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solana

What is Solana? How to Buy, expectations and everything you need to know about SOL

At the time of writing, there are more then 7200 cryptocurrencies. Almost each of them claims to bring something unique. This is something that no other cryptocurrency project has done before. Many of you know that most cryptocurrency projects either failed to deliver on their promises or never really had anything special to start with.

Solana does not belong to this category. This is a crypto project that takes a radically different approach to how blockchains work. It focuses on one element that is so devilishly simple that you wonder why it hasn’t been thought of.

In this article we explain a little more about the technical operation of Solana. We also tell you which projects are currently running within the Solana ecosystem.

What is Solana?

Solana is a powerful blockchain that supports smart contracts and decentralized applications (dApps). It uses a Proof of Stake (PoS) consensus mechanism with a low barrier to entry and time-stamped transactions to maximize efficiency.

This allows Solana to process 50-65,000 transactions per second, with a theoretical limit of over 700,000 transactions per second (compared to Bitcoin ‘s 7 GST and Ethereum ‘s 15 GST). Unlike other similar projects like Polkadot and Ethereum 2.0 (at its release), Solana is a single blockchain (layer 1) and does not delegate operations to other attached chains (layer 2).

The Solana team designed its blockchain with a long-term vision in mind. This vision stems from the experience of its founder, Anatoly Yakovenko, who saw telecommunications technologies double every year while working at Qualcomm.

Solana was developed by a company of the same name based in San Diego, California. The Solana team is made up of former employees of Qualcomm, Google, Apple, Microsoft and Dropbox. Solana’s architecture is not only based on similar database technologies used by Google and Microsoft, but is also inspired by Filecoin , a decentralized project for data storage in cryptocurrencies.

How does Solana work? A technical explanation!

First a word of warning: Solana is incredibly complex. So let’s start with a term you may have heard if you’ve ever looked at the project: Proof of History (PoH). PoH is not a consensus mechanism. Rather, it is part of Solana’s consensus on the Proof of Stake.

Architecture of Solana

PoH consists of time stamping transactions when they are added to a Solana block. A new block on Solana is generated every 400ms (compared to Ethereum’s 15 seconds or so and Bitcoin’s 10 minutes). The decentralized clock used as a reference for time stamps is the SHA256 hash function. SHA256 may sound familiar to you, as it is used in Bitcoin ‘s Proof of Work consensus algorithm .

But instead of trying to “solve” the hash functions to produce a new block, Solana uses the repetitive output of SHA256 as a reference — timestamps. This produces a kind of “clock tick” where each clock tick is 400ms (instead of a second like a normal clock). See Solana’s architecture below.

solana-sha256

 

PoS vs DPoS

Next, let’s clear up some misconceptions about Solana. Many sources refer to Solana’s consensus as Delegated Proof of Stake (DPoS). This is not correct, and Solana’s team has pointed this out repeatedly. This is an easy mistake to make because there are several roles on the Solana blockchain (leaders, validators, archivists, etc.).

While DPoS cryptocurrencies essentially delegate these roles to network participants, Solana does not. In other words, all Solana nodes play a role in fulfilling all network roles.

Solana Blockchain Leaders

For example, leaders on Solana are responsible for producing new blocks. The leaders rotate every 4 blocks (1.6 seconds). When a node takes a Leader position, it crams as many transactions as it can into the four blocks it produces and displays these transaction-containing blocks to the relevant groups of nodes, called Solana clusters. These nodes validate the transactions with reference digital timestamps, then quickly forward the records to other relevant nodes in the network.

Unlike other PoS cryptocurrencies, there is no purchase obligation. There is no minimum bet required to be a node on the Solana blockchain. Of course, the amount of block rewards you get is proportional to the amount of SOL tokens you stake on the network. While the selection of leaders is quite arbitrary, the amount of SOL you wager also affects your likelihood of becoming a leader who actually produces blocks. Nodes that misbehave will have their stake reduced and the diminished funds will be added to the block production rewards.

There are actually 8 core features that make up Solana. One of these has already been covered (Proof of History). Of the remaining 7, only 2 are worth mentioning in the context of this article. These are Sealevel and Gulf Stream.

Sealevel and Gulf Stream

Sealevel allows you to quickly identify all non-overlapping transactions and process them simultaneously. With Golf Stream you can know a small number of aspiring Leaders so that they can start accumulating trades before they start producing blocks. See the 8 core functions below.

