Bitcoin blockchain is about $3. Ethereum commissions range from $8 to $40. On Solana, the transaction cost is $0.0001.
It is impressive.

Solana’s goal is to ensure that “a decentralized network of nodes matches the performance of a single node”. If it sounds too complicated, then the proof is in practice.

When buying SOL tokens on the FTX exchange, many investors used the Phantom wallet, contributed SOL to staking, bought RAY tokens on Raydium and donated them to staking – all this, in their opinion, can be done very quickly and very cheaply. You don’t need to think twice before doing something on Solana because the platform does everything very quickly and very cheaply. That’s the whole point. It is no different from everyday use of the Internet.

The magic lies in how Solana does it. We’ll talk about this later.

To get started, Solana uses the Proof-of-Stake consensus mechanism in combination with Proof-of-History, a decentralized time source that the CEO and founder of Solana Labs said is the best way to get started. Anatoly Yakovenko is a “realization of the arrow of time in mathematics”.

It sounds very complicated, but it is. It means that Solana allows you to streamline transactions without simultaneously reaching an agreement on the network between all nodes. That’s why everything happens so fast.

It also means that Solana can be a single “shard”. It is expected that Eth2 will provide a throughput of 100 thousand transactions per second. He and other new blockchains will do this by using sharding, creating sidechains tied to the main Ethereum blockchain.

In Solana, everything happens within one chain and one state.

The beginning of Solana’s presentations is aphoristic: “Solana is a blockchain with the speed of NASDAQ”.

As already noted, the creators of Solana sought to “ensure that a decentralized network of nodes corresponds to the performance of a single node”.

That’s what it means.

A centralized exchange, such as NASDAQ, is a single node through which all its participants’ data is transmitted. The trader pays for the opportunity to trade on NASDAQ and access equipment connected to the network with the same Ethernet code as all other participants. As a result, all participants can receive price information and send orders at the same rate – “All participants’ data enter the markets at the same rate. It is resistance to censorship.”

As long as there is the confidence that NASDAQ provides accurate information quickly enough and is willing to pay for participation, this system works very well.

The challenge is to achieve the same censorship resistance in a decentralized network of nodes that must maintain the overall state of the web without having to trust any centralized entity.
From the very beginning, Solana aimed to create a “censorship-resistant single machine distributed around the world that ensures that anyone can access information as quickly as possible.”

The main advantage of decentralization, in this case, is that if you eliminate the intermediary and allow people to interact in a peer-to-peer mode, both sides of the transaction receive more benefits due to savings on commission payments to intermediaries. On the other hand, as you know, the main disadvantages of blockchains are low speed, low bandwidth and high costs.

The advantage of a “single” node is that it only agrees with itself. However, blockchains need to reach a consensus among a group of participants in an open and unchanging way. To do this, they use consensus mechanisms such as Proof-of-Work (PoW) and Proof-of-Stake (PoS).

Consensus mechanisms involve inevitable trade-offs, reflected in the scalability Trilemma or blockchain Trilemma: Decentralization – Scalability – Security.

Ethereum co-founder Vitalik Buterin pointed out that there are three main qualities: scalability, security, and decentralization, and if you stick to “simple” methods, you can only get two of these three qualities.

The largest blockchains, Bitcoin code and Ethereum (before Eth2), use Proof-of-Work consensus mechanisms to verify transactions.

In Proof-of-Work, “miners” worldwide use an increasing amount of energy to solve increasingly complex mathematical problems to verify new transaction blocks. Miners receive tokens for their work, some of which they keep for themselves, and some sell to pay for equipment and energy. Proof-of-Work blockchains are decentralized and secure, but they have scalability issues.

Bitcoin Revolution can process more than 100 transactions per second, with fees ranging from $2 to $50 per transaction. Therefore, it is suitable for sending Bitcoin to another address or buying/selling NFTs because even with all the recent activity, it doesn’t happen dozens of times per second. Plus, $50 isn’t a huge sum when you buy a million-dollar picture”.

NASDAQ, in turn, processes 500,000 transactions per second, and it is one of many such exchanges. So to decentralize global financial markets, you need a solution with higher throughput and lower costs.

