Solana’s 2023 Achievements Shadowed by Unexpected Hurdles

The price of the Solana coin surged in 2023 and joined the top blockchains in this price range. Unique technology, a large user base, and sustainable price forecasts drive the growth of Solana. It challenged the dominance of Ethereum in the crypto space.

In 2023, Solana has secured a place among the top 3 Layer 1 blockchains, competing with industry heroes such as Ethereum (ETH) and Binance Chain (BNB). In a month, Solana’s native coin “SOL” has seen a price rise of approximately 90%, and it has grown 30% in a week. The debut of Firedancer, a highly anticipated scaling solution on Solana Testament, has driven the sudden price rise in SOL.

This year, there have been improvements in parameters, such as uptime and transactions per second.

Solana

Solana is designed to support decentralized applications (dApps) and crypto projects at large scales. It is a high-performance Layer 1 blockchain and is often abbreviated as SOL. Anatoly Yakovenvo and Raj Gokal founded Solana in 2018.

Other members who were part of the founding team include Greg Fitzgerald, Eric Williams, and Stephen Akridge. Anatoly Yakonvenko is the CEO of Solana. He is a software engineer and has been involved in various technology projects, such as Dropbox and Qualcomm. Other members also know software engineering and distributed systems.

Working Mechanism of Solana

Solana is based on a mechanism known as proof of history (PoH). This feature differentiates Solana from other blockchain networks and consensus mechanisms. The PoH consensus mechanism was designed to create a historical record of each transaction to verify the occurrence of an event at a specific time.

That is done by encoding the passage of time in the data before it becomes a part of the ledger. This approach aims to streamline the consensus-reaching process across nodes, as they have shared a trusted notion of time.

The time-saving feature of Solana has become significant in Solana’s Tower BFT. It is a byzantine fault-tolerant derivative of the practical Byzantine Fault Tolerance (PBFT) consensus.

In addition, Solana has the capabilities of the Gulf Stream protocol. It attempts to optimize the time required in transaction dealing via pre-processing and sending them to validators before the completion of the previous transaction set. This approach is designed to reduce confirmation times and improve network efficiency.

Looking at all these mechanisms together, Solana is designed with a motive to support a high volume of transactions per second, positioning itself as a competitive entity in the blockchain space.

Solana’s Tokenomics

The SOL coin is Solana’s native token and its financial structure is centered around its native token. The SOL token has various functions within the network. It is primarily used for transactions and users use SOL to interact with dApps on the Solana platform. In simple words, to carry out an operation or use a dApp on Solana, users need the native SOL coin.

Another important function of SOL is staking. Users can secure the network by staking their SOL tokens. Users can do this by becoming validators themselves or by assigning tokens to existing validators. Users are rewarded for staking, and the APY (Annual Percentage Yield) is close to 7-8%. This rate can change based on several networks.

Validators play an important role in the network’s security. They receive new SOL tokens as rewards and also as a share of transaction fees. This approach encourages active participation and increases stability in the network.

As per the recent data, there is a total supply of 561 million SOL tokens, out of which 420 million are in circulation. It can also be interpreted as 141 million SOL tokens burned over time.

Solana Use cases in 2023

Solana’s blockchain technology has developed several use cases with the help of high scalability and low transaction fees. Some of the use cases are:

Decentralized Finance (DeFi)

Solana’s low transaction fees and high throughput make it a useful space for defi applications like DEXs, lending protocols, and digital wallets. Examples of Solana-based DEX are Orca, Serum, and lending platforms like Apricot Finance and Solend.

Gaming

Solana hosts games with play-to-earn (P2E) systems, enabling players to earn cryptocurrencies and NFTs through gameplay. Examples are online metaverses like Chainers and Aurory and survival-puzzle games like Naga Kingdom.

Non-Fungible Tokens (NFTs)

Solana supports the creation of NFT platforms and marketplaces where users can perform activities such as minting, buying, and selling NFTs. Notable platforms include Metaplex and Solanart, which help users interact with digital artwork and unique assets.

Web3 applications

Solana supports the development of Web3 apps that use modern Internet technologies. Examples of this are Audius- a decentralized audio streaming app, Squads- a Treasury fund management application, and Alchemy- a platform for building dApps quickly.

Cross-chain functionality

Solana has also been used for cross-chain transactions, as observed with the integration of USDC-SPL in Trust Wallet, enabling users to send and receive USDC with minimal fees and swift transaction times.

Hurdles faced by Solana in 2023

In 2023, Solana encountered challenges because of the number of network outages, which raised concerns about its flexibility.

The most severe challenge was faced on February 25, with a slowdown in block production. The main cause of this slowdown was an upgrade attempt from validator software versions 1.13 and 1.14. It was resolved through a network restart, as efforts to revert to version 1.13 were not sufficient.

That is not the only incident, as Solana has faced multiple outages in the past, highlighting that stability is a critical area for improvement. It has led to criticism from the blockchain community and competitors. It has also raised a red flag about the reliability of Solana as a Layer 1 solution.

The root of the outages is not known to Solana developers. It has led to leaving some issues unresolved for a longer period. The ambiguity and continuous downtimes have raised questions about the reliability of Solana, given the competition in the blockchain space.

Conclusion

In 2023, Solana emerged as an intimidating player in the blockchain space. Factors supporting the growth are a huge price surge, technological innovations, and a growing user base. Despite facing challenges such as network outages, Solana’s advancements in scalability, transaction efficiency, and diverse use cases, including DeFi, gaming, NFTs, and cross-chain functionality, underscore its potential. However, the network’s occasional stability issues have raised concerns, prompting the need for continued improvements to solidify Solana’s standing as a reliable Layer 1 solution.

With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts round the clock, and is a strong advocate for women in STEM.