What Is Solana?

BeginnerMar 03, 2023
As a blockchain project, Solana aims to optimize network scalability and increase speed, and adopts a unique proof of history algorithm to significantly improve the efficiency of on-chain transactions and sequencing.


Previously, we introduced the birth of Ethereum and smart contracts, allowing various decentralized applications (DApps) to be built on Ethereum,creating a rich and diverse Ethereum ecosystem. Subsequently, more blockchains were created one after another, among which Solana (SOL), known as the “Ethereum killer”, is the most popular. Solana’s main goal is to expand the transaction throughput of blockchain in proportion to the change of network size, implement smart contracts and transactions by improving efficiency and reducing costs, and achieve high throughput, security and decentralization, so as to break the magic spell of the “Impossible Trinity” of blockchain.

However, with the vigorous development of the blockchain industry, emerging blockchains such as Avalanche and Cardano and other competitors have risen in 2022. How does Solana stand out?

Development Process of Solana

Background of Solana

Solana is a high-performance, open-source blockchain project specially established for decentralized finance (DeFi) and adopting the authorized-less feature of blockchain technology. Its goal is to create a distributed, trustless protocol with the ability of quickly increasing the information processing capacity of the system. The protocol uses the proof of history (PoH) consensus algorithm and integrates the proof of stake (PoS) consensus mechanism to improve scalability, and optimizes its performance through eight innovative core structure ways.

Solana’s original concept and framework were conceived in 2017, when Anatoly Yakovenko proposed Solana’s white paper. Before the establishment of Solana, Yakovenko worked for Qualcomm and was a programmer of Dropbox. He has extensive compression algorithm expertise. In 2018, Yakovenko and his former Qualcomm colleague Greg Fitzgerald and other four people formed a core team to develop the testnet together; In 2019, Yakovenko and his team began to raise investment funds from venture capital institutions, raising hundreds of millions of dollars; In March 2020, Solana Foundation was officially launched in Geneva, Switzerland.

Among them, Solana’s team members have different backgrounds, many of them worked for the world’s top technology enterprises, such as Dropbox, Apple, Intel, Google, Microsoft, Twitter and so on.

What Is SOL Token?

SOL is the native token and utility token of Solana. It can be used for transfer, transaction, value storage, payment of blockchain royalties, etc. SOL is the only pass on Solana and users are required to pay SOL for any activity in Solana.

In addition, Solana is a blockchain that uses the PoS and PoH consensus mechanisms. In addition to staking a large number of SOL tokens to guard the Solana blockchain as a validator, users can also choose trusted validators to entrust SOL tokens to them, who act as agents to ensure the correctness and security of transactions and earn rewards.

Process of staking SOL

Users can get returns by staking their SOL tokens as follows:

  1. Transfer SOL to a cryptocurrency wallet supporting staking, such as Phantom.

Click “start earning SOL”.

  1. Choose one of Solana’s validators.

  1. Entrust the token held to the validator.

The price history of Solana

Following Solana’s Initial Coin Offering (ICO) in March 2020, SOL was launched on the market on April 11 of the same year. The starting price of SOL was approximately $0.70. In May, the token price fell to approximately $0.50, and then rose to $4.70 at the end of August. This marked Solana’s first rise. In December of the same year, its price fell again to approximately $1.50.

At the beginning of 2021, the price of SOL was approximately $1.80. With the strong social economy driving the bullish trend of the entire cryptocurrency market, the price of SOL soared at a very fast speed, reaching approximately $17 in February of the same year. After that, its price continued to rise, reaching a record high of $260. Soon after, SOL’s price began to adjust and retreat, with a continuous downward trend. At the end of the year, the price fell to approximately $170, with prices trending downward from the peak, but still remaining relatively high.

Affected by the overall economic downturn at the beginning of 2022, the price of SOL continued to fall, from approximately $180 at the beginning of the year to approximately $75.35 in February; Then in April, the price trend rose slightly, up to $143; In May, affected by the plunge in financial market prices, SOL price has never recovered since then.

By the middle of July 2022, the SOL price had fallen to approximately $37, with a market value of $12.7 billion. The circulation supply was 345,575,704 SOLs, out of a total supply of 511,616,946 SOLs, ranking ninth in the cryptocurrency market.