Most new blockchains use the Proof-of-Stake (POS) consensus mechanism. Ethereum will also switch to PoS in Eth2.

Unlike PoW, where miners verify blocks while spending energy, in Proof-of-Stake, “validators” run a program on a specialized computer to process, verify blocks, and add them to the blockchain. Each validator on the network can vote on which blocks they think should be added to the blockchain, confirming all-league transactions.

Votes of each validator are weighted by the number of their tokens (each validator’s share is essentially a guarantee that they will act in good faith). If they work correctly, they receive a reward in the form of many tokens; if they behave dishonestly and try to add incorrect blocks, then lose their tokens. The game’s theory works here – the number of tokens in each validator’s share exceeds the potential profit in case of unfair behaviour.

Solana uses PoS, or rather “Bonded Proof-of-Stake” (BPoS). It means that any SOL owner can delegate their votes to a validator of their choice and share the rewards (or penalties) for verifying transactions with them. Unfortunately, according to Buterin, “most DPoS blockchains (similar to BPoS, but with some differences) with high throughput are secure and scalable, but not decentralized”.

The reason is that in a traditional PoS system, validators need to coordinate with each other to understand when transactions are confirmed and which block will be next. If each person can send blocks, validators must wait before adding the following block to the chain. When a network includes thousands of nodes, it takes a very long time to reach a consensus.

Therefore, such blockchains use fewer validators. For example, Binance Smart Chain uses the Proof-of-Stake Authority algorithm with a bandwidth of ~ 100 TPS. To add a new block, BSC requires consensus among the 21st validator with the largest share. Ten validators are under the direct control of Binance. As a result, BSC is a more scalable but less decentralized blockchain.

Eth2 plans to solve the trilemma by using sharding. Sharding should allow you to increase throughput by 100 times by creating 64 chains – “shards” (individual segments) that verify transactions in parallel. Unlike a system where each miner has to check the entire chain, each bit will have to check only part of the whole chain.

It will allow Ethereum to process transactions on 64 shards in parallel and then execute them on the leading network in turn.

Solana uses a different approach, which allows it to save all activity within a single shard.

A key innovation implemented by Anatoly Yakovenko there was a Proof-of-History mechanism (Proof Of History). In most blockchains, miners or validators need to communicate how to organize blocks. On Solana, all units act as radio towers that can check with a watch.

The founder of Solana explains it this way:

“When using Proof-of-History, a record is created that confirms that an event occurred at a certain point in time. While in other blockchains, validators need to interact with each other to agree that a certain amount of time has passed, each Solana validator maintains its clock by encoding the time information into a simple, verifiable delay function (VDF)”.

This way, instead of waiting for other validators, Solana validators can use information encoded in the registry itself to determine whether a transaction is valid.

Because PoH provides predictability, validators can take turns performing their work within a pre-defined “lead rotation”. Only the leader can make an entry in the register at a certain point in time. Leaders are determined based on an algorithmically generated random order weighted by the share of each validator. For example, if you have 10% of all “staked” tokens, you will be the leader 10% of the time, but you won’t know precisely when.

You can view the leaderboard rotation in real-time on Solana Beach. And it’s fascinating.

Proof-of-History is one of the “eight innovations that make Solana the first web-scale blockchain”. Here are eight innovations:

1. Proof-of-History (POH) – “hours before consensus”;
2. Tower BFT – the PoH optimized version of PBFT;
3. Turbine – the block distribution protocol;
4. Gulf Stream – a protocol for sending transactions without using a mem-pool;
5. Sealevel — parallel processing of smart contracts;
6. Pipelining-a transaction processing mechanism that optimizes the validation process;
7. Cloudbreak — a database of accounts with horizontal scaling;
8. Archivers -a distributed registry repository.

It is essential to know that these eight innovations collectively solve the scalability trilemma, making the Solana blockchain scalable, secure, and sufficiently decentralized.

It is essential to focus on the decentralization aspect because one of the main drawbacks of Solana and other PoS blockchains is that they are less decentralized than PoW blockchains.

Balaji Srinivasan called: “The Nakamoto coefficient”, a generally accepted way of measuring the degree of decentralization, is what Balaji Srinivasan called “The Nakamoto coefficient”.

