The Solana Blockchain’s Native Scalability
Since its inception, several cryptocurrencies have struggled with scalability. Users benefit from decentralized security provided by blockchain databases and decentralized payment systems – but the more decentralized security they give, the longer it might take for new transactions to be confirmed and added to the blockchain. These networks confront the difficulty of maintaining adequate transaction speeds as their user base and transaction volume growth, while still maintaining the network’s security and decentralization.
When we discuss scalability and throughput, we’re talking to the number of transactions that may occur per second (referred to as transactions per second (TPS)). With a large number of transactions taking place each second, time becomes a critical factor in determining efficiency. Each computer (or node) in a decentralized blockchain network works on its own internal clock. With thousands of nodes spread throughout the globe, small differences in local system clocks are unavoidable. This creates a difficulty when the decentralized network must achieve agreement on which transactions happened and in what sequence. Both Proof-of-Work (PoW) and Proof-of-Stake (PoS) consensus systems are susceptible to the timestamp synchronization issue.
When transactions occur, they are timestamped using the system clock of the originating system. Then, when other nodes verify the transactions, the messages confirming or rejecting them are timestamped as well. The inherent inconsistencies between local system clocks (even those from good faith nodes) eventually pave the way for attacks in which bad actors attempt to take over a cryptocurrency network by broadcasting fake transaction broadcasts that closely approximate real timestamps — for example, “fake stake” (or “resource exhaustion”) attacks in the case of PoS, and Denial-of-Service (DoS) attacks in the case of c. To guarantee that transactions are not altered and money is spent only once, a significant amount of effort and processing power must be devoted to checking the timestamp correctness of transactions in a PoW or PoS system.
When all of the decentralized network’s clocks are synced, transactions are verified significantly faster since individual nodes are not need to devote as much processing resources to checking multiple timestamps. As a consequence of this synchronization, the Solana blockchain is intrinsically quick and built for natural scalability, offering increased energy efficiency and security through the minimal processing power and tamper-resistant nature of its synced timestamps. Solana’s attempts to accelerate transactions are based on a semi-centralized system in which a node leader is chosen and all nodes agree to use a single universal time source.
Solana’s built-in time synchronization technique enables the network to now sustain a theoretical peak throughput of 65,000 transactions per second. Although this statistic is based on a testnet rather than a real-world implementation, even achieving 50% of Solana’s testnet capacity at scale would be a game changer in the blockchain arena. 65,000 transactions per second is about 10,000 times quicker than Bitcoin, 4,000 times faster than Ethereum, 35 times faster than Ripple, and even around 2.5 times quicker than Visa. The protocol is theoretically meant to expand following Moore’s Law, doubling capacity every two years as technology and bandwidth increase. In other words, if computers improve, Solana will improve as well.
A New Proof-of-Stake and Proof-of-History Blockchain Architecture
The majority of current blockchains completely disregard the importance of time in their operation, with each node timestamping transactions and notifications regarding their confirmation or rejection exclusively using its local clock and subsequently reconciling any differences. This becomes problematic when the network’s decentralized nodes must agree on the authenticity of transactions and their sequence of occurrence.
Traditionally, consensus systems need all nodes to interact with one another to determine when time has elapsed. Each node provides an upvote or downvote to indicate whether a block is legitimate or incorrect. A specific amount of upvotes must be accumulated before the network considers a block legitimate. Thus, if a local clock generates a timestamp that is significantly different from the time used by other validators, this might result in a delay in block confirmation or even block rejection.
Because nodes must connect with one another to establish the passage of time, a substantial amount of processing power and time must be allocated to identifying the right chronological sequence of messages and transactions. The longer it takes to attain consensus, the slower the process of adding new blocks gets, since the next block cannot be validated and added to the blockchain until the previous one is confirmed.
Without a reliable source of time, differences between individual device clocks may become a recurrent and serious issue, since there is no assurance that each node or network participant will swiftly or properly validate the legitimacy of a message.
Without resorting to a “central clock,” Solana’s blockchain protocol is meant to offer verifiable time passing while retaining numerous decentralized properties. The project leverages a consensus mechanism known as Proof-of-History (PoH) to include time into the Solana blockchain ledger. PoH is intended to be used to cryptographically validate the time interval between two occurrences. It connects messages from nodes confirming the authenticity of blocks to create a relative chronological sequence of events independent of local clocks or timestamps.
This is accomplished by designating a network node as the leader and assigning it the responsibility of creating a PoH sequence. This leader sequences messages most efficiently and effectively possible. The ordered output is forwarded to replicating nodes known as validators, who are responsible for consensus method verification. At any one moment, the network has a single leader, who is elected through PoS elections. Solana’s Proof of Stake (PoS) system is based on a Byzantine Fault Tolerance (BFT) technique known as Tower Consensus. Tower Consensus reduces latency by using PoH as a global source of time before reaching consensus.
Any validator node may be elected as the leader of the PoH. If a failure of the PoH generator is discovered, the validator node with the next greatest voting power is picked to take the position of the original leader.
Algorithm for Proof-of-Stake Consensus Using the SOL Coin
SOL is the Solana blockchain’s native cryptocurrency. The validators who process transactions and manage the network, as well as the leaders who produce PoH sequences, are selected according to their investment in the network’s overall performance, as measured by their share in SOL. The nodes with the highest stakes are very certainly going to be picked to validate and add transactions to the blockchain, reaping the related rewards. This structure guarantees that people responsible for the network’s operation have a strong incentive to assure its optimum performance and reliability.
Additionally, users with a modest amount of SOL may delegate their SOL to a bigger validator. They may receive a share of the validator awards in this way even if they do not have enough SOL to become validators themselves. This style of delegation encourages even people with little SOL holdings to contribute to the Solana network.
Because many individuals are financially involved in the network’s optimal operation, Solana’s incentive mechanism contributes to the network’s overall security. Additionally, the staking requirements for being an active network member prohibit harmful and frivolous individuals from targeting the Solana blockchain.
The Structure and Economics of SOL Tokens
Along with granting staked users the ability to become validators or leaders, SOL may be used to generate staking rewards, pay transaction fees on the Solana network, and participate in PoS voting for network governance.
Initially, 500 million SOL tokens were produced. 12.5 percent of that total was retained by the founders, 1.6 percent was sold at auction, 35.4 percent was distributed to locked investors, 38 percent was designated as community tokens, and 12.5 percent is held by the Solana Foundation, which is governed by an independent board in Geneva, Switzerland. Funds raised by the foundation are utilized to support programming, marketing, grants, and the continuous development and support of Solana. By design, Solana transaction fees are paid in SOL and then burned (or permanently destroyed) to deflationary lower the overall supply and hence maintain a healthy SOL price.