Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.
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What is Solana?
Scalability is one of the most difficult aspects of blockchain technology to overcome. As these networks expand, they frequently encounter transaction speed and confirmation time constraints. Solana attempts to address these issues while maintaining security and decentralization.
The Solana blockchain, founded in 2017 by Anatoly Yakovenko of Solana Labs, uses a novel verification method. Scalability and speed difficulties plague Bitcoin, Ethereum, and a slew of other projects. However, the Solana blockchain can overcome this and handle thousands of transactions per second thanks to Proof-of-History (PoH) technology.
Value Model of Solana
Solana is a third-generation, Proof-of-Stake blockchain. It has developed Proof-of-History, a novel method of establishing a trustless system for identifying the timing of a transaction.
For cryptocurrencies, keeping track of transaction sequence is critical. Solana’s Proof-of-History strategy understands this and employs a unique technique to overcome the scalability and speed challenges that hamper its competitors.
Proof of History
The SHA256 hash algorithm hashes all Solana events and transactions. This function takes an input and generates a one-of-a-kind output that is nearly impossible to predict. Solana takes a transaction’s output and feeds it into the next hash. The hashed output now includes the sequence of the transactions.
This hashing technique results in a long, uninterrupted chain of hashed transactions. This feature creates a clear, verifiable order of transactions that a validator adds to a block without using a traditional timestamp. Validators can simply verify how much time has elapsed because hashing takes a given amount of time to finish.
Validators process and send less information in each block by arranging transactions in a chain of hashes. Moreover, the time it takes to confirm a new block gets considerably reduced when a hashed representation of the most recent state of transactions gets used.
Blockchain Model
The Solana team has developed eight fundamental technical elements to assist the blockchain in matching a centralized system’s capabilities. The most famous is perhaps Proof-of-History, but there are others as well:
Pipelining: a Transaction Processing Unit for validation optimization
Sealevel: Parallel smart contracts run-time
Tower BFT: a PoH-optimized version of Practical Byzantine Fault Tolerance
Turbine: a block propagation protocol
These elements combine to provide a high-performance network with block speeds of 400 milliseconds and thousands of transactions per second. For the sake of reference, Bitcoin’s block time is about 10 minutes, and Ethereum’s is about 15 seconds.
SOL token holders can participate in the blockchain’s PoS consensus method by staking their tokens. Users can stake their tokens with validators who perform and execute network transactions if they have a suitable crypto wallet.
Those who have staked savings into Solana share some of the rewards with a successful validator. This incentive system encourages validators and delegators to act in the best interests of the network.
Notably, Solana has roughly 900 validators as of May 2021, making it a relatively decentralized network.
Distribution Model
The Solana blockchain project was very successful in drawing interests from prominent venture capital firms, which will play a key role in enabling its distributionnetwork. In addition, partnerships, and integrations will help to consolidate its distribution. While the expansion of its commercial use cases will help it scale it further.
Web3 describes a version of the internet where data will be interconnected in a decentralized way. Web3 is an umbrella that comprises various fields like semantic web, AR/VR, AI at scale, blockchain technologies, and decentralization. The core idea of Web3 moves along the lines of enabling decentralized ownership on the web.
A blockchain protocol is a set of underlying rules that define how a blockchain will work. Based on the underlying rules of the protocol it’s possible to build a business ecosystem. Usually, protocol’s rules comprise everything from how tokens can be issued, how value is created, and how interactions happen on top of the protocol.
In software engineering, a fork consists of a “split” of a project, as developers take the source code to start independently developing on it. Software protocols (the set of rules underlying the software) usually fork as a group decision-making process. All developers have to agree on the new course and direction of the software protocol. A fork can be “soft” when an alteration to the software protocol keeps it backward compatible or “hard” where a divergence of the new chain is permanent. Forks are critical to the development and evolution of Blockchain protocols.
A Merkle tree is a data structure encoding blockchain data more efficiently and securely. The Merkle tree is one of the foundational components of a Blockchain protocol.
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A 51% Attack is an attack on the blockchain network by an entity or organization. The primary goal of such an attack is the exclusion or modification of blockchain transactions. A 51% attack is carried out by a miner or group of miners endeavoring to control more than half of a network’s mining power, hash rate, or computing power. For this reason, it is sometimes called a majority attack. This can corrupt a blockchain protocol that malicious attackers would take over.
A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.
An Application Binary Interface (ABI) is the interface between two binary program modules that work together. An ABI is a contract between pieces of binary code defining the mechanisms by which functions are invoked and how parameters are passed between the caller and callee. ABIs have become critical in the development of applications leveraging smart contracts, on Blockchain protocols like Ethereum.
A Proof of Stake (PoS) is a form of consensus algorithm used to achieve agreement across a distributed network. As such it is, together with Proof of Work, among the key consensus algorithms for Blockchain protocols (like the Ethereum’s Casper protocol). Proof of Stake has the advantage of security, reduced risk of centralization, and energy efficiency.
Proof-of-Activity (PoA) is a blockchain consensus algorithm that facilitates genuine transactions and consensus amongst miners. That is a consensus algorithm combining proof-of-work and proof-of-stake. This consensus algorithm is designed to prevent attacks on the underlying Blockchain.
According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum).
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
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Smart contracts are protocols designed to facilitate, verify, or enforce digital contracts without the need for a credible third party. These contracts work on an “if/when-then” principle and have some similarities to modern escrow services but without a third party involved in guaranteeing the transaction. Instead, it uses blockchain technology to verify the information and increase trust between the transaction participants.
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Decentralized finance (DeFi) refers to an ecosystem of financial products that do not rely on traditional financial intermediaries such as banks and exchanges. Central to the success of decentralized finance is smart contracts, which are deployed on Ethereum (contracts that two parties can deploy without an intermediary). DeFi also gave rise to dApps (decentralized apps), giving developers the ability to build applications on top of the Ethereum blockchain.
The history of Bitcoin starts before the 2008 White Paper by Satoshi Nakamoto. In 1989 first and 1991, David Chaum created DigiCash, and various cryptographers tried to solve the “double spending” problem. By 1998 Nick Szabo began working on a decentralized digital currency called “bit gold.” By 2008 the Bitcoin White Paper got published. And from there, by 2014, the Blockchain 2.0 (beyond the money use case) sprouted out.
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An imaginary flywheel of the development of a crypto ecosystem, and more, in particular, the Ethereum ecosystem. As developers join in and the community strengthens, more use cases are built, which attract more and more users. As users grow exponentially, businesses become interested in the underlying ecosystem, thus investing more in it. These resources are invested back in the protocol to make it more scalable, thus reducing gas fees for developers and users, facilitating the adoption of the whole business platform.
Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
