Scalability goes MOON – Sygnum Platform Winners Index welcomes Solana
The Sygnum Platform Winners Index selects tokens that show the highest acceptance based on adoption by the financial markets, users, and developers. The price of the Solana token has increased 60x year-to-date, and quickly risen to the top 10 cryptocurrencies by market capitalisation. After fulfilling the requirements of the Sygnum Platform Winners Index, Solana has entered the ETP as its latest constituent in August 2021.
Introduction to Solana
The Solana project was founded in 2017 during the ICO boom by Anatoly Yakovenko who wanted to create a more scalable and faster blockchain while making no tradeoffs in terms of decentralisation and security. Simpler blockchain engineering solutions have been constrained to accept tradeoffs between decentralisation, scalability, and security. The Solana innovation achieves scalability without resorting to centralisation, or making compromises with regard to security.
Similarly to Ethereum, Cardano, or Tezos, Solana also focuses on high performance, developer friendly smart contract functionality, aiming to attract a large number of decentralised applications.
Like most blockchains nowadays, Solana uses the Proof-of-Stake consensus mechanism - which avoids the high energy requirements of older blockchains such as Bitcoin that use the Proof-of-Work consensus mechanism.
Solana’s differentiator is its high network speed and scalability. Its average block creation time is approximately 0.4 seconds vs 14 seconds for Ethereum and 10 minutes for Bitcoin. The network can process over 65,000 transactions per second compared to Ethereum processing between 15-25 (before the Ethereum 2.0 upgrade) and Bitcoin about 7.
Solana achieves this high speed and scalability through a breakthrough insight. In other blockchains, the time a particular block of transactions was created is one of the items the validators need to reach consensus over. This takes time and consumes resources. Solana lightens the load on the network by providing a means of encoding time itself into the blockchain - a “cryptographic clock”.
Why this is important
This transaction capacity puts Solana on par with Visa. This is an important milestone as one of the criticisms levelled at cryptocurrencies has been that the technology could not handle the scale of real world transaction volumes and thus they are not serious contenders to displace the legacy financial infrastructure.
Scalability of blockchain protocols is a particularly pressing issue as blockchain networks are attracting more and more users, and applications such as Decentralised Finance (DeFi) are growing their user bases and volumes very fast. For example Ethereum, the most popular smart contract platform, has become extremely congested with transaction fees skyrocketing during the “DeFi summer” of 2020 and during the 2021 bull run.
Ultimately the success of the project depends on attracting a critical mass of developers and users. For now, about 400 projects have built on Solana vs over 3,000 on Ethereum. However, the growth trajectory is strong – in March, there were less than 80 projects in the Solana ecosystem.
Solana recently raised over $300m to create a venture arm, a trading desk, and provide support to applications building on their chain. The founder has his eyes on “getting the first one billion users”. In August Solana’s decentralised bridge (“Wormhole”) went live, which allows users to seamlessly move tokenised assets from other blockchains onto Solana and vice versa. This is another important milestone that will help drive adoption of Solana.
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