Since you need to control 51% of the PoW blockchain to capture it, “we define the Nakamoto coefficient as the minimum number of objects in a given subsystem required to achieve control over 51% of the total number of objects”.

According to Anatoly Yakovenko and Raj Gokal, it is indeed a measure of censorship resistance. Balaji said about PoW blockchains – for PoS blockchains, you only need 33% to stop the network (and 67% to make arbitrary transactions of any kind).

While Bitcoin and Ethereum are theoretically more decentralized (because anyone can run mining on cheap hardware, and Solana requires more advanced hardware to maximize the network’s capabilities), Solana has a higher Nakamoto coefficient than Ethereum or Bitcoin is growing.

The reason is that although there are more Bitcoin and Ethereum miners than Solana validators, these miners work in “pools” (which behave as single entities) and often use pool-driven software. The harder it is to mine blocks, the more likely miners will pool resources.

Bitcoin’s current Nakamoto ratio is roughly 4. For Ethereum, it is 3 or 4, and for Solana, it is 19.

While the project team’s goal is to continue to increase the Nakamoto coefficient and, therefore, censorship resistance, the Solana network seems to be entirely decentralized already, especially considering that most users care much less about decentralization than crypto insiders.

The following billion users will want a better user experience, faster speeds, lower costs, and more value in their pockets, and Solana is brilliant in this regard.

These technologies combine to form a decentralized system capable of processing 60,000 transactions per second with minimal transaction fees.

With the necessary infrastructure, Solana needed to attract users. And people, as we know, follow people.

How Solana works: Proof-of-History and other features.

Solana is one of the cheapest (in terms of fees) and fastest blockchains in the industry. It achieved it thanks to a lot of technical innovations.

Let’s compare Solana’s performance with its main competitors:

Blockchain Transactions/sec Fees Confirmation time

Solana 50000 0.001$ 0.4 seconds

Bitcoin 5 2-50$ 30 minutes

Ethereum 20 2$ 5 minutes

BInance Smart Chain 100 0.01$ 1 minute

Cardano 250 0.2$ 10 minutes

Polkadot 1000 1$ 2 minutes

Fifty thousand transactions per second are about 20 times more than the VISA payment system. Solana can issue significantly more in theory – this requires more validators and more powerful hardware. In other words, the rate of transactions per second can grow in the future only due to the development of the network and computer technology. High speed and low fees attract developers of Dapps and other crypto projects.

So what makes the Solana blockchain so fast? First of all, the innovative Proof-of-History algorithm. A detailed description can be found in the White Paper (Russian version), although it will be difficult for non-programmers. PoH is an additional algorithm that adds an encrypted timestamp to each transaction if you do not go into technical details.

What does it mean? The ability to coordinate the order of events in the blockchain without constant synchronization between nodes (computers that support the network). For example, in Bitcoin, the amount and order of transactions must be confirmed by thousands of computers worldwide, which takes so much time that money can go from 10 minutes to several hours. In Solana, the order of transactions is agreed upon after the fact due to the presence of timestamps. The order is known in advance, and it is unnecessary to confirm it through synchronization once again.

The question arises – after all, the time is different on each device, how to accurately understand which transactions follow each other? Usually, in the blockchain, nodes need to synchronize with the time reference constantly. Still, the Proof-of-History algorithm itself works as a decentralized reference clock. Moreover, cryptography allows you to prove that a particular event in the blockchain occurred between two others.

Thus, it is possible to build the order of data in the blockchain after transactions without synchronizing time between nodes.

Proof-of-History can work with the industry’s traditional Proof-of-Work and Proof-of-Stake consensus algorithms. The second option is used in Solana. One of the validators is assigned as the leader for 1.6 seconds, verifies transactions and passes the baton to the next validator — the order is known several steps ahead. You can see how this works in real-time on the website solanabeach.io:

The Tower BFT algorithm is used to protect the network from attacks – a variant of “Byzantine Fault Tolerance”, which uses PoH to save time and reduce ping when reaching consensus. Validators who vote for incorrect versions of the blockchain will receive a delay in the next vote. Also, all validators are divided into clusters, and separate groups vote for individual blocks, which allows you to speed up the process. Voting takes place every 400 ms, and 2/3 of the nodes must reach an agreement to reach a consensus.

