Solana aims to solve one of the biggest problems facing blockchains: scalability. With staking rewards imminent, it is vital to learn about the intricacies of Solana's Proof of History (PoH) consensus mechanism and its use cases. Figment supports Solana and SOL delegators with just a 7% commission rate. Learn more about Solana by reading below.
We see the scalability problem as a sticking point for end-user adoption. One of the things we love about the current generation of blockchains launching is all the different scaling approaches.
One popular approach to solving this is sharding. Sharding breaks up validation into small pieces and spreads it along the blockchain. But this makes it significantly harder for blockchains to talk to each other across chains.
Solana is a permissionless, decentralized, and secure smart contract blockchain platform proposing to solve the scalability problem - without sharding.
Solana bypasses the complexities and developmental delays inherent in sharded blockchains. Solana’s team has consistently delivered. Like many other ecosystem members, we’ve previously participated in Solana’s incentivized testnet competition, Tour de SOL.
Tour de SOL’s goal is to test the network’s stability and performance and its design and parameters. It is also a place for developers to harden the network’s structure prior to introducing features on mainnet.
Figment joined 49 other external nodes on July 25, 2019, for Solana’s first attempt at booting a fully decentralized cluster in preparation for Tour de SOL.
Solana soft-launched their client, mainnet beta, before the end of Q1 in 2020. They have over 350 validators, a global community, and continuing partnerships with Audius, Chainlink, Akash, Terra, with over 100 project integrations covering DeFi, gaming, and Web 3.
Solana is designed to ensure that the software doesn’t get in the way of the hardware. Their internal testnet achieved approximately 50,000 transactions/second across 200 nodes in 23 regions worldwide. As global Internet bandwidth capacities increase to meet user demand, so does Solana’s scalability solution.
Solana encodes the passage of time as data, called Proof of History (PoH), and leverages a verifiable delay function (VDF) to reduce transactional overhead between nodes in the network. The seven key innovations that make the Solana network possible:
“Anatoly (CEO) rose the ranks to Senior Staff Engineer Manager over 12 years at Qualcomm. After leaving Qualcomm, he began engineering distributed systems for Mesosphere and, later, Dropbox. He holds four patents in his name, including one for the invention of a lossless data compression system that leverages recurrent neural networks.”
“Greg (CTO) spent 11 years at Qualcomm, where he contributed to the development of their LLVM toolchain. Before leaving Qualcomm to found Solana, he rose to the position of Senior Staff Software Engineer, leading the web and messaging infrastructure team.”
Solana Labs has raised a total of $41.8 million over a series of 6 rounds. Their last round was in March 2020. They have received funding in the past from Multicoin Capital, Distributed Global, Blocktower Capital, Foundation Capital, Blockchange VC, Slow Ventures, NGC Ventures, Passport Capital, and Rockaway Capital.
Solana is designed for decentralized applications that demand high throughput. Its architecture enables transactions to be ordered as they enter the network, rather than by block. This allows for scalability in financial transactions, distributed storage, and gaming.
Financial systems lend themselves to benefit the most from the scalability that Solana offers. Particularly Decentralized exchanges (DEXes) and marketplaces in need of fair transactions (to prevent front-running).
Solana can process micropayments with low transaction costs (~$0.00001USD/tx) and sub-second transaction confirmation. This opens up opportunities for small payments in video games, payment processors, and e-commerce marketplaces.
Solana’s native token, SOL, will be used for staking and transaction fees. Fractions of SOLs are called lamports, and they are used for microtransactions.
Solana also has a wrapped token, SPL. It is the standard for synthetic token creation and exchange.
After a token burn event last year by the Solana Foundation, the maximum supply of SOL is 489 Million.
The token supply distribution is as follows:
New SOL tokens will be created based on an inflation rate that varies each epoch, based on two main factors:
Staking returns for SOL stakers will increase when more tokens are staked to incentive participation and network security. Solana’s inflation rates are currently being discussed but are expected to look similar to what has been running on the testnet. We’ll talk more about this in the Project Updates section near the end of this article.
Solana aims to have thousands of nodes active at the network’s maturity, so there is no restriction on the number of nodes. Participants must stake SOL tokens as a security bond, and the unbonding period has not yet been determined. Leader selection/rotation is based on stake-weight, so we should expect minimum or maximum stake thresholds. There appears to be no advantage for an entity to run multiple nodes.
There will be two types of clients involved in the consensus mechanism:
The network will be secured by bonded validator nodes that put SOL at stake to participate in the network. The more transactions a validator writes, the more rewards they and their delegators earn. Participants receive block rewards and transaction fees. Token holders may also earn rewards by delegating tokens to reputable validators.
