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Chapter 2:  Cryptocurrencies

Is Solana an Improved Version of Ethereum?

Interesting Fact:
Did you know that the Solana blockchain supports up to almost 70,000 transactions per second?
11 minutes

In this section, I will tell you all about what is Solana in crypto.This is one of those cryptocurrencies that definitely deserves a section of its own, since it's a project that all crypto enthusiasts should be aware of!

So, when Ethereum came around in 2015, it was a piece of revolutionary crypto technology. With time, however, there have been multiple new projects that have aimed to improve all aspects of ETH. Solana is often viewed as one of the most successful of these projects.

In this section, we’re going to answer what Solana is. To be more specific, I’ll tell you about the fundamentals of Solana, why it’s so special, and we’ll also touch on the idea of “Proof-of-History”, too!

So, let’s go!

What is Solana in Crypto? (Beginner-Friendly Animation)

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Video Explainer: Is Solana an Improved Version of Ethereum?

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What is Solana in Crypto? (Beginner-Friendly Animation)

What is Solana in Crypto? (Beginner-Friendly Animation) What is Solana in Crypto? (Beginner-Friendly Animation)

What is Solana?

In very very short, Solana is today’s future Ethereum 2.0 in some kind. But let’s begin by answering the fundamental question, first - what is Solana, exactly?

Well, Solana is a cryptocurrency project that’s very similar to Ethereum - the second-largest crypto platform in the world. Same as Ethereum, Solana aims to provide its users with the tools and environment to create decentralized applications, smart contracts, and other awesome projects.

All these are the biggest differences comparing those two to Bitcoin. Let’s call them smart chains, as they aim to have some utility logic developed and not just assets with some kind of monetary value.

What is Solana in crypto: Solana and Ethereum.

Now, if what I’ve just blurted out sounds like alien-speak, I highly recommend you to read previous sections in this BitDegree Crypto 101 Handbook, before we continue with Solana. This will help you get a better understanding of what I’m talking about, and about the world of crypto, in general!

A good way of how you can look at it is this - imagine that you’re using the same game console for over 7 or 8 years now. It does the job, and it is reliable, but does also have issues, too - it’s too old, kinda slow, no latest games are available for it, and it tends to heat up really bad from time to time. Not to mention the fact that it might not support your favorite game's latest version, which was just released on a different console brand.

What is Solana in crypto: An example with a game console.

Now, one day, at your local game store, you notice that there’s a brand new console of a different brand being advertised - one that’s MUCH faster and more advanced than your current “joy-machine”. However, there’s just one catch - all of your friends, and other people in your life are using the same old console that you are now.

Should you switch?

What if this new different brand console won’t support some of the essential older games that you have played for your whole life on your old machine?

Another point is that a firmware update is planned for your old console, too - one that should make it much faster and smoother to use, and maybe even bring the compatibility to your favorite games’ latest version, that you are still just dreaming to play… All of this is just plans and still not a reality, and also, you are not really sure if it will happen soon, in the first place.

While I do admit that the above example is very specific, you must understand that this is how people view Ethereum and Solana. ETH is extremely popular and is the old standard on which smart contracts and other decentralized platforms are built. While Solana offers extremely fast transaction speeds and advanced scalability features that are also planned for Ethereum in upcoming years.

Which one you’ll choose?

Should people switch from ETH to Solana? Maybe these two blockchains should be used in conjunction with one another? Well, in order to answer these (and similar) questions, you should first be aware of what EXACTLY makes Solana so attractive.

What are the Main Features of Solana?

As I’ve mentioned earlier, Solana aims to improve on all of the core aspects of Ethereum. These include things such as transaction speeds, smart contract creation, fees, use of its consensus algorithm, and general usability. Let’s cover each of these, in a simple-to-understand manner.

What is Solana in crypto: The main features of Solana.

Imagine that you’re planning to send some money to your friend in another country. Perhaps you owe them money or are buying that awesome console game off of him, now that your console supports it.

You have two methods (or, two payment gateways) of sending the money - let’s call them Method A and Method B. With Method A, you will send the money, and will have to wait a few hours for it to arrive to your friend. If you send the money with Method B, though, as soon as you press the “Send” button, your friend will receive the money - it’s instant!

This is rather similar to how transactions on Ethereum and Solana work. Ethereum can handle up to around 40 transactions per second. Sounds pretty decent, right? Well, yes - until you find out that Solana can handle up to almost 70,000 transactions per that same second. And this is the future of Ethereum too.

What is Solana in crypto: 70,000 transactions per second.

The difference isn’t anything to scoff at! Transaction speeds on Solana are astonishing, and you don’t even need to compare it to today's Ethereum! And to compare and understand these metrics globally, take traditional banking, as an example - VISA can theoretically handle up to 24,000 transactions per second! 70k on a blockchain, VS 24k today in real life. 

Do you feel the difference and why blockchain tech is booming so much? I feel it with, without a doubt! 