Example to better understand Solana

Imagine a small company with 180 employees (which is roughly the number of nodes/validators Solana currently has). Even though there are different departments in this company (eg accounting, shipping and receiving, customer service), every employee knows how to do the work of every other department. In addition, each employee is selected quite randomly to be the boss (leader) for 1.6 hours at a time, during which time he or she has to sign incoming documents from the various departments.

While the choice of the employee who will be the boss is partially arbitrary, each employee has a small window on their computer screen that shows the next 10 people who will temporarily fill the role of boss. This allows them to hand their documents over to that employee before he/she becomes the boss, so that he/she can get the job done faster (Gulf Stream).

Whenever the boss signs a document, it is time-stamped and sent back to the appropriate service(s) (Solana node clusters) for review and, if approved, added to the company database. Each department can do its own paperwork at the same time as there is no overlap (Sealevel).

Every employee has a role to play in keeping the paperwork, checking the paperwork and making sure the boss is really doing his job and not slacking off. This is basically how Solana works. See here the technical overview of how Solana works.

Summary

Most importantly, Solana assigns different tasks to different nodes in the network as needed to optimize speed, and timestamps all transactions to ensure accuracy. This means that one cluster of nodes (Solana Cluster) could be responsible for hosting a DeFi platform like Uniswap and another Solana Cluster could be responsible for processing microtransactions performed as part of the business. This makes Solana decentralized, scalable and secure without compromise.

Projects within the Solana ecosystem

Raydium (RAY)

Raydium is an automated market maker (AMM) and liquidity provider built on the Solana blockchain for the decentralized exchange Serum (DEX).

Raydium has a leading position as SMP within Serum and will play an integral role in integrating new and existing projects and protocols into the ecosystem.

The protocol will act as a gateway for projects looking to expand into Solana and Serum, and in the process Raydium and the RAY token will become a foundation to enable further development with partners, its own platform and the ecosystem at large.

Unlike other WMAs, Raydium provides liquidity on the blockchain to a central limit orderbook, meaning Raydium’s LPs have access to Serum’s entire order flow and liquidity.

Long-term, Raydium aims to gain and maintain a leadership position among MAs and liquidity providers on Serum, while leveraging the power of Solana to evolve decentralized finance (DeFi) and become a leading protocol in the space along with our partners and the community.

Raydium offers some key benefits:

  • Faster and Cheaper : We leverage the efficiency of the Solana blockchain to achieve faster size transactions than Ethereum and gas costs that are a fraction of the cost.
  • Central Liquidity Order Book : Raydium provides on-chain liquidity to the Serum DEX Central Limit Order Book, meaning Raydium provides access to order flow and liquidity across the entire Serum ecosystem.
  • Trading Interface : For traders who want to be able to view TradingView charts, set limit orders and have more control over their trades.

Oxygen Protocol (OXY)

The OXY token was released on March 16, 2021 following IEOs (Initial Exchange Offering) on ​​the FTX , BitMax and Gate.io cryptocurrency exchanges, as well as an IDO (Initial Dex Offering) on ​​the Serum-based decentralized exchange. 6 million tokens were sold at a price of $0.125/token.

It is a DeFi version of prime brokerage service built on the Solana blockchain and powered by Serum’s on-chain infrastructure. It is built around pools of assets that take collective action. By starting with a lending and lending service, users will be able to earn returns and leverage their wallets, laying the foundation for a dynamic, decentralized financial ecosystem.

Prime brokerage is an activity developed by investment banks that consists of a set of services made available to professional hedge fund investors. The idea is to offer these clients the outsourcing of operational services (mediation, middle and back office, etc.) by allowing them to take advantage of the existing infrastructures within the CIBs. The offering is completed by cash management services (securities and cash lending and borrowing, financing) and access to structured products (synthetic prime brokerage).

Oxygen improves resource efficiency in three ways:

  • Multiple uses of the same collateral: It allows you to generate returns on your wallet by lending cryptos and borrowing other cryptos at the same time.
  • Cross-collateralisation: You can use your wallet as collateral when you want to borrow other digital currencies. This should result in less margin call/liquidation risk for your wallet.
  • Market-Based Pricing: The whole system is based on the order book, rather than following a predetermined market model that needs to be adjusted manually. This means that you will get the best loan/borrow value every time.