In December, after deploying it on the testnet, the development team at Solana put forward a governance proposal for voting regarding PICO-inflation on mainnet. The proposal established an Initial Inflation Rate of 0.01% and a Dis-inflation rate of 0%.
This is just an initial rate. Given the current parameters of token inflation, the upper and lower rangers of token issuance may look like the following:
Initial Inflation Rate: 7-9%
Dis-inflation Rate: 14-16%
Long Term Inflation: 1-2%
A proposal to enable inflation was released on January 21st.
Every transaction on the network will involve a fee that incentivizes validators and replicators while protecting the network from spam attacks. The fee rate will vary.
Rewards will be SOL tokens, and the number will depend on the network’s inflation rate, the global amount of SOL staked, the volume of network fees, and for delegators, the validator’s commission rate. Many of the specifics are still under consideration. They will likely be rolled out in the same process as inflation proposals.
Anyone may offer the network storage space and use basic hardware such as a laptop to become a replicator. Replicators will earn SOL token rewards proportional to the number of successfully validated Proof of Replications provided to the network; thus, the amount of storage provided.
Validators and their delegators are at risk of being slashed. Downtime will not be punished by slashing, but both signing illegal transactions and voting for an inferior fork will result in a loss of tokens (slashed). Partial slashing may be implemented in the case of multiple validators being slashed during the same period.
Long-term governance will be conducted under the Solana Foundation, a Swiss non-profit entity established in June 2019. Various stakeholder groups within the Solana community (such as validators, replicators, users, developers, and token holders) will elect the foundation’s board. Solana Labs transferred network governance to the Solana Foundation in 2020.
The Foundation is committing to delegate 80% of their treasury evenly amongst nodes to:
Overwise, governance happens on-chain, and community voting is accomplished via SPL Tokens and minted based on the total active stake, then distributed to voters based on their stake weight.
They released the newest version of mainnet beta, v.1. 4.24. on January 20th, 2021. This is the same version that they’ve been running on the test-net since October 2020, so it’s finally coming to mainnet beta this month!
This release contains updates for improvements to memory on startup, various RPC timeout issues, and bug fixes. It also enables inflation rewards once the community votes on full-inflation for mainnet.
The full-inflation on mainnet will look similar to how it looks on the testnet, with an initial inflation rate at 8%, a long-term inflation rate of 1.5% and a dis-inflation rate of -15%.
The Solana team released a proposed schedule for establishing inflation on their mainnet. The Foundation is hosting on-chain community voting to allow representatives the right to enable full-inflation. They have broken down the proposed schedule a Nomination period, Upgrade period, and Voting period. Broken down, that schedule looks like this:
If everything goes as planned, we should see inflation on mainnet by the middle of February.
In 2020, Solana had dedicated a significant portion of its resources to building and sustaining a large community of users, developers, and evangelicals. The Solana Foundation has established a few different programs to benefit both their protocol and the ecosystem. They have used their grants program to fund projects such as the following.
Solana is particularly interested in helping cross-chain bridges, such as the Wormhole Bridge. Wormhole connects ETH and ERC20 tokens to SPL tokens. The Wormhole Bridge helps existing projects, platforms, and communities “seamlessly move tokenized assets across blockchains.”
Interoperability has immense value because it allows for different teams access to more resources and provides users a frictionless experience. This is just the first of many bridges to Solana and in the ecosystem as a whole.
Micro Payments and low-cost transactions make Solana attractive to video games and subscription services. Back in October, Audius announced its plan to build on Solana. Audius has over 1 million users - this made gas times and load times increase on their chain. They’ve decided to start scaling with Solana’s layer one and layer two solutions to combat this.
Solana has also hosted a hackathon back in November with over 1,000 registrations and 60+ project submissions. It was two weeks long, and projects ranged from DeFi and Web3 to NFT gaming and core infrastructure. In return, Solana improved their documentation and other educational resources to help onboard more developers and community supporters. Projects that did well included a couple of messaging platforms, a fantasy sports on-chain application, and a financial strategy tool - all of which fall under the use cases that Solana wanted to support back when they first launched in 2018.
Solana maintains a list of all of the projects developing on their network here.
Solana is an excellent example of an organization that knows the value of a healthy community. Fostering growth in a community provides mutual benefits for the blockchain, the ecosystem that builds on it, and the industry. Solana’s community development efforts demonstrate how much growth and dedication to outside developers are vital for a network’s growth and success. Solana’s ecosystem is evidence of a protocol that has promising long-term investments.
Interested in delegating SOL to Figment? Check out our Solana landing page for more information. We are offering a 7% commission rate and Figment Prime for large SOL holders.