Learn / Lesson 7

What is Solana?

Solana is a public blockchain designed for speed. It can handle thousands of transactions per second with fees that are often less than a penny, making it one of the fastest and cheapest networks in the crypto world.

If Bitcoin is digital gold and Ethereum is a digital app store, you can think of Solana as a high-speed highway built for apps that need to process a lot of traffic quickly — games, trading platforms, payment systems, and social networks.

Where Solana came from

Solana was created by Anatoly Yakovenko, a former engineer at Qualcomm, the company behind much of the technology in modern mobile phones. While working on telecommunications systems, Yakovenko realised that blockchains could process transactions much faster if every node on the network agreed on the order of events before the traditional consensus process began.

In late 2017 he published a whitepaper describing a new concept called Proof of History (PoH) — a way to create a verifiable record of the exact time each transaction happened, without waiting for the rest of the network to confirm. Think of it as stamping each transaction with a cryptographic clock that everyone can check.

Yakovenko co-founded the project with Raj Gokal, who joined at the end of 2017 and handles the business side as chief operating officer. The name "Solana" comes from Solana Beach, a small coastal town near San Diego, California, where the founders used to live and surf.

The Solana mainnet beta went live on 16 March 2020, and the Solana Foundation — a non-profit that supports the ecosystem — was established in April of the same year.

What makes Solana different?

Every blockchain faces a difficult balancing act between three things — often called the blockchain trilemma:

• Speed — how many transactions per second it can process.
• Security — how resistant it is to attacks and manipulation.
• Decentralisation — how many independent nodes run the network.

Improving one usually comes at the cost of another. Solana prioritises speed. It achieves high throughput by combining Proof of History with a proof-of-stake consensus system, so validators can process transactions in parallel rather than one by one.

In practice, this means:

• Transaction speed: Solana can process thousands of transactions per second. Bitcoin handles roughly 7, and Ethereum's base layer handles around 15 (though layer-2 solutions on Ethereum push that number much higher).
• Low fees: A typical Solana transaction costs a fraction of a cent. On Ethereum, the same transaction might cost several dollars during busy periods.
• Fast finality: Transactions on Solana are confirmed in well under a second.

What people build on Solana

Solana's speed and low cost have attracted developers building applications where high transaction volume matters:

• Decentralised exchanges (DEXs) — platforms like Jupiter and Raydium let users swap tokens directly from their wallets, without a middleman.
• NFT marketplaces — Solana became a popular home for digital art and collectible projects because minting and trading NFTs is cheap on the network.
• Gaming — blockchain games need to process many small transactions quickly (buying items, rewarding players), which suits Solana's design.
• Payments — some payment applications use Solana to settle transactions in real time, especially stablecoin transfers.
• Memecoins — Solana has become a popular network for launching community-driven tokens, though many of these carry extreme risk.

The trade-offs

Solana's emphasis on speed comes with real trade-offs that every beginner should understand:

Network outages. Solana has experienced several notable outages where the network stopped processing transactions entirely — sometimes for hours. These outages have shaken confidence and raised questions about how robust the network is under stress. The team has worked on improvements after each incident, but the history is worth knowing.

Hardware requirements. Running a Solana validator requires powerful, expensive hardware — much more than what Bitcoin or Ethereum nodes need. Critics argue this makes the network less decentralised, because fewer people can afford to run a node.

Younger ecosystem. Solana launched in 2020, making it much younger than Bitcoin (2009) or Ethereum (2015). A younger network has had less time to be tested and proven under all conditions.

Scam projects. Because it is cheap and easy to launch tokens on Solana, the network has attracted a large number of scam tokens and "rug pulls" — projects where creators disappear with investors' money. This is not a flaw in Solana's technology itself, but it is a reality of its ecosystem that beginners must watch out for.

Solana's native token: SOL

The native cryptocurrency of the Solana network is called SOL. It is used to pay transaction fees, to stake with validators (earning rewards for helping secure the network), and to participate in governance decisions about the network's future.

Like all cryptocurrencies, SOL's price is volatile. It has experienced dramatic rises and sharp crashes. It is not a guaranteed investment.

Keep in mind

• Speed and low fees are appealing, but they do not eliminate risk. Fast transactions also mean fast losses if you make a mistake.
• Solana's outage history is a real concern. The network has improved, but no blockchain is guaranteed to be available 100 per cent of the time.
• The low cost of launching tokens on Solana means there are many worthless or fraudulent projects. Always research before interacting with any token or app.
• Solana is not "better" or "worse" than Ethereum or Bitcoin — each network makes different trade-offs for different purposes.
• None of this is financial advice. Learn, ask questions, and proceed carefully.

Common mistakes beginners make

Judging a network by its fees alone. Low fees are attractive, but they are one factor among many. Reliability, security and how decentralised the network is also matter.

Buying tokens just because they are cheap to launch and trade. Low costs make it easy for scammers to create hundreds of fake tokens. A flashy website and an active social media account prove nothing.

Ignoring how fast losses can happen. A network built for speed lets prices of small tokens move very quickly. People have lost most of their money in minutes.

Assuming a network outage means lost funds. Outages usually stop transactions rather than erase balances. Even so, you cannot move your money while the network is down, so do not rely on it for urgent payments.

Try it yourself

Compare the three networks you have met so far. Make a small table with three columns, Bitcoin, Ethereum and Solana, and three rows: what it is mainly for, how fast it is, and the biggest drawback. Fill it in from memory, then check your answers against this and the previous two lessons. If you can explain each network in one sentence to a friend, you have understood the lesson.

Key terms from this lesson

• Proof of History (PoH) — Solana's method of timestamping transactions before consensus, enabling high speed.
• SOL — the native token of the Solana network.
• Validator — a computer that stakes SOL and helps process transactions on the network.
• Blockchain trilemma — the challenge of balancing speed, security, and decentralisation.
• Rug pull — a scam where project creators abandon a token after collecting investors' money.

Sources and credits

Sources: the Solana whitepaper (solana.com/solana-whitepaper.pdf) and the project's public documentation at solana.com/docs, cross-checked against independent reporting. People and the name: Fortune, April 2022. Education only, not financial advice.

Module quiz

3 questions. Tap an answer to see if you are right and why. Get 2 right to complete the module.

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