SOL price, Source: TradingView

The Way Solana Works

Solana is a blockchain network using proof of stake (PoS) and proof of history (PoH). In the blockchain network with proof of stake, nodes can stake tokens to become validators to write and confirm the transaction records on the blockchain and obtain staking rewards. On the Solana blockchain, a node will be randomly selected as the lead validator according to the number of staked SOL tokens every 1.6 seconds (4 blocks). The lead validator writes the new transaction record into the blockchain network while the other nodes validate whether the transaction record is correct.

Validating transactions on a blockchain network is time-consuming, and nodes in different zones may cause errors due to network delays or the influence of other nodes. Therefore, all nodes must reach a consensus on the existence and sequence of transaction records before packaging to generate the next block.

The “proof of history” consensus algorithm of Solana network establishes the data structure of time sequencing for each transaction record on the blockchain through the recursive verifiable delay function, which allows each node to work as if it has a common set of on-chain clocks, and can continue to operate without waiting for other nodes to broadcast, while ensuring the correctness of transaction sequencing. The “proof of history” mechanism enables the Solana network to generate new blocks at a faster speed. In the network with 1 Gbps transmission speed, the theoretical value of transaction per second (TPS) that can be processed is as high as 710,000.

What Is the Proof of History?

In the Solana network, the proof of history is to bring each event and transaction into the SHA256 hash function to produce a unique hash and count. SHA256 hash function can convert any information into 256 bit data. The same data source will produce the same calculation results, while different data sources will produce different calculation results. This feature is called collision resistance.

Solana uses the recursive method to continuously take the calculation result of the previous SHA256 hash function as the next input data, and then calculate the SHA256 hash function again. Because anyone can easily verify whether the result of the hash operation is correct, and the recursive operation takes time, it is also called the verifiable delay function. If there are different hashes in different counts, it can be proved that time has passed, and the sequence of events can be arranged according to the hashes and counts.

The recursive operation of proof of history can be understood as a continuous snapshot of the blockchain network. Each snapshot will capture a unique hash and count. This is like pouring a bit of dye into a clean transparent beaker filled with water. As time goes by, the dye will gradually diffuse in the water. Even if the arrangement order of the photos is wrong, you can still find the correct arrangement order according to the size of the dye diffusion range in the photos.

Distinctive Features and Core Technologies of Solana Network

Proof of History

The proof of history consensus algorithm of Solana can quickly and efficiently restore the on-chain transaction sequencing and increase the number of transactions that the blockchain network can process per unit time.

Tower BFT

Tower BFT is a consensus algorithm that, paired with historical proof, reduces the time required for node validation or additional communication, and reduces transaction delay.

Gulf Stream

Gulf Stream protocol plays a key role in transaction caching, allowing the validator to execute transactions faster, and reducing the pressure on the accumulation of unauthenticated on-chain transactions, so that Solana Network can load more than 50,000 transactions per second.


Sealevel is a parallel transaction processing engine, which makes the Solana Network run more efficiently and allows multiple transactions to be executed synchronously in the same state machine.


The Turbine protocol divides the data into smaller packets, which makes the data transmission between the on-chain nodes easier, and also improves the bandwidth and load capacity of the Solana Network.


Cloudbreak is a parallelized and scalable account database structure, which optimizes the synchronous reading and writing on the blockchain network.


Pipelining refers to the optimization of the transaction processing unit, and the input data flow will be assigned to different hardware, so that the transaction information can be more quickly verified and disseminated among all nodes on the blockchain network.


The decentralized ledger uses the Archivers as the data storage. The verifier on the Solana Network will transfer the data to the node network called Archivers, and irregularly check the Archivers to ensure the correctness of the stored data.

Ecosystem of Solana


source: https://www.projectserum.com

Serum is the largest decentralized exchange on the Solana blockchain. It uses an on-chain central order book system and matching engine, allowing users to freely choose trading pairs and prices, and enjoy the high speed and low handling fees of Solana blockchain.

The biggest feature of Serum is that it connects other decentralized exchanges on the Solana blockchain, so it can share liquidity between different applications, and also has the best trading depth. Users may exchange assets in one application, while opposite traders come from users of other applications. The Wormhole cross-chain bridge also attracts traders from other chains, which can be considered a hub for liquidity on the Solana blockchain.

source: https://medium.com/tulipprotocol

Tulip is a decentralized revenue aggregator on the Solana blockchain that provides many automated return strategies, such as automatically putting the reward of liquidity mining back into the liquidity pool, so that users can enjoy the effect of compound interest without manual operation. Tulip also has other options for structured yield farming, such as the leveraged delta neutral lending and liquidity mining composite product, which can provide a fairly high annualized percentage yield (APY). However, this type of derivative products have varying degrees of risk, which is more suitable for advanced users.

source: https://raydium.medium.com/

Raydium is a famous decentralized exchange on the Solana chain, which combines automatic market maker (AMM) and order book to establish a mixed liquidity market. Users can provide liquidity on Raydium to participate in the on-chain liquidity mining, as well as trade coins in the form of order books.

