A Guide to Solana: What It Is, SOL Coin and Its Advantages and Disadvantages
With the global cryptocurrency market reaching 1.23 trillion in 2023, everyone is interested in investing in cryptocurrency. Here, the SOL coin is a popular option. Solana, a decentralized public blockchain network, introduced the SOL coin. Here is a guide to what Solana is, how it works, and its advantages and disadvantages.
What Is Solana and What Does It Do?
Solana is a beta public blockchain network introduced in 2017. Due to its decentralized and open-source nature, no one can control it, and many participants manage it. The most significant appeal of Solana is that it is a blockchain development platform that allows you to create and use your application based on blockchain. This makes it similar to Ethereum, where you can create new apps in the blockchain, although it has higher transaction speed and lower fees.
Solana allows you to develop your solutions and new features yourself on platforms that can communicate with each other and transact or exchange the SOL coins throughout the system. SOL uses a contract-based framework similar to Ethereum. In smart contracts, you can attach as many conditions as you want to any transaction or step, which makes it more flexible.
This allows you to develop highly reliable decentralized apps (DApps) that work efficiently due to Solana's dependability and safety. The Solana network can scale many inventions, increasing its appeal to those looking to introduce and scale creative solutions.
The SOL Token
Solana introduced its SOL tokens in 2020 – the primary cryptocurrency of the Solana network used for transactions. There are 494,097,802 SOL coins currently, and the maximum supply hasn't been announced yet. SOL tokens are inflationary tokens, but they also have a reduced supply, due to which it has a 1.5% inflation rate per year
SOL coins are also provided to developers, which helps regulate the network's security. They're also used in the decision-making and governance of the Solana network, as those who have more tokens have a more significant say.
SOL transactions are recorded using a proof-of-history (PoH) timing mechanism that further helps the implementation of the proof-of-stake (PoS) protocol. This grants it scalability while increasing its transactional speed, with more than 50,000 transactions per second.
Token holders can earn a passive income through staking their tokens in platforms that give staking rewards. When staking, you will be rewarded a percentage of the inflation rewards of on-chain transactions for supporting the Solana network's daily operability. Staking an enormous amount of SOL on the Solana network increases your chances of being selected to validate new transactions on the Solana ledger, ultimately yielding rewards. This also allows you to participate in the network's governance and consensus and earn more SOL tokens as rewards. You can also convert your SOL to USD through cryptocurrency exchange platforms and receive it as cash through your bank account.
The Limitations of Solana
The Solana network doesn't work smoothly due to still awaiting launch on the Mainnet Beta. Additionally, the Solana network was made to scale with high bandwidth as a Web 3.0 cloud platform that’s scalable with a speed of 400 millisecond blocks and decentralization of 1,600 global nodes. This makes it disadvantageous as Solana requires sophisticated hardware that can leverage GPU cores to parallel execution and lessen the verification rate. Due to this, Solana is relying on the advancements in the hardware technology industry to scale the blockchain.
The Solana scalability is tied to how much a single weak node can process in a monolithic blockchain. The chain's performance is limited by the hardware you're using, and the higher throughput is only given by more expensive hardware, whose cost can start from $5,000. When Solana was launched, its supply was dedicated to VCs and investors. Due to this, with its medium disbursement rating, Solanas's decentralized nature is questionable.
The number of validator nodes is low in SOL, especially compared to Ethereum. It has enough nodes to give you a fast blockchain, making it ideal for decentralization. However, if Solana’s adoption continues to grow, especially in dApp and DeFi, more specialized hardware will be required in the future, which will be even more expensive. So, in the end, Solana could be governed by only a few people with access to this specialized hardware and the financial means to run it.
Endnote
Solana is a decentralized blockchain network where you can design your decentralized apps (DApps). Its cryptocurrency, SOL, is used for transactions across the Solana platform. SOL coins are limited in number, with 494,097,802 SOL coins currently available, and have a 1.5% annual inflation rate. You can make a passive income by staking your SOL coins on staking platforms or converting your SOL coins to USD on cryptocurrency exchanges.
SOL coins are advantageous due to their low transaction fees and fast speed. But it does require high-technology hardware to run, which costs more than typical hardware. It is also highly suitable for decentralized apps due to its nature, but its decentralized nature has been questioned.
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