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What Do We Know About Solana?

The difference between proof-of-work, proof-of-stake and proof-of-history as it pertains to blockchain, bitcoin, ethereum and solana


I will keep these broad strokes because I'll have to dive much more deeply into future posts and different aspects that will be touched on here. 

Solana is its own blockchain, officially launched around the infamous COVID crash in March 2020. This was considered a black swan event in the market where everything tanked in price. It took Solana about 3 years to go live after introducing the idea. 

In the interest of keeping this explanation high level, we'll talk about the famous tradeoff in cryptocurrency between security and efficiency. 

On one side of the spectrum, we have Bitcoin, considered the most secure network, but it's insanely slow. Bitcoin uses a "Proof-of-Work," where computing power dictates the following blocks created on the ledger. This uses physical hardware computers worldwide to create Bitcoin, which is starting to get an avalanche of negative press for its energy consumption and adverse environmental effects. More on another day.

Many of the other blockchains, including Ethereum, are now using what we call a "Proof-of-Stake" consensus mechanism. This method is infinitely more efficient (energy cost reduced by over 95%), and it's even said to be more secure. However, Ethereum still has the issue of scale - where transactions are costly and can only sometimess keep up with the number of transactions that large-scale financial institutions need to make every second. 

Finally, we have companies like Solana, which was built in part to address the looming Ethereum scaling issues. There was a need for a blockchain that could handle enormous transactions per second without being too pricy. Solana struck that chord perfectly. The only problem is that they had to sacrifice a bit on the security side - you could argue. The blockchain suffered 5 major outages in 2022 alone. This is a relatively significant issue considering Ethereum and Bitcoin have never gone down. At the same time, companies like Instagram and WhatsApp also go down all the time, and we still use them endlessly. 

Hopefully, this post helped position the need for a company like Solana. I plan to go into further detail as we go along. 

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