We have launched Cryptogram, an India-focused free weekly newsletter on blockchain tech, global crypto markets, and Web 3.0 technologies which promise to change our future. If you would like to subscribe to this newsletter, click here. You can read our past editions here.
Approximately $5.8 Million has been drained from Solana Wallets by crypto hackers. According to Elliptic, these attacks began on 2nd August, and have so far drained 7,947 wallets. Although no one has been able to give a plausible reason, many experts are citing flaws in certain wallet software as the reason for the hack. The attack comes a day after Nomad blockchain bridge (mobile gateway) lost $200 million in an unrelated attack. In todayâ€™s article we are looking into the Solana (SOL) ecosystem, their strengths and vulnerabilities.
What is Solana?
Anatoly Yakavenko, a Ukrainian-American is the brain behind Solana. After working with Qualcomm for close to 13 years, he moved on to build Solana and later brought on several other co-founders, including fellow Qualcomm alumni Greg Fitzgerald and Stephen Akridge. While Ethereum uses Virtual machines to run their solidity code, Solana uses the â€śRUSTâ€ť programming language, which is more powerful. One of the reason Solana became famous is because of their speed. Solana has a block-time of 400 milliseconds, compared to Ethereumâ€™s block-time of 10 seconds or bitcoinâ€™s 10 minutes. Another significant strength of Solana is their capability to handle 700 thousand transactions per second compared to 23 thousand transactions by VISA, although in real time they have not crossed over 50,000/Sec which currently sits at ~3000/second.
What makes them fast & affordable?
Their consensus mechanism, which is a model on how everyone is agreeing over the blockchain, is quite different to other blockchains. They do not use â€śProof of Stakeâ€ť or â€śProof of Workâ€ť and Anatoly proposed something called â€śProof of Historyâ€ť, which is basically proof of stake but adds in the variable â€śtimeâ€ť. Although Proof of History is not a mechanism, it is a way of integrating time into â€śProof of Stakeâ€ť by using timestamps that place specific date and time on the blocks. This is done to increase the speed of the sequencing validators, so that they know the order without the need to communicate back and forth.
On other blockchains, the nodes (basically computers on the network) have to communicate back and forth until they agree on a time, which is required before submitting a block to the blockchain and this can take up a lot of time. Solana fixed this with proof-of-history, to have everyone timestamp their block and use cryptographic proof, in-order not to wait on validators to approve the work.
Tokenomics, in simple terms, is how a coin of a project works, so that people can invest in it. The coin on the Solana network is the SOL coin and it is used for transaction fees across the blockchain ecosystem. SOL is inflationary since they started providing staking rewards last year which is currently at 5%-7% according to the staking rewards website, as well as deflationary, as 50% of all the transaction fees are burned as per their terminology page. In terms of total supply, they initially started with around 500 million, which will keep increasing due to proof-of-stake rewards. According to coinmarketcap, their total supply currently stands at 511 million, whereas their circulating supply is at 346 million.
Solanaâ€™s DeFi ecosystem is led primarily by its DEXs, which make up the majority of the top protocols by TVL. Their blazing speed has enabled over $2.54 billion to be locked (TVL), with Marinade Finance dominating the protocols with 12.46%, according to DeFi Lama.
Another most pertinent value generation to the ecosystem is their NFT market. Solanaâ€™s high throughput and low fees make it a perfect fit for NFTs of all shapes and sizes. Popular market places such as Opensea and MagicEden are using the Solana blockchain to mint NFTs.
Other avenues that add values are web3 gaming, payment solutions and DAOs that are growing rapidly in the ecosystem.
Outages & Hacks:
Although a decentralized protocol should never have downtime, Solana has been having multiple issues with downtime due to some bugs. However, it seems nobody is panicking over the news and the blockchain tends to be growing with minor price fluctuations.
After the recent hack, experts were able to determine that centralized exchange wallets were not hacked and only non-custodial wallets such as Slope and Phantom were affected. Investors are advised to secure their seed-codes, if they are holding assets in a non-custodial wallet. Seed-codes are basically a series of words generated by your crypto wallet that gives you access to the crypto associated with that wallet. The price stability despite the hack tends to prove the support of the community towards the Solana blockchain.
Use promocode TNM51 at www.giottus.com/profile#promo after registration to get Rs.51 worth free Bitcoin.
Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.