Sealevel is also worth mentioning, a mechanism for running smart contracts in parallel, up to several tens of thousands at a time. For comparison, in the Ethereum Virtual Machine, smart contracts are executed one after another, which is much slower. Another difference: smart contracts in Solana are written in the low-level programming language RUST – this complicates application development but increases the work speed.

It is not all that the Solana developers came up with to increase the speed of the blockchain, but I don’t want to inflate the article even more. Instead, we propose to assess the prospects and value of the SOL cryptocurrency in the future. Let’s start with the project’s economic model.

Tokenomics of the SOL cryptocurrency

Solana is considered an inflationary cryptocurrency. Unlike Bitcoin or Cardano, it does not have a maximum supply – its number will increase indefinitely.

The increase is due to high staking rewards (currently about 7%) – a necessary measure for the initial growth of the project. The Solana inflation plan assumes that this figure will decrease over time due to reaching about 2%:

The total number of SOLs in staking is kept in 60-90% of the total supply of cryptocurrencies. So that inflation will fall to about 1.5% by 2030. However, if you compare it with inflation today, the difference will be an additional 5.5% – that is, the yield on storing cryptocurrencies will be higher by 5.5%.

Another measure used to combat inflation, which is already familiar to you from Ethereum and Binance Coin articles, is token burning. Some coins are withdrawn from the market (manually or automatically) and made unavailable, so the total supply decreases and the price of the token increases.

There were moments of manual burning of Solana in the project’s history, but today this process is fully automated — 50% of network commissions are destroyed. Loading the blockchain with tens of thousands of transactions per second can significantly impact inflation. Furthermore, due to burning, the SOL cryptocurrency may become deflationary in the future, which will give an additional incentive for price growth.

According to statistics, all funds in circulation are distributed as follows:

• Solana Foundation: 13%;
• Public Sale: 2%;
• Community Support: 37%;
• Developers and other insiders: 48%.

Almost half of the tokens belong to the founders and others involved in the Solana project. Despite efforts to decentralize the network, this in itself creates risks: insiders can suddenly bring 150 million SOLS to the market and bring down prices. In addition, due to the Proof-of-Stake protocol, the owner of many coins is a kind of “oligarch”.

It can affect the operation of the entire network when introducing a voting system — the weight of the vote usually depends on the amount of cryptocurrency in the account.

Of course, developers can initially change the code as they see fit, but it is still a threat to the main idea of cryptocurrencies – decentralization and independence. So, we have analyzed all the nuances in detail, and it remains only to assess the prospects and make a forecast of the Solana exchange rate for 2022.

SOLD exchange rate forecast for 2022.

In our opinion, in 2022, SOL will continue to be a cryptocurrency with good growth prospects – there are all the conditions for this:

• high interest of developers;
• third-party investments in the project;
• the rapid growth of social networks;
• no scaling issues.

Of course, it is worth mentioning про the existing negative aspects and risks:

• network crashes create risks for wallet owners;
• the leading network is still running in beta mode;
• weak decentralization of the cryptocurrency;
• high inflation in the coming years.

It usually consists of studying price charts and unique indicators, but if you are not well versed in this, you can use a particular widget, namely:

• if the arrow is in the buying zone, the probability of an increase in the price of Solana is now relatively high, which means that this is an excellent time to buy cryptocurrency;
• conversely, if the arrow is in the sales zone-most likely, the price will fall soon; you need to take profits or open short positions.

Unfortunately, technical analysis does not directly show the current value of cryptocurrenciesы. To understand it, you need some benchmark, and many prefer to focus on Bitcoin, which occupies almost half of the crypto market.

Solana is a relatively new project, and its development potential is several times higher than that of Bitcoin, which has more than ten years of history. Of course, this does not mean that SOL will ever become more expensive than BTC, but the percentage increase in price will undoubtedly be higher. For this reason, the SOLBTC rate will grow in the long run. Based on this, it is necessary and necessary to act accordingly:

• when the SOLBTC rate is close to the historical maximum, the price of Solana is already relatively high, and it is better to refrain from buying;
• when the SOLBTC rate is noticeably lower than the historical high, the price of Solana has deflated and is much closer to the local minimum — purchases look much more attractive.

