What is Solana (SOL)?
Solana is designed to allow developers to create decentralized applications (dApps) without any concessions for performance bottlenecks.
Most traditional blockchains have a problem in agreeing on the time and sequence in which transactions occurred.
However, SOL uses Proof-of-History (PoH), which in simplified terms, timestamps transactions so that they can be automatically ordered.
In effect, SOL nodes can produce the next block without having to coordinate with the rest of the network, because they can trust the timestamp and order of transactions received. This results in a massive reduction in consensus overhead, which allows it to process more than 1,000 transactions per second (TPS) as compared to Ethereum’s 15 TPS.
All of this plays into reducing the barriers of entry into the ecosystem, and smoothing the transition from the Old World onto the blockchain.
Hybrid consensus mechanisms
While Proof-of-History (PoH) can be credited for Solana’s incredibly short block confirmation times, it would not be accurate to say that it is the consensus mechanism used to verify transactions on the protocol. Solana uses a conventional Proof-of-Stake (PoS) system to secure the network.
The result of this is that holders of the SOL token are incentivised to help the network secure itself by staking their tokens to validate transactions and earn rewards.
The household crypto derivatives exchange FTX launched their decentralized exchange (DEX) on the Solana blockchain in late July 2020. Evidently, the amount of institutional and retail interest is high given FTX’s vote of confidence in the protocol.
Solana has had a total of 5 funding rounds raising over 25 million USD. Rather uniquely, the Solana protocol even offered a guaranteed share buy-back of slightly under 20c for holders who subscribed and staked their tokens within the first 3 months of their ICO. This is highly indicative of their conviction in their protocol for dApp development use and as an ecosystem as a whole; and given their price performance seems to be well warranted.