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The Idiot’s Guide to Solana

Posted on 6/14/2021 by Mark

Disclaimer: The author holds SOL and a range of Solana-based tokens.

Food $200
Data $150
Rent $800
Uniswap fees $403,483
Utility $150
someone who is good at the economy please help me budget this. my family is dying

Your friends are out having fun at the bar. Your dual monitor setup is great; you can simp on a Twitch stream while furiously pissing away your net worth by trying to buy the illiquid gem that’s going to finally grant you financial freedom.

For the ninth time in a row, your Uniswap transaction fails. That’s okay, you think, as you wire this month’s rent straight to Binance to exchange it for more ETH, I’ll make it all back on this coin that some washed out 2000s rapper shilled on Twitter.

You’ve spent three hours and $900 this evening. Your friend, the one currently enjoying himself at the bar? He used Solana. It cost him about twelve seconds and a fraction of a cent to complete his swap.

What’s a Solana?

Founded in 2017 by Anatoly Yakovenko, Solana (native unit SOL) is a blockchain protocol that aims to provide “the open infrastructure required for global adoption.” Touting speeds of 50k transactions per second, it allows developers to build decentralized apps in a highly scalable environment.

Solana claims to solve the blockchain trilemma through 8 core innovations, including its approach to smart contract handling, transaction processing, and block propagation. Most interesting, however, is its consensus mechanism.

Where Proof-of-Stake meets Proof-of-History

You’re probably familiar with Proof-of-Stake (PoS): a mechanism that ensures consensus by having users validate blocks proportionate to the amount of coins they hold. In contrast, Proof-of-Work (PoW) systems (like Bitcoin and Ethereum) require users to sacrifice computing power.

People like this because it means less energy ‘wasted’ by having computers guess trillions of things per second. In many implementations, transaction processing is faster, as PoW doesn’t act as a bottleneck.

Solana uses PoS (an implementation called TowerBFT) combined with Proof-of-History (PoH), which allows nodes to synchronize and agree on time through Verifiable Delay Functions (VDFs).

Yep, it sounds like timekeeping should be pretty easy in 2021. But it really isn’t. In a permissionless ecosystem where billions of dollars in value are flowing, everyone needs to be very careful to avoid the heist of the century (followed by the collapse of the network).

Essentially, nodes shouldn’t trust the information that other nodes send them, unless it can be verified. Time-related data is no exception. But if you can encode time in a way that you can prove that something happened at a certain time, that’s a different story.

In Solana, VDFs allow us to determine the order in which transactions have taken place. And they carry none of the overheads that PoW ordering does, which is what makes Solana so fast.

How decentralized is Solana?

As you can imagine, Solana’s speed and scalability comes at the cost of high requirements for nodes (see the recommended specs here). In spite of these, the network has just over 1004 nodes at the time of this writing.

What can I do with Solana?

The Solana ecosystem is still in its infancy, so it isn’t as popular as the likes of Ethereum in terms of applications. That said, a growing number of developers have been working on replicating the DeFi functionality we’ve all come to love (yield farms, leverage trading, DEXs), plus a range of other applications.

Here are some noteworthy ones:

COPE – a project that aims to create an index which ranks traders based on their Twitter calls. Users will be able to unlock reports that analyze their results, providing insights intothe strategies that work best for them. Later, this system will be used to trade on users’ behalf by plugging into the index.

Mango Markets – a fully decentralized margin trading protocol. Here, users can trade withup to 5x leverage across BTC, ETH, SOL, and SRM pairs.

Hedgehog Markets – a Solana-based prediction market. At this time, it’s only accessible via the devnet.

Solape – a Serum-based decentralized exchange with some promising things in the pipeline, such as NFT drops and a blockchain-based casino.

Step – a dashboard that aggregates your activities on the Solana blockchain, from wallet holdings to margin positions.

Raydium – Swaps, staking and liquidity provision. Staking RAY gives users access to upcoming IDOs through Raydium’s AcceleRaytor.

Unlike many alternative blockchains, Solana can’t be accessed via MetaMask. So if you’re interested in getting started, Sollet, Solflare, or Phantom provide a very user-friendly experience for interacting with Solana’s growing ecosystem. These come bundled with Ledger support – a must if you’re serious about your funds’ security.

In conclusion

Solana’s blazing-fast transactions and nominal fees have put it on the map as a serious contender to other smart-contract-capable blockchains. What’s more, it has no plans for layer two scalability (such as sharding), given that its base chain architecture allows it to scale at the rate of Moore’s Law.

Time will tell whether it can compete with some of the existing leaders. So far, it’s looking good.