What is Solana?
Solana is a permissionless, decentralized layer 1 protocol renowned for its 8 core innovations, which have helped Solana consolidate its status as one of the world’s most performant and scalable networks. Solana has earned the moniker “the visa of blockchains” due to its rapid block times, extremely high TPS (Transactions Per Second) capabilities, and an average transaction cost of $0.00025.
The Top Solana Misconceptions Debunked:
Misconception 1: Proof of History (PoH) is a consensus mechanism
Reality: Solana uses a Proof of Stake consensus mechanism, and Proof of History is not a consensus mechanism but a pre-consensus millisecond network clock.
Why do people think Proof of History is a consensus mechanism?
This misconception likely is prevalent for a few reasons.
- One of the main reasons is that Proof of History uses the same rhetorical structure as Proof of Stake and Proof of Work, both of which are consensus mechanisms. It is, therefore, natural to assume that Proof of History is also a consensus mechanism due to its precursor’s linguistic lineage.
- Another reason is that many traders and investors don’t have sufficient time to do their due diligence on every technical element within a given ecosystem; therefore, they apply heuristics.
- A third reason is that Proof of History does not form the consensus but enables it as it occurs pre-consensus and functions as a rapid timestamp. And because it does serve a function that occurs pre-consensus that allows for actual consensus, many people falsely conflate these elements on a technical level.
So, let’s dive into what form of consensus Solana uses and what Proof of History is:
What is Proof of Stake?
Proof of stake is a consensus mechanism in which network participants must own a stake in the network, sometimes above a certain threshold, to validate blocks. Proof of Stake is an alternative consensus mechanism to Proof of Work (PoW) that allows different participants to agree on the order of transactions. Validating blocks in this way earns the network participant emissions/rewards. This is Solana’s consensus mechanism.
What is Proof of History?
Proof of History is a permissionless, sub-second network clock that timestamps transactions with a SHA256 hash using a recursive Verifiable Delay Function (VDF) to verify the historical record and the ordering of blocks. To express it less technically, Proof of History is a pre-consensus timestamping mechanism for sequencing. Proof of History is one of Solana’s key technological innovations, which has allowed Solana to be one of the most performant blockchains in the web3 ecosystem.
What problem does Proof of History solve?
Proof of History was designed to solve what Anatoly Yakovenko calls “the clock problem” in a decentralized way. For decentralized systems to agree on time and sequencing, some kind of timestamp must be active that does not come from a centralized source, as this could corrupt the network.
Decentralized networks require decentralized solutions; otherwise, you risk adding the very elements of centralization and the issues that accompany centralization back into the ecosystem, subverting the advantages of decentralization. This means that Solana required a decentralized solution to solve the “clock problem”, and Proof of History is a response to this.
Decentralized networks like Solana cannot trust external clocks or centralized timestamps for the reasons above and require an uber-fast and hyper-efficient timestamp that allows nodes to have an ordering of events and transactions without the communicative bottlenecks and latency caused by synchronous communication between nodes.
Proof of History functions as a source of time for each validator node. Each validator node has its own internal clock which uses a recursive VDF that timestamps transactions down to the millisecond.
In conclusion, Solana’s Proof of History technology allows the PoS consensus mechanism to operate effectively and rapidly by acting as a network clock pre-consensus. But, Solana is a Proof of Stake blockchain that is augmented with Proof of History.
Misconception 2: Solana has no real-world applicability
Reality: Solana is one of the biggest innovators in terms of real-world utility and applicability
Many people falsely believe that although Solana and other cryptocurrencies have a boast-worthy TPS and other highly laudable metrics, Solana (like the rest of crypto) has no real-world utility. However, contrary to their claims, many of Solana’s most boast-worthy features are directly what gives Solana its real-world applicability; these include Solana’s high TPS, rapid TX finality, low fees, and vertical scalability.
For the longest time, cryptocurrency skeptics touted the inefficiency of blockchains by using TPS/ throughput metrics to claim that centralized fintech companies such as Visa were more efficient than any decentralized financial technology could hope to be. But now Solana outflanks Visa’s throughput whether you use 24,000 TPS or 1700 TPS and has even earned the moniker “the visa of blockchains”.
Besides Solana’s cornucopia of killer features, Solana recently has created a disintermediated Customer to Business and Business to Customer (C2B and B2C) technology called Solana Pay.
Solana Pay is a P2P payment protocol at the frontier of digital commerce which allows websites and businesses to accept Solana and Solana-based stable coins. Solana Pay allows stablecoins on Solana such as USDC to be instantly spendable on any store or website, all with the ease of just scanning a QR code. In the future, Solana Pay is just likely to be one part of a larger movement toward mainstream adoption with fully-fledged Solana e-commerce and even potentially Solana crypto cards.
Solana’s ultra-high TPS, rapid TX finality, and sub-cent fees form a triad of utility that allows revolutionary products like Solana Pay to flourish in the first place. For example, can you imagine an Ethereum version of Solana Pay in which a customer tries to buy their meal at a restaurant in USDC and subsequently ends up paying a $25 gas fee for a $10 meal?
Solana is one of the biggest innovators in terms of actual utility and applicability because real-world utility and applicability require high TPS, rapid TX finality with low fees. This creates an open market for more real-world applications and spurs technological adoption amongst those less aware of cryptocurrency. If Web 3 was a game, Solana is probably the closest that a contender has come in slaying the infamous trilemma in the final boss battle.
