Solana Steps Up as the ‘Ethereum Killer’

| June 21, 2021 | 1 Comments

Solana Labs, the creator of Solana blockchain, has raised $314 million from the sale of its SOL token.  The company’s native coin aims to expand the smart contract network.  SOL is now the 12th largest cryptocurrency with a market capitalization of $11 billion. 

In 2018, Solana Labs began building a “high performance permissionless” blockchain.  Ahead of Solana’s network launch, the company raised $20 million from a token sale in 2019 with Multicoin Capital taking the lead. In 2020, Solana sold SOL tokens worth $1.76 million in the Coinlist exchange platform.  

 

How it started 

Solana is not as widely known outside of the cryptocurrency space but experts agree that the blockchain network is interesting for several reasons and one of it is the company’s founder, Anatoly Yakonevo. He is an engineer who was working on wireless protocols at Qualcomm for 12 years. 

He said the idea came to him when he was in a cafe in San Francisco several years ago.  The idea was mainly about building a historical record to make “consensus” faster.  This is how decisions are made in blockchains that also function as peer-to-peer systems. 

Yakovenko is excited about the shift of other networks like Ethereum to a proof-of-stake system. He told Techcrunch that he’s “not rooting against Ethereum” because doing so would certainly be “devastating for the entire industry.” 

However, Yakovenko still believes that proof of stake is not good enough.  He said that even with proof of stake, miners still have access to transactions that will give them the ability to exploit user information.

Solana’s network will use his idea known as “proof of history.”  The blockchain will have a sort of synchronized clock that will assign a timestamp for each transaction. It will also block miners from deciding the order of transactions that will be recorded in the blockchain. 

“Basically, the speed of light is how fast we can make this network go,” says Yakovenko. Ethereum may be ahead of Solana by 3 years but Yakovenko said his network is not far behind. He explained that Solana is not interested in competing against Ethereum or any other cryptocurrency. All Solana wants is to disrupt traditional finance and the rest of the global markets. 

The Solana network is still in beta stage as full functionality is not yet operational. The network uses a proof-of-stake consensus system to enable investors to assign SOL to validators who process the transactions. In a test conducted by Solana in 2019, their blockchain network has the ability to process 44,000 transactions per second without needing second layer institutions.  This type of technology is currently being explored by Ethereum and other networks. 

The Serum decentralized exchange is Solana’s popular application that was launched by crypto exchange FTX. Since its launch in August 2020, the app surpassed $2 billion in trading volume in April. 

In May, the SOL token had a market cap of $15 billion but lost half of that value in a sell-off later in the same month.

 

Why it’s better than Ethereum

What makes Solana the “Ethereum killer” is its unique approach to scaling.  Competing smart contract platforms like Ethereum are more focused on scaling solutions with layer-2 technology.  Supporters of Solana believe this feature is the network’s greatest advantage since projects will not have to “deal with multiple shards or layer-2 systems.”

The Ethereum blockchain has struggled to meet the high demand for DeFi products.  The network behind the Ether token has been plagued with congestion and steep transaction fees that have reached as high as $70.8 million in May. 

Ethereum processes 14 transactions per second while Solana has the ability to handle 1,000 transactions per second. However, previous reports said Ethereum is scheduled for a critical update that would enable its transition from proof-of-stake to proof-of-work. The new improvements to the Ethereum network are expected to go live in 2022. 

 

Challenges ahead

Despite the rise of Solana’s network and increase in capital, the company still faces significant challenges.  It is not only expected to contend with Ethereum but it also has to compete with similar networks like Algorand, Cardano, Polkadot and Tezos among others. 

The amount of funding might also draw the attention of regulation authorities since it is usually issued in the form of the SOL token. The SEC may think such tokens are equivalent to securities.  According to Forbes, Bitcoin and Ether are the only pure cryptocurrency assets deemed to be non-securities by US regulatory bodies. 

 

Solana is building an open and fair “censorship-resistant global marketplace” that’s much better than the New York Stock Exchange. The founder imagines price discovery as the killer use case for decentralized public networks.

 

Reissa Su

Writer

Reissa covers latest news for Revolution Crypto.

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4 months ago

Bullish on Solana!