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Solana (SOL) is a blockchain platform specifically designed to support decentralized applications (dApps) and cryptocurrencies. It is distinguished by its high performance in terms of transaction speed and scalability, aiming to provide a faster and more cost-effective solution compared to older blockchain technologies.
Here’s what Solana does:
Solana was launched in 2020 by Solana Labs, which was founded by Anatoly Yakovenko and Raj Gokal in 2018.
SOL's primary objective is to significantly enhance the scalability of blockchain technology. This goal aims to exceed the performance levels of existing blockchains like Ethereum by offering a platform that can handle more transactions at faster speeds and lower costs. Solana's design focuses on providing a high-performance blockchain solution that emphasizes scalability, speed, and cost-effectiveness, making it an attractive option for developers and users seeking efficient decentralized applications and services.
Solana utilizes a Proof of Stake (PoS) consensus mechanism, not Proof of Work (PoW). The PoS model allows validators to stake their cryptocurrency as collateral for the privilege of validating transactions and securing the network.
Solana combines this PoS system with an innovative protocol known as Proof of History (PoH) to achieve high throughput and efficiency. The PoH mechanism is used to encode the passage of time into the ledger, helping to optimize transaction ordering and improve overall network performance without compromising security or decentralization.
Solana's staking rewards are calculated and distributed every epoch to validators and their delegators, based on the amount staked and the validator's performance. The system is designed to incentivize participation and support the security and efficiency of the network.
Solana (SOL) gets created or minted through a couple of primary mechanisms inherent to its blockchain technology and consensus model. The creation of SOL tokens is closely tied to the network's Proof of Stake (PoS) system and its unique Proof of History (PoH) feature. Below is an overview of how SOL gets minted:
The economy of SOL is based on a deflationary model, which guarantees its scarcity over time.
The Solana Network uses newly issued SOL to pay rewards, and the initial inflation rate is 8% per year. The “deflation” rate – the rate by which the inflation rate decreases per year – is 15%. As such, the inflation rate will decrease by 15% per year until the inflation rate reaches the expected long-term inflation rate of 1.5%.
Owning SOL means you have a stake in the Solana network, with the ability to use the token for transactions, participate in securing the network through staking, potentially influence governance decisions, invest in the network's future, and access various applications and services built on Solana.
Like any asset, the value and utility of SOL are subject to change based on network performance, adoption rates, and broader market conditions.
The Solana roadmap for 2024 encompasses a variety of strategic initiatives aimed at enhancing the blockchain's infrastructure, scalability, and efficiency. The Solana Foundation is focused on driving innovation, increasing developer engagement, and improving network scalability to support more transactions per second efficiently. This initiative comes as part of Solana's effort to solidify its position as a leading Web3 infrastructure, emphasizing its fast, decentralized, scalable, and energy-efficient platform capable of powering thousands of transactions per second.
Key highlights from the Solana 2024 roadmap include:
Like other crypto assets, there are some general risks associated with investing in SOL.
We describe many of these general risks in Solana’s Crypto Asset Statement, including risks relating to: volatility; access, loss or theft; control of processing power; settlement of transactions on crypto asset networks; momentum pricing; private keys; internet disruptions; faulty code; network development and support; regulatory risk; network forks; air drops; voting rights; cybersecurity incidents and other systems and technology problems; unforeseeable risks.
While we tried to describe the key risks associated with SOL here and in our risk statement, these aren’t all the risks associated with trading in SOL. You should also always do your own research on SOL to make sure you are comfortable investing in it.
Get live price data and learn how to buy SOL in Canada through Coinsquare's Comprehensive Guide.