Raydium also serves as an incubator for new projects on the Solana chain. Projects with development potential will launch their initial decentralized exchange token offering (Initial DEX Offering) on AcceleRaytor. Users can stake RAY tokens to participate in the lottery, and those who win will be eligible to purchase new tokens..


source: https://magiceden.io

Magic Eden is the largest NFT trading platform on the Solana chain, accounting for nearly 90% of the NFT secondary market trading volume of the whole network. Magic Eden’s operation interface and screening function are similar to OpenSea on Ethereum. Creators pay no fees to list their work on the platform and only pay a 2% fee on transactions when their work is bought or sold.

Magic Eden is also a decentralized autonomous organization (DAO) and a launching platform for new projects. Users can see the latest NFT team works launched here. In addition, it also opens up a game zone and API interfaces to connect different platforms and projects.

source: https://solsea.io

Solsea is another well-known NFT trading platform on the Solana chain. It provides many tools, such as rarity computers, collection ranking, and certification and authorization services for well-known NFT series. Sellers can specify whether their NFT works are for commercial use or only for personal use.

Solsea also has a “minting live” channel where users can find the newly released NFT on the Solana chain. If they find a favorite NFT, they can also immediately place an order to buy it, giving users a sense of presence to participate in bidding activities.

source: https://solanart.io

Solanart is the first NFT trading platform on the Solana chain, and also the gathering place of many well-known NFT projects such as the Degenerate Ape Academy, Aurory, Abstractica, and SolPunks. Works that go up on Solanart need to be reviewed first to ensure the quality of NFT on the platform.

NFT transactions on Solanart require a 3% handling fee. New projects are constantly being launched on Solanart, , where users often have the opportunity to buy the latest NFT works.

source: https://opensea.io

Opensea is the largest NFT trading platform at present. In April 2022, OpenSea opened NFT trading on Solana. Presently, it is still in the Beta test stage, which can only allow users to buy or list NFT at a fixed price, and the auction mode has not been opened yet. As it is still in Beta, the only wallets that can be accessed are Phantom and Glow.

GameFi(Game Finance)

source: https://stepn.com

Stepn is a Web 3.0 lifestyle App built on the Solana chain that combines sports and games to encourage outdoor sports by rewarding users with tokens. Players participating in Stepn need to buy NFT Sneakers first, send it to their wallet, and then bind it with Stepn APP.

There are differences in the type, rarity and ability points of NFT Sneakers. When playing, APP will track the GPS trajectory of users. Generally speaking, the higher the ability points of NFT Sneakers and the longer the moving distance, the more token rewards. Users can upgrade or mint NFT Sneakers by burning GMT and GST tokens. Stepn has attracted the participation of many players since its launch, setting off a “move-to-earn” boom around the world.

Other Applications

source: https://medium.com/audius/

Audius is a decentralized music streaming platform, which makes it easier for creators to control their music creations and remove unnecessary intermediaries and vague ownership in the traditional music industry. Audius uses blockchain technology to meet the needs of artists, fans and node operations. Creators can store their works in the content ledger on Audius, and fans can listen to tracks with high-quality streaming, and stake tokens to support favorite artists. Nodes, on the other hand, maintain the sustainability of creative content and obtain economic rewards while assisting the operation of the project.


source: https://samoyedcoin.com

Samoyedcoin (SAMO) is the native meme coin on the Solana chain, which aims to spread easily and quickly in the community and help newcomers quickly integrate into the Solana community. Samoyedcoin was born out of the popularity of dogecoin in the cryptocurrency community and the ownership of a Samoyed dog byAnatoly Yakovenko, the founder of Solana.

Samoyedcoins were directly airdropped to community members at its creation. Unlike other dog-themed memecoins, Samoyedcoins are not entirely owned by the community with the core team retaining approximately 4% of the token supply. Presently, the project team is planning a crypto academy to introduce educational content about decentralized finance and the Solana Network.