What is the purpose of Oxygen?

Users can interact with the protocol through three main channels: the wallet, the API and smart contracts on the Solana blockchain.

The process is quite simple. Interested borrowers and lenders simply create their own pools on the platform, deposit their digital assets there and indicate which ones are eligible for loans. Lenders and borrowers are automatically linked.

Lenders earn more crypto in exchange for the interest on the money they have provided for loans. The borrowers get access to the loans after they have pledged part of their assets as collateral. After that, they are linked to lenders based on the crypto they want to borrow.

It is up to the user to decide how he wants to use his loan. They can use it to trade cryptocurrencies, hedge, create leverage, or simply transfer assets.

The model is not much different from many other platforms that connect lenders and borrowers. In fact, it contains almost all the elements present in similar protocols such as collateralisation, crypto projects and risk management models among others .

It uses the Serum DEX order book to determine the value of cryptocurrencies on the platform. The price is then determined based on the average of the best bid and ask prices in the order book. Because it is built on the Solana blockchain, it promises faster transaction settlement times and lower Gas prices compared to Ethereum-based platforms.

Aleph.im (ALEPH)

Aleph.im (ALEPH) is expanding its influence within the Solana blockchain by becoming the first decentralized indexer on the network. The nodes, which are controlled by virtual machines, will facilitate access to data needed for smart contracts and developers of decentralized applications.

Aleph.im’s infrastructure, specializing in cloud computing and cross-chain data storage, already provides this solution to Raydium protocol, an automated market maker operating on Solana. The idea is to provide users with the data they need to run smart contracts. This information may include the supply of liquidity, the transaction history of the tokens and their price, or the total volume of all trading pairs.

Before the launch of this indexing solution, the applications running on the Solana network had to rely on their own centralized indexing solutions. This entailed high costs in terms of physical resources, internet connections and computing power.

“Aleph’s indexing tools will be critical to Solana’s success and currently power all of Raydium’s analytics,” said AlphaRay, Raydium’s manager.

Aleph.im will now be able to manage indexing and data retrieval, saving time and energy for the participating protocols. Aleph.im’s press release states that 50 independent nodes are already operational to meet demand.

Kermit Finance (KERMIT)

Kermit Finance is a decentralized peer-to-peer protocol that simplifies the interaction between users and blockchains. In the DeFi world, where finances and money do not depend on a central intermediary such as exchanges, it is important that users have an experience where they have transparent control over their money and assets.

Kermit is built on top of Serum, Solana’s DEX to provide users and artists with the best trading experience that allows them to trade their favorite token/NFT in an easy way.

Their native KERMIT token has a stock of 10,000,000 tokens and is used on the platform to make trades. Holders of KERMIMT tokens can also claim a share of the transaction costs.

Atomic (AWC)

Atomic is a non-deposit cryptocurrency wallet that supports SOL and SPL tokens built on the Solana network. Atomic also offers payment gateway functionality and crypto on-ramp capabilities.

What makes this project unique is that they offer SOL staking at about 7% interest per year. In addition, they have a 1% cashback when users trade on their listed crypto pairs. They offer users the option to buy crypto instantly via bank cards in USD and EUR.

The simplicity of this project is due to strong encryption, no account is required to get started, and no authentication or KYC for basic functions.

1Sol

If you want to invest in small projects that can explode in the long run, 1Sol could be your ideal solution. It is a cross-chain DEX aggregator for decentralized protocols on Solana, enabling transparent, efficient and secure operations in DeFi.

As the Fi infrastructure grows, aggregators are in high demand. Cross-chain transactions are certainly an interesting development for the future. 1Sol aggregates swaps, integrates order books and extends to OTC markets.

SolApe (SOLAPE)

SolApe is a serum-based Solana DEX. It was founded with the belief that crypto and blockchain technology should reach the general public through easy accessibility and give rise to a rewarding and fun ecosystem.

Their goal is to give newcomers an entry into the crypto field, or to let existing members discover it in a new light. The Decentralized Exchange (DEX) not only serves as a trading platform for high-capacity coins, but also provides new projects within Solana with a platform to list their tokens and provide their communities with a hub to trade them.

They will soon be leveraging the NFT ecosystem by enabling “Ape Art” which is a trend of late with the “Crypto Punk” craze. As you know, these types of NFTs have appreciated tremendously in the past.

