Solana: What Is This Blockchain and Why Did It Become Popular?

In 2017, Qualcomm engineer Anatoly Yakovenko started working on solving scalability issues in cryptocurrency networks. He noticed that Bitcoin and Ethereum suffered from slow transactions and high fees, especially compared to centralized payment systems. This inspired him to develop a new distributed system algorithm called Proof of History (PoH). The algorithm helped speed up transaction processing and reduce confirmation times.

Initially, Yakovenko worked on Proof of History using a closed C-based codebase. However, his Qualcomm colleague, Greg Fitzgerald, suggested switching to Rust for better security and performance. The decision paid off—Yakovenko migrated the entire project in less than two weeks.

In February 2018, Fitzgerald began implementing the whitepaper in an open-source GitHub repository under the name Silk. Within just two weeks, the team managed to process and verify 10,000 transactions in only half a second. Another colleague, Stephen Akridge, introduced the idea of using GPUs for verifying digital signatures.

Together with Greg Fitzgerald and Stephen Akridge, Anatoly Yakovenko founded a company initially called Loom. However, due to confusion with an existing Ethereum-based project of the same name, the team rebranded the platform as Solana.

In March 2020, the network launched in Mainnet Beta mode. The project raised $1.76 million in a public token auction on CoinList. At launch, Solana supported basic blockchain transaction functions and smart contracts. The price of SOL was $0.95, and by November 2021, it surged to $260.

This decentralized approach makes the network resilient and eliminates the need for intermediaries in transactions. Solana positions itself as the fastest blockchain in the world, capable of processing up to 65,000 transactions per second at a cost of less than $0.01 per transaction.
Solana can be seen as a token that powers an ecosystem of applications and services. Why?

• With a Solana wallet, users can send, receive coins, and use them for payments.
• Traded as an ETF on regulated stock exchanges.
• Smart contracts execute agreements automatically.
• Solana supports NFT creation and sales.
• The platform enables payment systems free from government and centralized control.
• Solana provides a development platform for games, social networks, investment tools, and other applications.

A unique feature of Solana is its transaction validation approach, which combines Proof of Stake (PoS) and Proof of History (PoH). With Proof of Stake, users can stake their coins and delegate them to validators who confirm transactions on the blockchain. In return, they receive rewards in the form of new coins.

Proof of History adds timestamps to transactions and eliminates the possibility of changing their order.

Comparison with other blockchain platforms

The SOL token is the foundation of the Solana ecosystem. Primarily, it is used to pay transaction fees and interact with the network. It also plays a key role in security and decentralization.

Since Solana is based on the PoS (Proof of Stake) blockchain algorithm, SOL cannot be mined. Instead, users can participate in staking, which means locking up existing SOL tokens to support the network. This works similarly to a bank deposit, where users earn interest for delegating their assets.

When staking, tokens are delegated to a validator—a specialized node in the network that processes and confirms transactions. In return, stakers earn rewards, averaging 8% annually. This makes staking a simple way to generate passive income.

How to Earn from Staking

To get started, users need to choose a validator through a Solana-compatible wallet like Phantom or Solflare, then delegate their tokens. Staking pools are also available for beginners, allowing them to automatically distribute their stake among multiple validators.

A more advanced and technically demanding way to support the network is by becoming a validator. Validators confirm transactions and add them to the blockchain, earning commissions from staking rewards contributed by other participants.

Running a validator requires significant hardware and financial resources:

• 12+ core high-frequency processor
• At least 128GB RAM
• High-speed SSD (1TB minimum)
• Unrestricted internet access (1 Gbps speed)

Maintaining a validator setup costs around $30,000 per year. Validators must either hold a large amount of SOL (around 50,000 SOL) or invest hundreds of tokens upfront to cover fees.

Due to the high costs and complexity, running a validator is best suited for large investors and technically skilled enthusiasts.

Despite its high ambitions and achievements, the platform faces both technical and user-related challenges. One of the main difficulties is transaction processing delays. Recent cases where $SOL deposits were delayed for more than 1,000 minutes (almost 18 hours) have caused significant dissatisfaction. Solana positions itself as an ultra-fast blockchain with low fees, and such delays contradict its core principles.

Why do these failures occur? The reason is increased activity, especially on popular exchanges. Coinbase was not prepared for the sudden surge in transactions.

Another major issue for Solana is the high volatility of the SOL token. For example, in early January 2025, the token lost 21% of its value in just one week, partly due to speculative interest in meme coins on the network. Such hype attracts investors but does not provide a stable foundation for long-term growth. When speculative assets lose popularity, SOL’s price also suffers.

The Solana network is also facing a decline in decentralized application (DApp) activity and a decrease in total value locked (TVL) within its ecosystem. At the beginning of the year, Solana’s TVL decreased by 5.9%. While this aligns with overall market trends, it raises concerns about the network's ability to retain developers and users.

For comparison, Ethereum lost 18.1% of its TVL during the same period, but at the same time, increased its on-chain transaction volume.

Solutions

To address these issues, Solana needs to:

• Implement real-time monitoring to prevent congestion.
• Create backup systems and protocols for load distribution.
• Develop more long-term and sustainable applications beyond speculative meme coins.
• Increase the number of validators to enhance decentralization.
• Regularly inform users about the network status and solutions to ongoing issues.
• Work with partners to optimize integration and reduce delays.
• Encourage institutional blockchain investors and develop infrastructure to attract stable capital.

On February 10, 2025, the launch of Solana futures on the Chicago Mercantile Exchange (CME) is planned. This should strengthen the network’s position, bring more liquidity, and enhance stability. The launch of futures is an important milestone in its development. These contracts will allow investors to hedge risks associated with SOL price fluctuations through regulated financial instruments.

Advantages of Futures:

• No need to own real assets due to settlements in fiat currency.
• Contracts will be available in both standard and micro sizes.