How to Interact with Solana Network

Hot and cold wallets that support Solana are as follows:

Hot wallet and its functions

Solana has its own hot wallet Phantom, which currently supports a variety of web browsers and mobile devices. Phantom can not only be used to store tokens and connect Solana, but also to directly view NFT in personal collections and stake SOLs, entrusting tokens to selected verifiers.

Cold wallet and its functions

Solflare is a Web3 wallet specially belonging to Solana. It allows users to send and receive SPL tokens and Solana’s NFT, and can be connected to the hard wallet Ledger Nano to deposit assets in it, providing a certain degree of security and risk reduction in case of exposure to network hacking.

Controversial Events

In March 2021, Solana’s TVL was approximately 150 M, and has since grown into a top-level public chain with a TVL of 1.96 B. The growth is quite amazing. When we think of Solana as the “Ethereum killer”, we immediately associate it with its speed, cheapness and scalability.

(Source: DeFi Llama)

But what else do we have to know?

Security is worrisome due to frequent shutdown

Solana’s problems began to surface in September 2021. Solana was shut down several times in a year for various reasons. For example, in September 2021, the downtime was 17 hours, because the robot initiated a large number of transactions, resulting in insufficient validator capacity; DDOS attacks caused shutdown in December 2021 and January 2022. Shutdown events also occurred successively in May and June 2022.

As can be seen from the chart below, Solana was shut down again in early June 2022.

(Source: status.solana.com)

In addition to making ordinary users unable to interact with Solana in the shutdown events, users with collateral in the lending protocol on Solana will also be liquidated because of shutdown and failure to add margin in time.

Decentralization has been questioned brought by unequal token allocation

In addition to the frequent shutdown, another dispute in Solana is the uneven distribution of initial tokens.

As can be seen from the chart below, at the time of initial token distribution, the auction share opened to the general users was very small, only 1.6%. Most of the tokens were distributed to venture capital companies, teams and foundations.

Although Solana Labs does need funds to develop, it is unable to achieve a good balance between decentralization and token distribution, which makes its claim of decentralization questionable..

(Source: messar i)

Another controversial event is that in June 2022, Solend, a lending protocol on Solana, launched a horrific proposal SLND1: Mitigate Risk From Whale.

A blue whale on Solend stored 5.7 million SOLs (worth $170 million) in the protocol and lent 108 million USDTs and USDCs. Its deposits and borrowings account for a considerable share of the Solend protocol. If the price of SOL falls to $22.3, a liquidation of $21 million may occur. If the liquidation proposal is passed, the protocol can take over the position of the blue whale and carry out OTC liquidation.

The proposal was approved within hours of its issuance. There are two schools of views on this proposal. The proponents believe that taking over the blue whale position can avoid all kinds of crises that may occur on Solana. For example, the liquidator usually sells tokens through DEX, DEX cannot afford a sudden large number of exchanges, and Soland will have unprocessable bad debts, which will also cause great pressure on Solana Network. Opponents believe that such behavior violates the principle of decentralization. Although taking over the position of the blue whale can make Solend safer, it also causes a loss of trust in decentralized financial protocols.

We can see from the proposal that the number of votes of the person who cast the highest number of votes in the “Yay” option is enough to decide whether the proposal is passed.

(Source: Solend )

The proposal was replaced and rejected by the new proposal II only the next day, which makes one wonder that proposal I was rejected by the new proposal II immediately after it was passed, so what is the significance of the original vote?

In the end, although the blue whale found that his position was deeply in the liquidation crisis, he quickly solved the problem, resolving everyone’s fear of the liquidation crisis. However, in the face of possible “black swan”, the handling method of the protocol is chilling, and it also makes the public rethink the meaning of decentralization.


It has been three years since Solana was born, during which it has successfully passed through the complete bull and bear market cycle. Thanks to the innovative rapid verification structure mode and more efficient consensus algorithm, it has reached its initial commitment in terms of transmission speed and scalability, and addressed many limitations of early blockchain technology. Meanwhile, it holds a strong position in the NFT market and thus has a strong competitive chip.

Although Solana’s advantages such as transaction speed, low handling fees and the continuous and vigorous development of the blockchain ecosystem are very prominent in many projects, there are still many disputes that can be considered potential crises. Looking ahead, we need to judge whether there are more developers to join and whether the ecological operation and utilization rate are steadily improving.

Author: James, Piccolo, Jz
Translator: Joy
Reviewer(s): Hugo, Jiji, Yuler
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