What is Solana used for?
Solana is a blockchain protocol. The Solana protocol can scale to 50,000 transactions per second with low fees — in contrast, other blockchains have trouble handling a few hundred transactions without getting bottlenecked.
Working of Solana
Most blockchains can handle a few hundred transactions per second. This seems like a lot, right? But in reality, it’s not enough to power a decentralized internet. If too many people want to use a blockchain at once, it can get bottlenecked and start processing transactions so slowly that it becomes impractical. We saw this with Bitcoin during the 2017 bull market; transaction times spiked, and transaction fees went up by over 1000% in a single day!
In contrast, Solana can process 50,000 transactions per second with low fees.
Solana’s original purpose was to perform large-scale tokenized staking and voting but has expanded into other areas such as non-fungible tokens (NFTs).
Initially, Solana was created to perform large-scale tokenized staking and voting. But since then, it has expanded into other areas such as NFTs.
Solana uses Proof of Stake (PoS) to reach consensus — this means that instead of using up energy to mine blocks, users stake their coins to earn rewards.
Now that you know why Solana uses PoS let’s talk about how it works.
Solana’s Security Protocol
In addition to staking, the Solana protocol has a Proof of History (PoH) mechanism to secure its blockchain. This is similar to traditional proof-of-work blockchains that use the hash of previous blocks for security. Unlike proof-of-work, PoH does not require a lot of computational power and can be done by low-powered machines such as mobile devices and IoT devices. PoH is also more energy-efficient than POW and doesn’t hog network resources. It also ensures that each block contains proof of work from the past hour, sanding off any rough edges from your transaction’s journey through Solana’s network.
With this combination of components — staking, transaction sharding, and Proof of History — Solana solves some significant issues with existing blockchain protocols: confirmation speed, transaction throughput, and decentralization.
Solana has been designed to be very secure by decentralizing its network. This is done through proof of stake (PoS) and proof of history (PoH).
Solana also encourages decentralized computation by offering incentives for users to run nodes from their hardware instead of just relying on cloud providers like Amazon Web Services or Google Cloud Platforms as many other networks do nowadays.
Uses of Solana
The key innovation that allows for the decentralization of the Solana protocol is its proof of history mechanism, which is used alongside evidence of stake.
The vast majority of projects built on the Solana blockchain are related to decentralized finance (DeFi) or NFTs.
Over half of the more than 200 projects listed on Solana’s directory are DeFi or NFT-related. The platform’s speed and low fees make it an ideal candidate for DeFi and NFT applications. DeFi apps such as Serum and Project Serum have a lot of transaction volume, which can get expensive on Ethereum. The same goes for OpenSea, one of the most well-known platforms for buying and selling NFTs.