SOL is the native cryptocurrency that powers the Solana network. SOL is used to pay transaction fees, incentivize actors that support the network, and serve as a governance token that enables holders to vote on proposed upgrades to the network.
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A brief history
Solana was created in 2017 by Anatoly Yakovenko and Raj Gokal. Yakovenko, who is also the CEO of Solana Labs, came from a background in system design and wanted to apply this knowledge and create a brand new blockchain that could scale to global adoption. Solana boasts a theoretical peak capacity of 65,000 transactions per second and has become one of the most highly used blockchains due to its speed and low transaction costs. Solana runs on a hybrid protocol of proof-of-stake (PoS) and a concept Solana calls proof-of-history (PoH). Solana is also said to be an “Ethereum competitor,” due to its distinct advantage over Ethereum in terms of transaction processing speed and transaction costs. Solana can process as many as 50,000 transactions per second (TPS), and its average cost per transaction is $0.00025. In contrast, Ethereum can only handle less than 15 TPS, while transaction fees reached a record of $70 in 2021.
SOL in practice
Solana’s native cryptocurrency is SOL. It’s used to pay transaction fees and for staking. As mentioned previously, Solana uses a combination of Proof of Stake and a new mechanism called “Proof of History (PoH).” Comparing the two, PoS permits validators to verify transactions based on how many coins or tokens they hold; PoH allows those transactions to be time-stamped and verified at faster speeds. The Proof of History consensus mechanism accomplishes this by keeping time between computers on a decentralized network without all the computers having to communicate about it and come to an agreement. Participants stake their own SOL to become a validator, in exchange for a chance at earning new Solana and a cut in fees. SOL also serves as a “governance token,” meaning that holders also are able to vote on future upgrades and governance proposals that are submitted by the Solana community.