Key Points

Solana is a blockchain project conceived in 2017 and officially launched in 2020, known for its low transaction fees and high throughput.

Solana introduces an innovative system called Proof of History (PoH). It is not a consensus mechanism but a method to efficiently reduce the time required to confirm transaction order.

Solana aims to support various applications and serves as a hub for numerous decentralized markets, games, and NFTs, making it one of the hottest blockchain ecosystems.

What is Solana?
Solana is a blockchain platform designed to host decentralized applications (DApps) and facilitate fast, low-cost transactions.

Solana was founded by Anatoly Yakovenko in 2017 and launched in 2020. With its exceptional speed and scalability, Solana has attracted millions of developers and users worldwide. Thanks to its high throughput, Solana is highly appealing to developers building applications that require instant processing, such as games, finance, and marketplaces.

As of January 2025, Solana has ranked among the top five cryptocurrency projects, with a market capitalization exceeding $120 billion.

How Does Solana Work?

Solana is a third-generation Proof of Stake (PoS) blockchain that achieves high throughput, fast transactions, and low fees through the following innovative technologies:

Solana Virtual Machine (SVM): An execution environment that processes transactions and smart contracts.

Parallelization: Allows multiple smart contracts to run simultaneously, enabling the processing of a large number of transactions at any given time.

Proof of History (PoH): A method of timestamping transactions before they are added to the blockchain, significantly reducing processing time (more on this later).

Tower BFT: A PoH-optimized version of the traditional Byzantine Fault Tolerance (BFT) system.

Turbine: A block propagation protocol that keeps the network synchronized.

Gulf Stream: A transaction push protocol that significantly reduces the memory capacity required by validators (computer nodes that confirm transactions).

Token Extensions: A rich set of features built into the token program, supporting complex behaviors and use cases.

These features collectively build a high-performance network with a block time of just 0.4 seconds and the capability to process thousands of transactions per second. In comparison, Bitcoin has a block time of about 10 minutes, while Ethereum's block time is around 15 seconds.

With Proof of History (PoH) and parallelized transaction processing, the Solana network, while built on a decentralized, permissionless global blockchain, can match the performance of centralized systems.

Proof of History (PoH)
In most blockchains, determining the exact order of transactions is not easy because there is no shared clock to help all computers (nodes) determine when events occurred. Solana solves this problem with its unique system—Proof of History (PoH), which acts like a built-in clock for the blockchain.

Proof of History uses a hashing process to create a timeline of events. Hashing takes data and processes it through a special formula to generate a unique string of letters and numbers. In PoH, this process is repeated continuously:

A piece of data (e.g., a transaction) is processed through the hashing formula.

The result is used as the input for the next hashing operation.

This cycle repeats, forming a sequence that "represents" the exact order of events.

Each step in this chain acts like a timestamp, proving when an event occurred relative to others (i.e., which transaction came first). Once the chain is built, it is nearly impossible to alter, ensuring security and reliability.

In short, PoH generates a cryptographic sequence to prove the time intervals between different events. This is achieved by continuously hashing data using the SHA-256 algorithm, where each hash output serves as the input for the next hashing operation. The unique sequence created reflects the order and time intervals of blockchain transactions.

Advantages of Proof of History

By embedding a verifiable timeline into the blockchain, PoH offers the following advantages:

Increased Efficiency: Validators can process transactions more quickly without waiting for consensus on transaction timing and order.

Enhanced Security: The sequence of hash values is immutable, making it difficult for malicious actors to alter the order of transactions.

Scalability: PoH simplifies the validation process, allowing the network to handle a larger volume of transactions.

In summary, Proof of History is like a built-in watch for the Solana blockchain. It is not a consensus mechanism but an efficient method to reduce the time required to confirm transaction order. When combined with PoS, selecting the next validator for a block becomes easier and more secure.

Transaction Fees
Solana's fees are extremely low, with an average transaction cost as low as $0.02. The low fees significantly lower the barrier to entry for Web3, as gas fees on other chains can substantially increase the cost per transaction.

However, during peak traffic periods, fees may rise to $0.30 or more (e.g., during the launch of the meme coin Trump in early 2025).

Energy Efficiency
Solana's nodes require less time and resources to validate transactions, and there is no need for mining like in Proof of Work (PoW) blockchains, making Solana one of the most energy-efficient blockchain networks.

The Solana Foundation, a nonprofit organization dedicated to protecting and supporting the Solana ecosystem, regularly publishes third-party audit reports on Solana's energy consumption impact, comparing it with other blockchain projects and average household energy usage. A report released in September 2024 stated that since the December 2023 report, Solana "has reduced its carbon footprint by 69%."

What is Solana (SOL)?

SOL is the native cryptocurrency of Solana. It uses the SPL protocol, Solana's token standard (similar to Ethereum's ERC-20 standard).

As part of a deflationary model, the Solana network burns a portion of SOL tokens. SOL tokens have two primary uses:

Paying transaction fees incurred when using the network or smart contracts.

Serving as staking tokens as part of the Proof of Stake consensus mechanism.

SOL Staking

SOL holders can stake their tokens to participate in the blockchain's PoS consensus mechanism. Through compatible cryptocurrency wallets like Phantom, you can stake your SOL with validators who process network transactions. Successful validators then share rewards with the relevant token stakers. This reward mechanism incentivizes validators and delegates to act in the best interest of the network.

Alternatively, you can stake SOL on Binance while enjoying the benefits of BNSOL—earning staking rewards while maintaining liquidity.

Solana Validator Costs

SOL holders can become network validators based on their needs, but due to high maintenance costs, validators are typically users holding large amounts of SOL. While there is no minimum requirement to become a Solana validator, the existence of voting transaction fees means you will need to pay a significant amount of SOL annually.

As of January 2025, the estimated annual cost is about 354 SOL, or 0.97 SOL per day. This means that to be profitable, you may need to attract tens of thousands of users to delegate their staking rights to your node.

Solana Ecosystem

Since its mainnet launch in 2020, the Solana ecosystem has grown significantly. As of January 2025, the Solana network has over 4 million active wallets and thousands of developers.

With its fast transactions and high throughput, Solana has become the preferred network for multiple Web3 use cases.

Decentralized Finance (DeFi): Solana supports numerous DeFi applications, enabling users to access services like lending and trading without intermediaries.

Payment Systems: The Solana Pay protocol supports a seamless payment ecosystem, completing transactions in seconds.

Gaming and Entertainment: Processing massive transactions with minimal latency opens up Web3 applications for gaming, entertainment, and metaverse features.

Non-Fungible Tokens (NFTs): The platform has attracted a growing number of NFT projects, allowing creators to mint, trade, and showcase digital art and collectibles.

Decentralized Physical Infrastructure Networks (DePIN): Real-world networks leveraging blockchain technology. DePIN extends blockchain's decentralization principles to tangible infrastructure like energy grids and supply chains.

Conclusion

Solana is a powerful blockchain that is fast, low-cost, and energy-efficient. With unique features like Proof of History and other advanced tools, it effectively addresses common issues in traditional blockchains, such as slow speeds and high costs.

Over the years, Solana has evolved into a popular platform for building applications, trading NFTs, and developing Web3 projects. Its relentless pursuit of speed and usability has made it a key player in the blockchain space.