What is cryptocurrency Solana and how does it work?

What is cryptocurrency Solana and how does it work?

Cryptocurrency Solana was developed to complement Ethereum and work similarly. Software developer Anatoly Yakovenko came up with the name Solana, taken from a small seaside community in Southern California.

Yakovenko first put up the novel blockchain in 2017, and Solana was introduced in March 2020. It has quickly gained popularity and is currently among the top 10 cryptocurrencies in market valuation.

In recent news, a hack on August 2 affected the Solana ecosystem. The SOL coins from Solana, also known as SOL, are allegedly missing from Phantom, Slope, and TrustWallet as a result of a compromised private key, according to blockchain specialists and cryptocurrency investors. These “internet-connected” wallet owners allegedly had their money taken.

What is cryptocurrency Solana?

Cryptocurrency Solana, a rapidly expanding blockchain frequently referred to as an “Ethereum killer,” bears remarkable parallels to Ethereum.

The SOL coin can be bought on significant exchanges, just like Ethereum. Transactions on the Solana network determine the token’s actual value, which offers special benefits.

Most early digital currencies, including Bitcoin and Litecoin, use a proof-of-work algorithm to determine the nodes in their chains. Proof of work’s consensus technique depends on miners to select the next block.

Nevertheless, this proof-of-work system consumes a lot of resources and operates slowly, which consumes a lot of energy. This is one of the motivations behind Ethereum’s impending Merge, which will see the network switch to a proof-of-stake architecture.

Instead of the previous proof-of-work system, proof of stake uses staking to choose the next block. The SOL coin can be bought on significant exchanges, just like Ethereum. Transactions on the Solana network determine the token’s actual value, which offers special benefits.

Cryptocurrency Solana employs “a mixture of time-tested cryptographic algorithms and fresh ideas to address the flaws of crypto’s first-wave solutions,” claims Konstantin Anissimov, COO of cryptocurrency exchange CEX.IO.

Cryptocurrency Solana’s primary goal was to address Ethereum’s scalability difficulties, which it accomplished thanks to its distinctive blend of proof-of-history and outsourced proof-of-stake algorithms. A variant of the more conventional proof-of-stake algorithm is called delegated proof-of-stake.

For those who require a refresher, the proof-of-stake method is a series of transactions that uses a validator system to add new blocks to a blockchain. Solana’s delegated proof-of-stake approach benefits consumers in several ways.

According to Christian Hazim, an ETF supplier Global X analyst, the history algorithm offers additional protection to the network.

Cryptocurrency Solana resolves two of the three problems Vitalik Buterin, co-founder of Ethereum, mentioned in his blockchain paradox of scalability, security, and decentralization.

Most experts feel that the network only handles two aspects of the trilemma—security and decentralization—even though Buterin initially claimed Ethereum would address all three components.

But Solana is made to handle the trilemma’s security and scalability sides. SOL’s proof of history technique offers the network exceptional security. While the Solana platform’s improved scalability is made possible by how quickly computations are performed.

What makes Solana unique?

According to Anissimov, the crypto Solana uses a unique combination of proof of history and outsourced proof of stake to enable much faster transaction speeds than its closest competitors, Ethereum and Cardano (ADA), at a fraction of the cost.

Proof of history employs timestamps in its determination of blocks for the Solana chain as opposed to proof of work, which uses the miners themselves to determine the next block in a network, or evidence of stake, which utilizes staked tokens to select the next block.

This cutting-edge technology enables blockchain validators to vote on the date stamps of various blocks in the chain.

How does Solana work?

For both outsourced proof-of-stake and proof-of-history operations, Solana uses protocols.

Bryan Routledge claims that Solana utilises this set of protocols to “process lots of transactions quickly.”

Routledge observes that while striving to handle transactions quickly, centralization is often required. For instance, Visa maintains its processing speed via a vast computer network. In comparison, Routledge asserts that to preserve its decentralized nature, Bitcoin “processes operations very slowly.”

Cryptocurrency Because the fundamental point of blockchain technology is to facilitate decentralized services, Solana attempts to process transactions at rates comparable to a large, centralized company like Visa while maintaining Bitcoin’s decentralization. This speed provides greater scalability because Solana’s solutions have decreased financial and environmental expenses.

The Solana blockchain needs more protection because blocks are added to it so frequently. Solana’s proof of history method is useful in this situation. This technique preserves system security while timestampeding every block.

The Solana SOL tokens are then kept and applied as network transaction security. These transactions range from using Solana as a non-fungible token (NFT) exchange to verifying intelligent contracts.