What is Solana Crypto?

Solana is one of the most popular cryptocurrencies in the world alongside Bitcoin and Ethereum. In this guide I’ll go over:

• The main benefits and drawbacks of Solana.
• Whether Solana is a good potential investment. 
• Whether Solana will “beat” Ethereum

So let’s jump right in!

What does Solana crypto do?

Solana’s claim to fame is that it’s the fastest mainstream blockchain in the world (not sure what a blockchain is? Here’s a quick guide.)

But what does being “the fastest” crypto really mean?

At the heart of it, a blockchain is a fancy way of recording transactions in a secure way. Each crypto blockchain has a limit to how many transactions it can record per second.

Ethereum, for example, can record 15-45 transactions per second.

Solana, on the other hand, can record up to 50,000 transactions per second.

What limits the speed of different blockchains is the way they write things to the blockchain. The way that a blockchain records something is called a “consensus mechanism” (to learn more see “what is a consensus mechanism?”). 

Unlike Ethereum, Solana uses both a proof-of-stake and a proof-of-history mechanism to process transactions.

👉 The “proof-of-history” mechanism is essentially what makes Solana so special. 

When blockchains record a new transaction, all the computers on that network have to confirm the transaction with each other.

As you can imagine, when you’re dealing with thousands of computers spread all over the world, this can take a lot of time and get very expensive.

To make this process simpler for the computers, the “proof-of-history” mechanism has a universal clock that all the computers can use. This means that the computers no longer have to confirm at what time all the transactions took place, because they just look at the timestamp that the universal clock has provided.

This means if someone tries to sneak in an unauthorized transaction, the timestamp on that transaction won’t match all the other timestamps around it, and it can be flagged as malicious.

👉 This allows the computers on Solana to save a lot of time and process transactions for much cheaper than Ethereum.

Is Solana built on Ethereum?

Solana is a Level 1 blockchain, which means it stands alone and is not built on Ethereum. To learn more about blockchains that are built on Ethereum, check out my guide on Level 1 vs Level 2 blockchains.

Who created Solana?

Solana was officially created in 2020 by Anatoly Yakovenko. Anatoly is a technologist who has led the development of operating systems at Qualcomm, distributed systems at Mesosphere, and compression at Dropbox. He holds 2 patents for high performing Operating Systems protocols. 

Notable investors in Solana include billionaire FTX CEO Sam Bankman-Fried, Reddit co-founder Alexis Ohanian, Kevin Rose of Google Ventures, and Three Arrow Capital co-founders Su Zhu and Kyle Davies.

How is Solana different from Ethereum?

Besides speed, the main difference between Ethereum and Solana are how each secures its blockchain. Ethereum uses an older way of securing it’s blockchain called “proof-of-work.”

Proof-of-work is similar to how your teacher might ask you for proof that you did your math homework. On a blockchain like Ethereum, thousands of computers race to solve math problems as quickly as possible. 

The computer that solves the math problem the fastest is allowed to record the transaction and gets paid for doing so.

This is a very secure system, but it’s also a very wasteful system because all those other computers that were working on the same math problem essentially get nothing for their efforts. This means that they not only wasted their time, but also wasted a ton of energy trying solve the math problem.

Proof-of-work is a very secure way of running a blockchain, which is why Ethereum and Bitcoin both use it, but it’s wasteful and expensive.

👉 Solana, on the other hand, uses “proof-of-stake” to secure its blockchain. 

Instead of forcing computers to solve complex math problems, a proof-of-stake system asks computers to put crypto money into a virtual vault to become a “validator.” 

The computers that put the most money into the vault and keep it there the longest amount of time are given priority to record the transaction (and get paid for doing so).

If any of the computers try to cheat and do malicious things to the blockchain, they lose their validator privileges and their money is taken from them. This makes a proof-of-stake system secure and deters people from trying to cheat the system.

The main benefit, however, is that this saves a lot of energy and time, which is why new blockchains prefer to use proof-of-stake instead of proof-of-work.

Will Solana beat Ethereum?

Whether Solana will “beat” Ethereum is widely debated, but in my opinion it won’t beat Ethereum. The developers of Ethereum are aware of the “proof-of-work” problem, which is why they’re working on Ethereum 2.0.

Ethereum 2.0 will move to the newer and better “proof-of-stake” system soon, which will make Ethereum a much cheaper and better blockchain.

This doesn’t mean that Solana will go away, however. Solana boasts that it, “is the fastest blockchain in the world and the fastest growing ecosystem in crypto, with over 400 projects spanning DeFi, NFTs, Web3 and more.”

Something that Solana also has going for it is that it’s programming language is much easier to write programs for. This means that it will most likely attract more developers to the platform and create new value well into the future.

In the future I believe that Solana and Ethereum will both co-exist and each will have it’s benefits and drawbacks. 

When I explain the two systems to friends, I tend to say that Solana and Ethereum are like Apple and Microsoft. We need both and having both will force each one to become better.

Like Apple and Microsoft, investing in either one is a good idea and investing in both is even better in my opinion. As always, however, do your own research before investing and make sure you understand what is a good price for what you’re buying into before making that investment.

If you’re looking for a good crypto exchange to start investing, you can also see my guide here:

👉 The 5 Best Crypto Exchanges I Use and Recommend