What’s Behind Solana’s Meteoric Rise?
Solana has been trending in the crypto space recently. This is partly due to the fact that in just the past year, Solana’s native token, SOL, has risen from about $1 to a price of around $200 at the time of writing this article. That’s an astonishing price gain in a short amount of time, but what caused it? How much do you really know about the company behind SOL? Here we’ll take a closer look at Solana and the Solana Ecosystem to try to better understand the key to the project’s early success.
Solana was founded in 2017 by a team of software engineers in San Francisco. The lead developer behind Solana is Anatoly Yakovenko, who is the Founder and serves as the CEO of the project. Stated plainly on Solana’s website it says “Solana is the fastest blockchain in the world”. Just how fast? The Solana blockchain can process a few thousand transactions per SECOND!
Why Solana’s Speed Matters
By developing a blockchain that can process thousands of transactions per second, the Solana team is helping the broader crypto space to overcome one of the main challenges faced by most of the existing blockchains; slow transaction processing times. For example, a transaction on the Ethereum blockchain takes between 30 seconds and 16 minutes.
On the Bitcoin network, average transaction times are 10 minutes but vary. Not only are the slow transaction times of many blockchains frustrating to users, but they also represent a barrier to entry, as some people might think twice about buying and trading crypto due to slow speeds. In today’s fast-paced world, time is everything, and people don’t like to waste time waiting.
By processing more transactions in less time, Solana represents a scalable solution to one of crypto’s most common problems.
How Solana Works
Solana uses a concept called Proof of History. Proof of History uses Bitcoin’s SHA256 hash function to keep time inside the blockchain. Proof of History is not a consensus mechanism such as Proof of Work or Proof of Stake, but it contributes to the way Solana uses the Proof of Stake consensus mechanism.
Proof of History allows Solana validators to put many more transactions into a block, to be verified later by additional validators using time stamps. This feature and Solana’s block time of 400 milliseconds combine to present a blockchain that can process thousands of transactions per second. Solana is expected to become even faster as hardware improves. This also applies to Solana’s smart contracts, making it the fastest smart contract blockchain available.
The Solana Ecosystem
With an increase from 100 projects building on top of Solana to 250+ from January to May 2021, the growing size of the Solana Ecosystem contributed directly to SOL’s substantial price increase during that time. Solana has the support of both Alameda Research and FTX, both founded by Sam Bankman-Fried, and FTX is also the developer of Serum, a decentralized exchange that runs on the Solana blockchain.
By September 2021, Solana had climbed to 7th in the crypto top 10, however in the same month, the Solana blockchain suffered a blackout which required a complete restart of the system to be completed. Although this was inconvenient for users and projects building on top of Solana, it only very briefly impacted SOL’s price, which quickly rebounded.
The VegaX Solana Index (VSOLX)
In order to give investors a chance to track SOL’s progress, the VegaX team has developed the VegaX Solana Index (VSOLX) which tracks the top 5 Solana-based assets, including SOL. The other assets included in the Index are selected by market capitalization. Investors can gain access to Solana’s network of governance tokens, DeFi protocols, and data providers all in one place through VSOLX.
Solana’s Next Moves
It seems clear that Solana will continue to be a project to watch well into the future, and it’s solution to the blockchain speed problem that impacts many other blockchains will have a lasting impact on the crypto space.
We expect that Solana will continue to be an innovator in the crowded field of blockchains as it continues to scale. Will Solana’s Ecosystem rival Ethereum’s some day or is that already happening? That question remains up for debate, but maybe not for long.
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