The world of decentralized applications is both new and fascinating, with more use cases emerging every day. This technology is being applied to reduce inefficiencies in the way we store information and do business, as well as to help cut out some of the unecessary red tape and excess costs in financial services.
As one of the major blockchain platforms developing decentralized applications (DApps), Solana has been dubbed a potential “Ethereum killer.”
Here’s how it’s being used.
What is Solana?
Solana is a Layer-1 smart contract blockchain designed to tackle the scalability issues currently plaguing the blockchain industry without compromising on the other two intricate properties of a blockchain – security and decentralization. The project seeks to perfect and develop innovative solutions which enable its network attain tremendous throughput when compared with legacy blockchains (Bitcoin and Ethereum).
Ethereum was developed to improve on the shortcomings of the Bitcoin blockchain and has successfully revolutionized the crypto industry with its smart contracts functionality which allows other tokens and projects to be built on Ethereum, alongside its ability to process roughly 15 transactions per second (TPS). This is a sizeable improvement when compared to the Bitcoin blockchain (the largest cryptocurrency by market cap which does about 4.6 TPS). However, the Proof-of-Work (PoW) consensus mechanism (which governs how nodes on both networks make decisions) makes them highly energy-intensive, expensive, and near-impossible to scale with extremely slow throughput in comparison to traditional payment networks.
Hence, Solana’s primary goal is to deliver a highly-scalable and ultimately secure decentralized network, capable of all the functions of blockchain technology today (such as building decentralized applications) and cost-effectively delivering fast transaction speeds.
Is Solana Proof of Work?
Without getting too technical, Solana attains its ultra transactions speeds by leveraging a hybrid consensus protocol – a combination of Proof-of-Stake (PoS) and Proof-of-History (PoH), with the latter being the genius solution responsible for the Solana network’s incredible transaction speeds and throughput.
The PoS consensus mechanism has proven to be an energy-efficient alternative to the Proof of Work model used in earlier blockchains. However, Solana’s implementation of the Proof-of-History provides the blockchain with a decentralized clock that allows a timestamp on every event (transactions) that occurs on the network, helping nodes create a chronological record that shows which event happened before the other at what point in time.
This eliminates the need for node synchronization, which is the primary factor that affects the throughput of a decentralized blockchain network (i.e. the faster nodes on a network reach a consensus, the better the transactions it can process per time); hence, relieving the pressure on validators.
Therefore, each validator node can create a record of the blockchain in a correct order regardless of when it receives the information. Solana also implements a parallelization technology that facilitates a parallel smart contract execution, ensuring that the entire network can scale as hardware resources get faster and better.
These help Solana’s performance figures in terms of scalability and speed in comparison to other smart-contract-enabled blockchains. Boasting a capability of processing thousands of transactions ( over 50,000 TPS), a block time of 400 milliseconds and a transaction fee of about a fraction of a cent, Solana dwarfs its biggest competitors and ultimately becomes an enticing alternative for crypto users and developers.
Solana use Case: Faster Than Ethereum
Solana is a credible project that many in the crypto community believe to have tremendous potential in the future, given its ultra-fast network when compared to Ethereum 1.0.
Developed by Solana Labs and still reported to be in the beta-phase by the project’s team, Solana currently processes 1000x more transactions per second (TPS) than any existing blockchain network in the crypto industry, and we will be examining its use-cases to see what the fuss is all about.
Ethereum has had serious scaling and transaction speed problems, which are the main hurdles it now faces as the leading DApp development platform. If Ethereum cannot scale to meet demand, Solana is a serious contender among the blockchain networks vying to take Ethereum’s place.
Solana Use Case: Decentralized Applications (DApps)
Like Ethereum, Solana is a smart-contracts blockchain platform. This means that it supports the development of decentralized applications (known as dApps), which have gained a wide range of use-cases. Any type of application can be built on smart-contract blockchains, ranging from simple web apps to complex decentralized finance (DeFi) apps; however, building DeFi and NFT app platforms has been Solana’s primary use cases as developers continue to explore cheaper and scalable platforms.
Solana boasts a growing and budding ecosystem of dApps, majorly in DeFi and NFTs which have been responsible for its rally this year. Developers building DeFi applications aim to replicate traditional finance offerings (such as lending and borrowing) in a decentralized manner, relinquishing the need for centralized intermediaries such as banks.
Solana Use Case: Non-Fungible Tokens (NFTs)
NFT (Non-fungible Token), on the other hand, is a digital representation of almost anything – ranging from art, music, video clips, images etc. They are “non-fungible” because they contain information that proves authority and ownership over the item and cannot be replicated.
Solana also supports building NFT marketplaces where these NFTs can be listed for sale. Although this is not a major use case of Solana yet as there are not many Solana-based NFT marketplaces, the Solana network is expected to be one of the top NFT platforms giving network congestion is significantly minimal.
Solana Use Case: Trading and Passive Income
As with many other cryptocurrencies, Solana also represents a means of exchange and investment opportunity for passive income. With its native token ($SOL), which is used to pay transaction fees and become a validator on the Solana network, users can trade SOL tokens for other crypto assets or fiat currencies.
Overall, the Solana network can be leveraged to develop decentralized applications that need high throughput at very low latencies. It is best suited for use cases that involve running computations, storing data, or transacting at high speed and in high volume. These include: Processing large volumes of high-speed transactions (e.g. micropayments), Processing large amounts of data (e.g. image processing), and trading platforms with significant market depth (e.g. exchanges).
Is Solana an Ethereum-Killer?
Although Solana’s co-founder Raj Gokal recently publicly refuted the “ethereum killer” mantra, stating that the goal of everyone working in the crypto industry should be to drive its mass adoption into day-to-day lives and activities, the Solana network and project certainly pose a challenge to the Ethereum network with its lower fees and faster transaction speeds.
In summary, Solana provides a new architecture for high-performance decentralized finance applications and aims to be the go-to hub for building highly-scalable blockchain projects spanning across DeFi, Web3, gaming and NFTs.