FUNDAMENTALS OF CRYPTO

What Is Solana: A 2026 Guide to the High‑Speed, Low‑Cost Blockchain

Solana has emerged as one of the most talked about “Ethereum killers” thanks to its ability to process thousands of transactions per second at fractions of a cent. Founded in 2017 by former Qualcomm engineer Anatoly Yakovenko, Solana launched as a mainnet beta in March 2020. The network combines a new Proof‑of‑History (PoH) timing mechanism with Proof‑of‑Stake (PoS) consensus, allowing validators to agree on the order of transactions without constant communication. This architecture gives Solana its signature speed and efficiency, making it a compelling platform for decentralised finance (DeFi), non‑fungible tokens (NFTs), gaming, payments and more.

The Innovation of Solana

Bitcoin proved that a peer‑to‑peer network could transfer value without intermediaries, and Ethereum demonstrated the power of smart contracts. Both networks, however, can be slow and expensive during periods of high demand. Solana was designed to address these pain points. Yakovenko’s whitepaper introduced Proof‑of‑History, a cryptographically verifiable clock that timestamps transactions so validators no longer need to constantly talk to each other. When combined with Proof‑of‑Stake, this innovation allows the network to finalise transactions in parallel, dramatically increasing throughput.

By 2024 Solana routinely processed 200–400 transactions per second (TPS) on average and could burst above 2,000 TPS during periods of high demand. Average transaction fees were roughly $0.00025, making micro‑transactions and high‑frequency trading economically viable. The network’s low costs and fast settlement attracted DeFi protocols like Jupiter and Raydium, NFT marketplaces such as Magic Eden, and experimental projects like Pump.fun that drive huge trading volumes. Its mobile phone initiative, the Saga and upcoming Seeker devices, brings wallets and decentralised apps to everyday users. Institutional players have also taken notice: firms like Franklin Templeton and Citi have launched financial services on Solana, and stablecoins such as PayPal’s PYUSD operate on the network.

How Solana Functions

Solana’s architecture is a mosaic of innovations designed to maximise speed, efficiency and scalability.

Proof‑of‑History (PoH)

PoH is a cryptographic clock that timestamps events before they enter the blockchain. Each validator generates a sequence of hashes that prove the passage of time. This mechanism allows all validators to agree on a consistent order of transactions without repeatedly communicating. By offloading timekeeping from consensus, PoH reduces latency and frees validators to process transactions in parallel.

Proof‑of‑Stake (PoS)

Solana still uses PoS for security. Validators stake SOL tokens and are randomly selected to produce blocks. If they act maliciously, their stake can be slashed. Stakers earn block rewards and a share of transaction fees. Combining PoS with PoH ensures fast finality while maintaining energy efficiency – Solana uses significantly less energy per transaction than proof‑of‑work networks like Bitcoin or pre‑merge Ethereum.

Learn the differences between the proof models here. (POW, POS, POA, POH)

Tower BFT, Turbine and Gulf Stream

The Tower Byzantine Fault Tolerance (BFT) algorithm coordinates consensus votes using PoH as a clock, reducing messaging overhead and providing deterministic finality. Turbine is Solana’s block propagation protocol; it breaks blocks into small “shreds” and distributes them through clusters of validators for rapid dissemination. Gulf Stream bypasses traditional mempools by forwarding unconfirmed transactions directly to upcoming block producers, reducing congestion and ensuring that valid transactions are quickly incorporated.

Sealevel, Pipelining and Cloudbreak

Solana’s runtime engine, Sealevel, allows the network to execute multiple smart contracts concurrently by identifying non‑overlapping state and running them across CPU cores. Pipelining assigns specific hardware to each stage of transaction processing, overlapping tasks to keep all resources fully utilised. Cloudbreak is a horizontally scaled database that spreads ledger data across multiple solid‑state drives, supporting concurrent reads and writes without sharding. Together, these technologies enable Solana to scale vertically with hardware improvements while maintaining a single global state.

Validator Clusters and Archivers

Solana organizes its network into validator clusters. Each cluster processes a portion of transactions and periodically checks in with others to ensure consistency. Archivers store historical data in lightweight nodes, freeing validators from maintaining the full ledger. This architecture helps maintain decentralisation by distributing storage and computation across many participants.

Performance, Fees and Energy Efficiency

Solana’s design translates to real‑world performance. The network routinely handles 200–400 TPS on average and peaks above 2,000 TPS during high demand. Upcoming upgrades aim for hundreds of thousands of TPS with second‑generation validator clients like Firedancer. During a stress test in January 2025, Solana processed over 200 million transactions per day, welcomed 400 000+ new wallets and facilitated up to $39 billion USD of daily decentralised exchange (DEX) volume without downtime. Typical transaction fees are around $0.00025, far below Ethereum’s gas costs. Because the network relies on PoS and optimised hardware rather than energy‑intensive mining, its carbon footprint per transaction is minimal.

Ecosystem and Use Cases

Solana’s speed and affordability have fostered a vibrant ecosystem:

Decentralised Finance (DeFi): High‑performance protocols like Jupiter and Raydium enable instant swaps, order‑book trading and yield farming. Innovations such as bonding‑curve liquidity pools on Pump.fun drive large volumes and MEV opportunities.
NFTs and Digital Collectibles: The network’s low fees attract artists and collectors. Platforms like Magic Eden and Tensor facilitate affordable minting and trading, and projects such as Metaplex provide standardised NFT infrastructure.
Gaming and Metaverse: Game developers leverage Solana’s low latency to build real‑time play‑to‑earn games and virtual worlds. Tools like Helium’s RPS 2.0 aim to decouple read and write layers to improve responsiveness.
Payments and Mobile: Solana’s Saga smartphone and its successor Seeker integrate wallets, dApps and tokenised assets into a user‑friendly mobile experience. Payments companies such as PayPal have launched stablecoins (PYUSD) on Solana.
Institutional Finance and Real‑World Assets: Traditional finance firms like Franklin Templeton, Citi and Société Générale are issuing funds and euro‑denominated stablecoins on Solana. The Solana Attestation Service allows off‑chain credentials such as KYC status to be associated with on‑chain accounts, paving the way for regulated tokenised securities.
Decentralised Autonomous Organisations (DAOs): Low transaction costs make it economical for DAOs to manage treasury operations, voting and membership. New governance mechanisms like confidential transfers add privacy for sensitive decisions.

