Solana - One project we have been looking at is Solana. Solana was founded in 2018, and the token officially launched in 2020. During the 2021 bull run it garnered a lot of hype as an “Ethereum killer”. It also had some pretty big backers from SBF to Multicoin. It rode the hype to a peak value of $250 per token and an overall market capitalization of $100B. While the fun didn’t last, the project isn’t dead and we think there could be some opportunity down the road to reclaim some of its success.So what sets Solana apart? First, it utilizes a unique consensus mechanism called Proof of History (PoH) in conjunction with the traditional Proof of Stake (PoS) consensus mechanism. PoH essentially adds a timestamp to each transaction as part of the hashing algorithm. This gives a defined sequencing that streamlines the validating process. This combined with PoS enables Solana to process a high volume of transactions at lightning-fast speeds, often surpassing thousands of transactions per second. This scalability not only ensures rapid confirmation times but also makes Solana an ideal choice for decentralized applications (DApps) and DeFi platforms that require near-instantaneous transaction processing.Furthermore, Solana boasts impressively low transaction fees. The network's efficiency and scalability result in minimal fees, making it an attractive option for users who are frustrated by the high transaction costs associated with other blockchain networks like Ethereum. This cost-effectiveness is particularly appealing for microtransactions and enables developers to build more accessible and user-friendly applications on the Solana blockchain.
One of the main drawbacks of the project is, coincidentally, one of the reasons it is so cheap and fast. The project is highly centralized. The requirements to run a full node and validate transactions are extremely high to the point where only a few entities can afford to run machines that possess the computing power to act as a validator. This gives a lot of control to a few validators. One downside of this is that the network can be more prone to shut down if a few validators are offline. This has happened in the past. However, Solana is making efforts to further decentralize.
Overall, Solana's scalability and affordability make it a promising contender in the cryptocurrency space, despite its issues. It remains a viable alternative to the Ethereum network and when activity picks up during the next bull run it could take considerable market share from ETH as a faster and more cost-effective option.