What is Solana? Trends and use cases

Blockchain technology is evolving rapidly, and Solana continues to make its case as one of the most promising projects in the cryptocurrency world. With low fees for transactions and high network speeds, Solana (SOL) is becoming a central hub for new decentralized applications.

In this article, we will take a deeper look into the Solana cryptocurrency, its key features, how it works, its price history, and also how it compares to other blockchain networks.

What is Solana?

Launched in March 2020, the Solana cryptocurrency has stood the test of time and currently ranks 5th in market capitalization, with $81.7 billion in total (at the time of writing). 

The blockchain offers an all-in-one solution for developers to create decentralized applications (dApps) and scale them easily. This becomes easy as Solana offers fast transaction speeds and low fees, which are some of the biggest challenges that haunt other blockchain networks. 

It also runs on the Proof of Stake (PoS) mechanism along with Proof of History (PoH) which helps in advancing its scalability without distressing the security and decentralization aspect.

When was Solana’s first block created?

Solana’s genesis block came into existence on March 16, 2020, which also marked the launch of its mainnet. From the start, the Solana blockchain focuses on delivering efficiency, and high throughput, all while maintaining competitive transaction fees. All of this led to a wider adoption of the blockchain by hundreds of cryptocurrency projects, and now it is one of the most popular blockchain networks in the cryptocurrency world.

Key features of Solana

While the technical features of Solana are too many to list, here are some of the key features that are important to know for new developers looking to build on this blockchain.

1. High throughput: Solana claims to have a transaction processing speed of over 65000 transactions per second (TPS). This high speed enables Solana to offer seamless user experiences on the decentralized applications built into its ecosystem. 

2. Scalable architecture: Solana’s architecture makes use of two mechanisms, Proof of Stake (PoS) and Proof of History (PoH) which allows Solana to maintain high levels of scalability without compromising on security or decentralization. 

3. Low transaction fees: With an average transaction cost of $0.00025, Solana is an exciting place to conduct financial transactions in its ecosystem. Since the transaction costs are so low, users prefer Solana over other blockchains which attracts even more users to the platform in the long run. 

4. Tools for web3 developers: Solana provides an in-built tool kit for a web3 suite of tools and resources. The most popular one is known as the Solana Software Development Kit (SDK). SDK allows web3 developers to create and deploy decentralized applications while also testing their programs inside the Solana ecosystem which makes the whole development process efficient and faster.

So what is Solana used for, and how does it work?

How does Solana work?

Solana operates on unique consensus mechanisms to achieve scalability and provide low translation fees to the projects in its ecosystem. It uses a hybrid consensus model that integrates Proof of Stake (PoS) and Proof of History (PoH), which is important to know to understand how Solana works. 

Proof of Stake is where validators use Solana tokens to create new blocks that they are willing to ‘stake’ on the Solana network. This process ensures security and energy efficiency in the ecosystem and in return, these validators are rewarded per their staked Solana crypto tokens. 

Overall PoS is a process that promotes network integrity while rewarding validators and also attracting new users to participate in the proof of staking process. 

In addition to PoS, Proof of History is also used by Solana which acts as a second layer of security. In PoH, timestamps and events are recorded in chronological order which doesn’t rely on validators to sequence them. 

When there is a clear historical record, validators can process multiple transactions at the same time, resulting in a significant increase in efficiency and throughput in the Solana ecosystem. This is because whenever a new transaction is initiated, it is first verified by the PoH mechanism, which establishes its timestamp, and then validators do their job, thus ensuring a swift validation job while also contributing to the overall security process of the network. 

Solana price history

Solana (SOL) has had a wild run in the crypto markets. It has seen its all-time high in 2021 where it went to $259.96, and it also witnessed the strong bear market of 2022 where the Solana cryptocurrency dropped to $7.80 in December 2022. 

At the time of writing, Solana stands at a market cap of $82.77 billion, with a fully diluted valuation of around $103.38 billion. In the last 24 hours, SOL has reached a volume of $3.63 billion, indicating volatile market activity in this token. 

In terms of price range, Solana has ranged between $162.47 to $178.32 in the past week. Currently, it is trading at $176 indicating a bullish increase of 13% in price in the last 7 days.  

Solana vs. other blockchains

Solana is in the top 10 blockchains when it comes to key performance indicators and overall user base. Here we will compare it with three of the popular blockchains in the cryptocurrency market.