SOL Token: Supply, Staking and Governance

The native cryptocurrency of the Solana network is SOL. It has three principal functions:

Transaction fees and rent: SOL is used to pay network fees when sending tokens, executing smart contracts or storing data.
Staking for security: Holders can stake SOL to validators and earn rewards. Staking secures the network by incentivising honest behaviour and penalising malicious actions through slashing.
Governance: While Solana does not yet have on‑chain governance like some networks, the Solana Foundation and community periodically vote on protocol proposals and funding allocations. Validator participation is high; a 2025 vote on SIMD‑228 drew nearly 75 % of staked SOL.

Solana’s supply is inflationary. At launch the inflation rate was around 8%, declining by 15% each year until it eventually stabilises around 1.5%. Staking rewards and validator incentives come from this inflation schedule. As of early 2026 roughly 565 million SOL are in circulation, while the total supply is uncapped due to ongoing inflation and rewards.

Challenges and Criticisms

No blockchain is perfect. Solana has faced scrutiny over:

Network Outages: Early versions of the network suffered multiple outages caused by client bugs and transaction spam. In 2022 the network experienced 14 major or partial outages. A significant 17‑hour outage occurred in September 2021 and there was a multi‑hour downtime in February 2024. These events undermined confidence and spurred criticism about centralisation.
Centralisation Risks: Solana’s high throughput relies on powerful validators and specialised hardware. Critics argue that this raises barriers to entry and concentrates control among a small set of operators. However, the network’s Nakamoto coefficient – a metric of decentralisation – remains competitive and has improved with new validator clients and a diverse ecosystem.
Security and Smart‑Contract Risks: As with any programmable blockchain, vulnerabilities in smart contracts can lead to exploits and loss of funds. Users must exercise caution and rely on audited code when managing crypto trading risks.

Recent Upgrades and Future Roadmap

Solana’s developers have responded to challenges with a slate of upgrades:

Firedancer & Frankendancer: These new validator clients, written in C/C++ by Jump Crypto and other teams, dramatically increase throughput and improve resilience. Firedancer’s initial version processed blocks 20% faster and aims for 1 million TPS. Frankendancer went live in 2025 and is part of Solana’s multi‑client strategy.
Stake‑Weighted Quality of Service and Local Fee Markets: Introduced in late 2023, these features prioritise transactions based on the stake behind the validator and introduce localised fee markets to reduce congestion.
QUIC‑based TPUs and RPS 2.0: Upgrades such as QUIC‑based Transaction Processing Units and RPS 2.0 decouple the read layer from the write layer, improving responsiveness and addressing architectural critiques.
ZK Compression and Confidential Transfers: Zero‑Knowledge Compression shrinks state data to lower storage costs and enable high throughput, while confidential transfers provide privacy for sensitive transactions.
Doubling Block Space and New Consensus Algorithm: The 2025 roadmap aims to double block space and introduce a new consensus algorithm that eliminates vote transactions and reduces block times. These changes lay the groundwork for multiple parallel proposers and further scalability.

These upgrades have already borne fruit: the Solana network achieved 16 months of continuous uptime by mid‑2025 and set records for on‑chain activity during stress tests. Continuous innovation positions Solana to meet growing demand and compete with upcoming Ethereum rollups and other high‑performance chains.

Getting Started with Solana

Interested in exploring Solana? Here’s a step‑by‑step overview:

Get a wallet: Install a Solana‑compatible wallet such as Phantom, Solflare or Backpack. These wallets allow you to hold SOL and interact with dApps. Learn more about “Which Crypto Wallet is right for you”.
Buy SOL: Acquire SOL tokens on a reputable exchange and withdraw them to your wallet. Always enable two‑factor authentication and store recovery phrases securely.
Stake to a validator: Delegate your SOL to a validator to help secure the network and earn staking rewards. Staking is non‑custodial; you retain control of your tokens, and rewards accrue automatically.

Explore decentralised applications: Visit dApps built on Solana. For DeFi, try Jupiter for swaps, Meteora or Kamino for yield strategies, and Marinade for liquid staking. For NFTs, explore Magic Eden and Tensor. Use caution with new projects and always verify contract addresses. Our full educational resource on DeFi can be found here.

Final Thoughts

Solana is a compelling example of how blockchain design can push the boundaries of speed and scalability. By fusing PoH’s cryptographic clock with PoS security and layering innovative execution and propagation mechanisms on top, Solana achieves throughput and costs unthinkable on early blockchains. Its rapidly growing ecosystem spans finance, art, gaming and mobile, attracting both retail users and global institutions. Yet high performance brings its own challenges: technical complexity, reliability concerns and centralisation risks require ongoing vigilance and upgrades.

If you’re considering building or investing in Solana, start by understanding its architecture, staking mechanics and token economics. Use audited code, diversify your exposure and keep abreast of network updates. With careful due diligence, Solana offers an exciting platform for innovation at the frontier of decentralised computing.