Audius (AUDIO)

Audius presents itself as a social network. If you log in to the platform via your account, you can follow artists, post music and communicate with other users. It is really similar to Soundcloud, much more than Spotify. Although in this industry, music streaming, it is difficult not to relate everything to the leader, Spotify.

However, the presentation is very different. This brings us to a second point: the potential developments are very wide. Since Audius is presented as a social network, the accounts are much more customizable. They can therefore potentially accommodate a large number of new functions.

Audius has developed a solution to integrate NFTs from the Solana ecosystem directly into the platform. In the case of Audius, the integration of NFTs into a music streaming platform means several things.

First, they are traditionally images associated with non-fungible tokens. But art is by nature multidisciplinary. Many artists want to develop the use of NFTs into music, images, film, etc . In short, into an artistic whole, a grouping of different types of multimedia files, to form a complete work of art.

Second, this work by the latest Audius team is a reward for a loyal community. The project is solid, and it is progressing according to its promises by staying close to its users. This is also reflected in the value of the AUDIO token.

Atlas Finance (ATP)

Atlas Finance is a cross-chain DEX, built on Solana, with the main goal of providing users with aggregated liquidity through a single, easy-to-use platform.

It is planned to be a DEX where traders can trade any available token on a supported exchange listing. With the fast transactions and low costs of Solana, Atlas can offer a good user experience at attractive prices.

Mercurial Finance (MER)

Mercurial Finance is betting on innovation to redefine a strategic part of DeFi: stable coins . It is an area that is becoming increasingly important as the adoption of cryptocurrencies accelerates.

Mercurial Finance (MER) is a project that aims to provide stable assets for DeFi, also known as stable coins. Mercurial Finance is tasked with providing stable liquidity to Solana’s entire DEFI system.

Based on the finding that swaps between stable currencies cause significant value shifts and that stored capital tends to be underutilized, the company offers a solution that will shake the habits of a world that is new but already stuck in its comfort zone.

To create a dynamic liquidity system, the Mercurial team will rely on its users to deposit their stable coins and provide liquidity to the ecosystem, while being rewarded for their contribution.

Thanks to an architecture that takes advantage of the unique capabilities of the Solana protocol, the deposit boxes will be autonomous and act as true market makers.

Automated through powerful smart contracts, they will maximize profits and reduce costs in managing the assets entrusted to them, as opposed to the usual role of simple storage played by most of the competition.

Four types of stable coins will be available on Mercurial Finance: USDC, USDT, and also wUSDC and wDAI. Necessary for transparent pricing, the advent of oracle protocols as the Solana ecosystem evolves will allow for the gradual introduction of other stable coins.

To implement the protocol, the company is putting together an experienced team from the ranks of one of the best-known Ethereum-based decentralized exchanges. Blockchain technology veteran Loi Luu, creator of Kyber Network, is one of the four co-founders of Mercurial Finance. He is joined by Andrew Nguyen and Ming Ng, respectively CTO and Advisor at Kyber Network. The leader is none other than Siong Ong, creator of Envoy, a Solana project funded by a16z.

A keen team that recently released its white paper. As expected, the content is commensurate with the strategic challenges of providing stable coins at the scale of an entire ecosystem.

Conclusion

Without a doubt, Solana’s ecosystem is becoming increasingly important to the world of cryptocurrencies and blockchain. This is because the team behind Solana kept the future in mind while developing the platform. This is exactly where many other projects go wrong. Just look at Bitcoin and Ethereum. They now have problems that are difficult to solve.

By tackling problems immediately, they will not arise in the future. This ensures that more and more developers choose to run their application within the Solana ecosystem. You have already read that in this article. We told you which projects are already underway within the Solana ecosystem. These are:

  • Raydium (RAY)
  • Oxygen Protocol (OXY)
  • Aleph.im (ALEPH)
  • Kermit Finance (KERMIT)
  • Atomic (AWC)
  • 1Sol
  • SolApe (SOLAPE)
  • Audius (AUDIO)
  • Atlas Finance (ATP)
  • Mercurial Finance (MER)

It is worth looking up more information about these interesting projects, which may have a lot of potential. That is also because we recommend that you always do good research into a crypto project yourself before you decide to invest in it, and not immediately take the advice of others.

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