Additionally, it is importantимаto know how expensive or cheap Bitcoin is. It can be done using the fear and greed index, which shows the prevailing emotion in the market, namely:

• great fear (0-30);
• normal condition (30-70);
• more incredible greed (70-100).

If fear prevails in the market, the price of Bitcoin falls lower than it should.
At the same time, the price of SOL usually falls even more – it becomes possible to buy cryptocurrency many times cheaper.
Well, if the index is above 70, you should look for a moment to withdraw profits – it will be difficult for prices to grow stronger.

The last indicator that is often used to analyze cryptocurrencies is Google Trends:

• It shows how often the query “Solana” is mentioned in the Google search engine. This value correlates with the frequency of mentions of the Solana cryptocurrency in the media space. If it is high, the demand for SOL increases and prices rise. Conversely, if the frequency of words is relatively low, there are fewer buyers, and prices fall, making it possible to purchase cryptocurrency at a lower price.

Summing up, it should note that Solana looks like an up-and-coming crypto project. However, the developers have already solved the scaling problem that Bitcoin and Ethereum suffer from.

Great efforts are also being made to attract new projects in DeFi, NFT and GameFi – the most “hot” today.

The Solana Pay project is also an interesting-an attempt to enter the e-commerce market and become closer to real business.

Unfortunately, there are some negative aspects, such as periodic network crashes – this happens much less often for competitors. However, this can be attributed to the project’s youth and work in beta mode. If developers fix the problems, this will lead to an even more significant increase in interest in Solana.

In general, the project seems undervalued – its potential is no less than that of Ethereum.

How to buy Solana cryptocurrency and where to store it?

If, after reading this review, you have a desire to buy Solana (SOL), then let’s immediately figure out how to do it conveniently and profitably. First of all, you need to choose a wallet to store money. There you will receive a digital address for sending cryptocurrency.

In order not to make a mistake when copying an address, it is best to use a particular button (to the right of the speech) – so it will ultimately fall into the clipboard. Also, in most cryptocurrency applications, you can scan the address using a QR code – it is even safer.

Today, there are many cryptocurrency wallets, many of which have already added support for the Solana network. Here is a list of suitable options among different types of wallets:
Binance, Trustee Wallet, Ledger, Phantom.

A few words about each option:

• Binance is the largest cryptocurrency exchange. On exchanges, it is most profitable to buy and exchange digital assets while not bothering with passwords and private keys of wallets. Thus, it is an excellent place to store small amounts of money – the security on Binance is quite good, and the passive profit from staking is the highest – up to 11% per annum. Large investors should withdraw money to external wallets to have 100% control of their money and passwords;
• Trustee Wallet is a popular mobile wallet with open source code and a good level of protection. Supports storing and exchanging more than a hundred cryptocurrencies. It differs from its analogues by a convenient Russian interface and high percentages of SOL staking;
• Ledger is the most famous “cold” wallet. The most reliable place to store cryptocurrencies: the wallet connects to the network only when necessary, making it almost impossible to hack. It looks similar to a flash drive costs $100-200 depending on the model;
• Phantom is currently the best option for using and staking Solana on a PC (via a browser). Phantom supports dozens of other blockchains, as well as NFTs.

Once you’ve decided on your wallet choice, all you have to do is choose the Solana purchase method.
There are at least ten of them, but due to the low commissions in the Solana network, we recommend the Binance cryptocurrency exchange.

On the Binance crypto exchange, the best purchase price is always the best due to the high liquidity millions of traders participate in trading. On the other hand, the disadvantages include mandatory verification and a small number of deposit methods (bank card and several payment systems).

As an alternative to a crypto exchange, online exchangers are best suited. You can use them to buy Solana without verification using all popular electronic currencies and payment systems, so this method may also serve many people.

However, commissions are considered in the exchange rate, so it is worse than the exchange rate. In terms of security, it is recommended to use monitoring sites where only “white” exchangers are added. One of the best sites for such a plan is ExchangeSumo due to receives cashback during the exchange.

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