What is Solana? Unpacking its role in the crypto space

Solana is a high-performance blockchain platform and one of the biggest names in crypto.

Currently ranking fifth in market capitalization, which is the total market value of the company's outstanding shares, Solana is designed to handle a wide variety of applications, including NFTs, finance, gaming, and payments. By making these services accessible with low fees and high speed, it stands out as a strong player in the crypto world.

Solana was created with one primary goal: to support millions of users efficiently, without sacrificing the decentralization that defines blockchains. This focus on scalability makes Solana not only faster but also more cost-effective than many other blockchain platforms.

The key to Solana’s scalability lies in a unique consensus mechanism called Proof of History (PoH), which enables the platform to validate transactions rapidly and securely. This technology allows Solana to process thousands of transactions per second, all while keeping fees low for users.

How consensus mechanisms keep blockchains secure

For a blockchain to work, it needs a way to verify transactions and secure its network. The two most common methods for this are Proof of Work (PoW) and Proof of Stake (PoS).

Proof of Work (PoW): This method, used by Bitcoin, relies on “mining”. Miners solve complex math problems to confirm transactions and create new tokens. While secure, PoW can be slow and energy-intensive.
Proof of Stake (PoS): This approach, used by many newer blockchains, is faster and more energy-efficient than PoW. With PoS, users “stake” (lock up) their tokens to help verify transactions. Those who stake their tokens, known as validators, are rewarded for their contributions to the network’s security.

Proof of History: Solana’s unique twist on blockchain security

Solana takes PoS one step further by introducing PoH on top of it. PoH works like a secure, timestamped ledger that records events in a specific order. By adding these timestamps, PoH ensures that transactions happen in a precise sequence, which speeds up processing and boosts security. In simple terms, PoH allows the network to track exactly when each transaction takes place, making Solana faster and more efficient.

According to the Blockchain Council, these timestamps are both authentic and unchangeable, which is especially useful for blockchains that need to process transactions quickly. In blockchain terms, this is called throughput—the number of transactions a network can handle in a set amount of time.

The role of SOL: Solana’s native token

Solana’s native token, SOL, is essential to the platform. It’s used to pay transaction fees, rent accounts, and perform various activities on the network. SOL has a smaller unit called a Lamport (similar to how a dollar is divided into cents), with 1 billion Lamports making up one SOL. Most apps built on Solana use these Lamports for transactions and transfers, making it easy for users to manage and spend SOL.

What’s driving Solana’s growth?

Several factors contribute to Solana’s success. First, its low fees make it affordable for people to use for a wide range of applications, from trading and payments to gaming and DeFi. This has drawn a lot of attention, especially from developers building decentralized finance (DeFi) projects and NFT platforms.

The network has also gained popularity in the world of memecoins—lighthearted, meme-inspired cryptocurrencies. According to CoinMarketCap, Solana’s memecoin market recently reached $12.2 billion, featuring popular tokens such as WIF, POPCAT, BONK, MEW, and GOAT.

Solana continues to grow and innovate through partnerships. Recently, Solana-based restaking platform Solayer partnered with OpenEden to launch sUSD, a new stablecoin on the blockchain. Backed by US Treasury bills and pegged to the US dollar, sUSD is the first yield-bearing stablecoin on Solana, creating new opportunities for users to earn returns on their holdings.

sUSD joins a growing ecosystem of products issuing tokenized U.S. Treasuries on Solana, including @OndoFinance (USDY) and @maplefinance (cash management).

Learn more about how sUSD works here: https://t.co/VPpQaFTYx1
— Solana (@solana) October 29, 2024

On social media, Solana announced that “sUSD joins a growing ecosystem of products issuing tokenized US Treasuries on Solana,” showing its commitment to offering new and valuable services.

The future of Solana

Solana’s co-founders, Anatoly Yakovenko and Raj Gokal, are optimistic about the platform’s future. In June 2023, Yakovenko said on social media, “Solana launched over three years ago, during the worst crisis the world has seen in half a century. If you told me that in three years Solana would be in the top 10 with all these amazing folks building products, I wouldn’t have believed you.”

.@solana launched over 3 years ago, during the worst crisis the world has seen in half a century. if you told me that in the 3 years @solana would be in the top 10 with all these amazing folks building products, I wouldn't have believed you. I am insanely lucky to be here with…
— toly 🇺🇸 (@aeyakovenko) June 28, 2023

In an interview with the global investment platform SALT, Gokal added that “the larger that Solana gets in users, assets, and network effects, the more beautiful and easy it will be to use blockchain in general.” The team believes that as Solana’s user base grows, it will become even more user-friendly and accessible.

Although Solana has already made a major impact, it’s only just beginning. With its focus on speed, low costs, and partnerships, Solana is positioned to be a leader in the next generation of blockchain applications. Whether you’re interested in NFTs, DeFi, or simply want a faster, more affordable blockchain experience, Solana is a platform worth watching as it continues to expand and evolve.