Solana vs Bitcoin

At the time of writing, Solana’s total value locked (TVL) stands at approximately $6.28 billion, with a total market cap of around $82.77 billion. Meanwhile, Bitcoin has a TVL of $429.52 million towards scalability and low gas fees, however, Solana has already achieved that goal, which is why it is still attracting new projects to build on its platform and attract a wider user base who want to benefit from the low fees it offers. 

Solana vs Ethereum 

Ethereum, the second most popular cryptocurrency after Bitcoin has a TVL of $121.26 billion and a market cap of $297.64 billion. These numbers indicate an established dominance of Ethereum in the decentralized finance (DeFi) sector.  

However, Solana boasts a big edge over Ethereum due to its fast processing times coupled with low transaction costs. It is a fact that Ethereum’s transition to Ethereum 2.0 is a big step towards making Ethereum more accessible to new projects, however, Solana has already achieved that which is a reason why new projects are building more on Solana than Ethereum.

Solana vs BNB Smart Chain

The BNB Smart Chain is a popular choice for developers and users alike. It has a total value locked (TVL) of approximately $6.05 billion and a market cap of around $84.95 billion, at the time of writing. In comparison, Solana’s TVL stands at $6.28 billion indicating a similar growth and types of users from the decentralized finance (DeFi) landscape.

Both Solana and BNB Smart Chain offer fast processing times and low transaction speeds. However, it is the higher throughput where Solana edges the latter blockchain. Allowing for a higher volume of transactions with lower latency is one of the favorite features for DeFi developers as it helps them in building more scalable applications. 

Overall both of these blockchains are seen as high-performance and low-cost options for users and developers. And ultimately, it is the growth and user-friendly environment that will decide which blockchain comes out on top in the end.

Use cases of Solana

Solana is used by a variety of decentralized applications across multiple web3 sectors. Low transaction costs and high throughput make Solana an ideal blockchain for DeFi platforms and decentralized exchanges (DEXs), which often come under criticism for high transaction fees and lagging speeds. 

Furthermore, Solana is becoming more popular in the non-fungible token (NFT) market, which enables efficient minting and sales of digital art by artists and creators.  Solana-based NFT platforms like Magic Eden and Solanart, eliminate the high gas fees which are associated with big blockchains like Ethereum. 

Solana also supports decentralized games built on its blockchain. Online games have a high user base which is supported effectively by Solana due to its high scalability and security infrastructure. 

All things considered, Solana’s adaptability and developer-friendly ecosystem enable web3 developers to build reliable applications that need scalability, security, and speed, enhancing its standing as a top blockchain platform.

Advantages and challenges of Solana

With a unique blend of Proof of Stake and Proof of History mechanisms, Solana offers high transaction speeds of over 65,000 transactions per second (TPS) at a very low cost. Web3 projects can effectively build on Solana due to its scalability and the user community can be retained on Solana due to the low cost of transactions offered on NFT and DeFi platforms.

However, as they say, not all that glitter isn’t gold. Solana also faces its fair share of challenges. While low transaction costs are a great benefit, it also means that there are high transaction volumes and sometimes this causes outages which has raised concern in the web3 community. 

In addition, certain critics contend that Solana’s degree of decentralization is inferior to that of well-known networks like Ethereum, despite the fact that its speed is a major benefit. This may give rise to concerns about governance and security. Resolving these issues will be essential as the platform develops in order to keep its competitive advantage in the blockchain market and draw in more users.

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How to get started with Solana 

Getting started with Solana is easy and you can follow these easy steps to start benefitting from the blockchain. 

1. Select a crypto wallet that supports Solana. This can include Phantom, Metamask, and similar ones. 

2. Buy SOL tokens from a centralized or decentralized exchange and send your SOL tokens to your crypto wallet. 

3. Now, explore the decentralized applications built on Solana. This can include dApps like Serum, Raydium, or NFT marketplaces like Solanart. 

4. Read whitepapers and guides written by Solana dApps and join their online communities on Telegram and Discord. This is a great way to stay informed on upcoming opportunities or any major updates that may come in the Solana ecosystem.

With its fast transactions, cheap fees, and scalability for DeFi, NFTs, and web3 apps, Solana is still one of the top blockchains. Although there are still issues with decentralization and network stability, its creative architecture and developer-friendly environment make it a major force in the development of blockchain technology going forward. Solana’s long-term success in the changing crypto world will depend on its capacity to handle these issues as use rises.