Magic Eden – The most popular NFT marketplace built on Solana, allowing for the trade of NFT collections like the Degenerate Ape Academy or DeGods. Audius – A music streaming platform built for musicians to share music with listeners and earn more for their art than traditional streaming options. However, just last May 2022, Solana was able to overtake Ethereum in NFT trading volume with $24.3 million in total volume compared to Ethereum’s total of $24 million. This is a strong sign of Solana’s thriving ecosystem, not just in developers, but also with consumers.
As with any crypto investing, Solana can carry significant risks, including volatility and a lack of regulation. That said, its rapid growth and scalability have made it attractive to many investors. Following the general rise of the cryptocurrency market in 2023, its market cap rose to $7 billion. Solana was launched in 2020 by Solana Labs, which was founded by Anatoly Yakovenko and Raj Gokal in 2018. The blockchain has experienced several major outages, was subjected to a hack, and a class action lawsuit was filed against the platform.
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The most recent happened on Solend, a Solana DeFi protocol, whose actions have drawn the ire of DeFi investors. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Large numbers of simultaneous transactions have contributed to several outages of the Solana blockchain.
Account holdings are for illustrative purposes only and are not investment recommendations. If applicable, your Stash banking account is a funding account for purposes of the Advisory Agreement. Your subscription fee may be deducted from your Stash banking account balance. On 14 September, 2021, the Solana blockchain went offline after a surge of transactions caused the network to fork, and different validators had different views of the state of the network.
Charting the Growth of the Solana Ecosystem
Several other Layer 1 chains run on the framework developed by a single entity. The Nakamoto Coefficient is based on a popular way of measuring inequality called the Gini Coefficient . Under the GC, a score of one indicates a system where all the resources are controlled by one entity, with scores less than one indicating increasing distribution levels throughout a group.
- There was opportunity for the public to purchase tokens in the open market between $0.50 and $0.75 in April, May, and June of 2020.
- This is a strong sign of Solana’s thriving ecosystem, not just in developers, but also with consumers.
- Solana achieves such efficient transaction speeds by utilizing a centralized network, which comes with a concerning level of risk for its users as mentioned above.
- Solana is a programmable smart-contract blockchain that aims to achieve high transaction throughput without sacrificing decentralization.
- Solana’s SOL tokens are then staked and used as collateral to process transactions on the network.
- Several other Layer 1 chains run on the framework developed by a single entity.
In June 2018, the project scaled up to run on cloud-based networks, and a month later, the company published a 50-node, permissioned, public test net consistently supporting bursts of 250,000 TPS. Yakovenko surmised that using proof-of-history would speed up the blockchain tremendously compared with blockchain systems without clocks, such as Bitcoin and Ethereum. These systems struggled to scale beyond 15 transactions per second worldwide, a fraction of the throughput handled by centralized payment systems such as Visa , which see peaks of up to 65,000 TPS. PoH gets past this hurdle, with every node in the network able to rely on the recorded passage of time in the ledger on the trustless basis that is key to blockchain functioning.
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However, Solana’s token distribution looks more similar to Binance Coin’s, which also has around 50% of its tokens held by insiders and is frequently criticized for its lack of decentralization. While the Nakamoto Coefficient is not without its criticisms, it is currently one of the best and most accepted ways to measure decentralization in blockchain systems. Additionally, any analysis method is only as good as the quality of the data put into it, which can often be subjective. With these points in mind, this feature will try to construct the most accurate possible picture of how decentralized Solana is compared to its competitors. However, identifying these metrics is not enough; finding an appropriate way to quantify the data is incredibly important when forming an idea of how decentralized a blockchain network really is. One way to do this is by using the “Nakamoto Coefficient” outlined by the former CTO of Coinbase, Balaji Srinivasan, and named after the pseudonymous creator of Bitcoin, Satoshi Nakamoto.
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Server Program initiative, which pairs validators with vetted and approved independent service providers in an effort to further decentralize the Solana network. That Hetzner’s ban would not meaningfully impact Solana, as validators have many alternative options for service providers. SOL is up 2.87% in the last 24 hours to be trading at $36.28 at the time of this writing.
To compensate for this lack of scaling features at the core of its blockchain, layer-two solutions help provide enhanced scalability and throughput. The technology behind the Solana network breaks down data into smaller chunks, making it easy to transfer it across the network. Another technology called Sealevel also helps the processing of transactions across GPUs and SSDs, both of these combined result in an efficient blockchain network. The driver behind the network efficiency is its Proof of History timekeeping method, which works alongside its delegated Proof of Stake consensus mechanism. Proof of History allows multiple validators to process transactions simultaneously.
This is because it doesn’t account for the number of individuals needed to comprise a system. In other words, a blockchain network, by definition, cannot exist with only one node or validator, but society can exist with one entity controlling 100% of the resources. A blockchain is a digitally distributed, decentralized, public ledger that exists across a network. Instead of validator nodes, Solana uses validator clusters, where groups of validators work together to secure the blockchain and move transactions. Solana is a blockchain platform designed to host decentralized, scalable applications.
What is Solana? (SOL)
It’s one that centers on a small number of stakeholders, reinforcing the level of centralization. Presently, 77.7% of all SOL tokens are staked, showing that the tokens held by insiders are directly contributing to the network’s validation power. what is solana With so few tokens in active circulation through the initial token sale, most staked Solana is likely to be held by insiders. Additionally, the Solana Foundation has reserved another 13% of the token supply as incentives for future development.