Now, let’s stick to that same example of you sending money to your friend. Let’s say, you want to send $10. If you send it with slow Method A, not only will you have to wait longer for the money to arrive to your friend, you will also have to pay, say, $4, as a transaction fee. While sending the same $10 via Method B, the transaction fee will be just a few cents.

So you pay more for the slowest service, how fun is that? And… does it make any sense? It’s like paying triple for the economy class flight instead of getting business class on a bargain.

This is another huge point that comes up when talking about Solana. The network allows users to make transactions for a fraction of the cost that you would pay on Ethereum.

Now, when it comes to smart contracts, there is a section "What are Smart Contracts?". Check it out, if you want to understand the topic in-depth! Here, I’ll just mention that smart contracts are special automated agreements that are designed to perform certain processes without human intervention.

Now, initially, smart contracts were an invention of Ethereum. ETH was the first blockchain that came up with the concept, and the developers behind the network in question have taken the concept very far. Solana, however, does also support smart contract development.

On Solana, smart contract development is much faster and simpler than on ETH. This is due to a variety of reasons, actually. Solana uses a different programming software than Ethereum, is simpler to get into, and requires less time to truly be grasped by developers.

What is Proof-of-History?

Now, whenever you're researching Solana, the term “Proof-of-History” is bound to come up, all the time.

In this part of the section, we’ll have to get just a little bit technical - worry not, though, since I’ll explain all of the concepts that we’ll be talking about, or lead you to resources where you can learn more.

In the world of crypto, there’s a concept called “consensus algorithm” (or consensus mechanism). Essentially, what this refers to is the way of how the communities behind different blockchains make decisions, and come to agreements on serious questions and issues.

The most popular consensus algorithms are Proof-of-Work and Proof-of-Stake. At first glance, you might think that Solana uses a different consensus algorithm - Proof-of-History. Well, let me tell you right off the bat - that’s not the case!

What is Solana in crypto: Proof-of-History protocol.

Proof-of-History is actually just an improved version of Proof-of-Stake, the mechanism that will be adopted by Ethereum 2.0 probably in upcoming years. In addition to all of the staking functionality that you have with Proof-of-Stake, Proof-of-History also implements universal timestamps for transaction confirmations.

Traditionally, when different validators on the network confirm transactions, they send that information relying on their own local clock timestamp without knowledge of any other participants' actual clocks in the same network. In other words, if you’re based in New York, and your friend is located in Berlin, even if you confirm the transaction at the same time, the timestamps will be very different.

The lack of a standardized clock, or, let’s say, a universally-trusted time source, meant that when a transaction proceeded, there was no guarantee that every other active party in the network would stay synchronized with the same timestamp you set. And this is a huge bump for network speed because it takes time to figure out what happens, and time is everything on a blockchain.

What is Solana in crypto: transaction confirmation in chronological order.

Normally, most “smart” blockchains, like Ethereum, rely purely on external mechanisms to add their timestamp — which they then apply to confirm all transactions in the order they were received.

So, as we see, network synchronization is the key feature of Solana. Proof-of-History sorts this out by arranging all transaction confirmations in an organized, set chronological order. Allow me to give you an example.

Imagine that you’re working from home, and have decided to order a few things, since you can’t really be arsed to go out. You order groceries from the store, some lunch from the local restaurant, and a book from a bookstore in another town. You did all of the ordering in that manner.

What is Solana in crypto: An example of ordering groceries.

However, your lunch came in first, since the restaurant was half-empty. The book came in second, since they noticed that there’s a copy in a store near you. And lastly, you received your groceries, since there was a traffic jam in that part of town.

Now, while all of these processes happened in a very random order, you have your app, where you can check EXACTLY when you’ve asked for each order to be sent out, and when they WERE sent out by the respective establishments. No matter when they came in, you know the time they were sent to you!

Do keep in mind that I’ve discussed a very simplified and broad version of Proof-of-History. The concept is much more difficult than that, and there are other aspects that need to be kept in mind.

The final point that I want to leave you with is the idea of “Ethereum killers”. Solana and similar projects are often labeled like that - the communities behind these blockchain networks believe that they will surpass Ethereum, and become the superior crypto projects!

With time, though, it’s becoming apparent that reality isn’t as simple as that. These yet advanced “Ethereum killers” often have many issues of their own. For example, Solana was taken down in December 2020, due to a bug in the network - that’s worrying since decentralized projects shouldn’t be so prone to complete network shutdowns!

On top of that, there are also fears regarding the decentralization aspect of Solana - the team behind the blockchain project has been criticized for sacrificing decentralization in order to achieve those amazing transaction speeds we’ve talked about earlier in this section.

With Ethereum getting ready to launch a huge update called ETH 2.0, it’s becoming more and more obvious that crypto fans shouldn’t search for “Ethereum killers”, but rather, aim to create a decentralized, blockchain-powered future together. Solana definitely does have the potential to become a significant part of that future!