Misconception 3: Solana only has higher throughput due to the superior hardware requirement.
Reality: Solana’s throughput is not solely due to its superior hardware or high-spec requirements but due to many of its core innovations working in tandem to increase the throughput.
Anybody in the Solana ecosystem that has engaged in conversations about Solana for long enough will eventually be hit with a common criticism that goes something like this “Yes, Solana does have high transaction speeds and can process a lot of transactions, but that’s only because Solana requires computers with high specs to validate.” Or a similar related misunderstanding will occur “Is it true that Solana runs on quantum computers?”
This argument ignores that Solana’s high throughput is not uni-causal but multi-causal. Solana’s technological componentry intertwines with its other innovations forming more than each of its constituent parts.
Solana’s throughput is not reached solely by a single causal factor but by a cluster of them; Solana’s renowned 8 core innovations enable higher throughput by design. Taking Turbine as example:
Turbine is a block propagation protocol that reduces the overall time taken to send data to every validator node. A common issue in PoS systems is that once a validator node count increases, the data will need to be transferred to more nodes, and thus the data will take longer overall to reach its destination target with each additional node increasing latency.
Turbine effectively solves this by breaking blocks down into smaller components and then having the leader send each of the packets to a different validator in a neighborhood. A neighborhood is a group of peer nodes, and there are many different neighborhood groupings.
Once a neighborhood has received the packets, they then transfer the data to the neighborhoods below them in a merkle tree structure. For example, a neighborhood of 200 nodes can reach 40,000 validators in 200 milliseconds due to this structure under certain constraints. In this way, Turbine minimizes communication times and reduces network latency allowing for effective and rapid data communication and transference between nodes that allows effective scaling of inter-validator communication.
These types of technological innovations which are central to Solana enable the throughput to be so high. To solely attribute the throughout to the hardware superiority required for node validation is to overlook the architectural backdrop and misperceive how all the components come together to create the end result.
Misconception 4: When compared to other L1s, Solana’s total number of validator nodes is less, proving it’s less decentralized than other L1s in this realm.
Reality: Solana’s validator nodes have more nodes than most Layer 1s when counted by unique validator nodes.
A comparative analysis that juxtaposes node count between Solana and Ethereum 2.0’s beacon chain is highly misleading because although both projects are Proof of Stake-based systems, the validator nodes function under different parameters with different assumptions and constraints.
Comparing Solana and Ethereum’s beacon chain by validator node count is perpetrating the logical fallacy of the false analogy. The problem with this comparison is that it ignores that the main tenor of the analogy is disanalogous due to the inherent structural difference between Solana’s validator nodes and Ethereum’s Beacon chain. Ethereum’s beacon chain allows parties such as Lido or Rocket Pool to set up thousands of validator nodes. The same is not true for Solana. The validation nodes’ hardware requirements are higher, and it doesn’t make economic sense for parties to operate multiple validator nodes, leading to unique validators.
To express it concisely: the total validator node count is not an accurate barometer for the level of a network’s decentralization. Decentralization is a spectrum with a multiplicity of axes, and even if a project is centralized on a single axis, it could be decentralized on others and vice versa. According to Solana’s website, as of the 15th of February 2022, Solana has 1,509 validator nodes. Nearly all, if not all of the validator nodes, will have a different owner due to Solana’s staking architecture.
According to Staking Launchpad, Ethereum has 294,312 validator nodes as of the 15th of February 2022, but this statistic does not show the total number of unique validators. And that is a much better metric to gauge a network’s decentralization than the total node count. Also, Ethereum’s minimum staking requirement is 32 Ethereum, and for each 32 Ethereum requires a new node. Solana has no minimum staking requirement or a maximum SOL cap per validator node but has higher validator node requirements. Therefore, validators and new potential validators on Solana are economically disincentivized from creating a new node as it doesn’t make sense in terms of economic profitability.
In conclusion, In a world of accelerating technologies and ecosystems, keeping up with technological innovations and their accompanying impacts can be a daunting task due to the pace the technologies unfurl at. In the process of trying to learn about these sets of technologies, memetic bundles of information can spread like wildfire and become accepted without skeptical inquiry or any kind of critical disassembly.
But, there comes a time when we must look at our cherished notions with further scrutiny and displace the ossified mistruths we’ve historically accumulated. Most novel technologies and their impact usually undergo a period of misunderstanding arising from the speed with which they move and a lag in the understanding of the technologies and the consequences they bring about. Yet, the cycle of technological dynamism continues.
Staking Solana on Ledger Live
We are thrilled to partner with Ledger, a leading hardware wallet provider. Through this partnership, we are excited to bring staking to the Ledger Live dashboard with ‘Ledger by Figment’ staking nodes, starting with staking support for Solana $SOL. Staking through the Ledger ecosystem brings a wide range of benefits including ease of use, self-custody, security, and coverage. Staking also allows users to further participate in blockchain ecosystems, and earn yield.
Users can lock up their SOL tokens to earn rewards. The staked tokens help secure the network and enable its functioning. In return, stakers earn a share of the network emissions collected by the network. Learn more about staking Solana on Ledger Live here.