# d1.1 SOLANA (SOL) 

By [Degenerate Dan](https://paragraph.com/@degenerate-dan) · 2022-02-08

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Date: 8th Feb 2022

`DAY 1 - Solana? What the fuck is this and why is it so hot?`

![Currency : $SOL](https://storage.googleapis.com/papyrus_images/e7bad593560eeb522537b52618db52472f585a3c9a994eaded974ae45b18f9c8.png)

Currency : $SOL

`Basics of Solana and its Ecosystem`

It is a decentralised blockchain protocol built to enable faster, scalable, user-friendly apps for the world. As of today, it has achieved the following:

*   Completes 2552 transactions/second,
    
*   1478 validator notes for consensus purposes on the blockchain,
    
*   Completed >56B transactions till date,
    
*   Fucking low transaction fee at US$0.00025. (Ridiculous!!)
    

In the decentralised ecosystem, SOL is referred to as a Layer 1 solution (or Blockchain protocol) that is coined the “ETH killer”. It is more cost-efficient and scalable v.s. ETH, and can handle way more transaction at a lower/minimal gas fee. Both are able to have smart contract capabilities - but SOL is quicker, faster, more efficient for devs to create codes to carry out instructions via smart contracts on SOL blockchain, highly essential to run DeFi Apps and NFTs.

`SOLANA IS LAYER 1 SOLUTION WITH LAYER 2 SPEED!`

![BLOCKCHAIN LAYER ECOSYSTEM](https://storage.googleapis.com/papyrus_images/23945d60d3d7328ec87d3359af276acea89345a98fe8872b511c8127e9985e2e.png)

BLOCKCHAIN LAYER ECOSYSTEM

The Solana protocol is designed to facilitate decentralised app ([DApp](https://coinmarketcap.com/alexandria/glossary/decentralized-applications-dapps)) creation. It aims to improve scalability by introducing a proof-of-history (PoH) consensus combined with the underlying proof-of-stake ([PoS](https://coinmarketcap.com/alexandria/glossary/proof-of-stake-pos)) consensus of the blockchain. Proof-of-history (PoH) consensus was developed by Anatoly Yakovenko. This concept allows for greater scalability of the protocol, which in turn boosts usability. The protocol is designed in such a way as to have low transaction costs while still guaranteeing scalability and fast processing.

**Note:** The proof-of-stake (PoS) consensus is used as a monitoring tool for the PoH processes, and it validates each sequence of blocks produced by it. The combination of two consensus mechanisms makes Solana a unique phenomenon in the blockchain industry.

`Determinants of SOL tokenomics - Will they dethrone ETH?`

*   **The developer’s community:** Strong support. ~13,000 today. With top Dapps such as Solanart (NFT), Raydium (AMM/ Dex), Solend (Lending), Serum (Exchange). The ecosystem is massive:
    

![SOL Ecosystem](https://storage.googleapis.com/papyrus_images/75338809f4d70bcad7ba5d4f6a85372dd7578272ef54982eedbfe5575e16f794.png)

SOL Ecosystem

*   **Team pedigree:** Solana foundation from Switzerland. Members are fully doxxed and verified software engineers hailing from QualComm, Dropbox etc.
    
*   **Liquidity in exchanges:** Binance, FTX, Huobi. Daily trade = US$2.6B is huge.
    
*   **Moat:** PoH is amazing. Enhances fast processing speed and low gas.
    
*   **Competitors** (e.g. Layer 1 alternatives, Layer 2 scaling solutions): ETH alternatives mainly Cardano, Polkadot, Avalanche, Fantom.
    

**Today’s price on 8th Feb =** **US$115** (ATH at US$258)

*   Market cap = US$36.4B
    
*   Circulating supply = 317M (Max announced by foundation to be 489M)
    

**Staking yield is great at 6-10% today:** FTX, Phantom software wallet.

`Solana’s Future`

There is going to be a massive adoption rate going into 2022. Not too late for buy recommendation at US$1XX/SOL. The main narratives are:

1.  Gaming. Low transaction fees, fast processing speed. Massive opportunity. Think Fractal from Justin Kan.
    
2.  Exchanges can benefit from low fees.
    
3.  Very very strong community/ and dev community in general.
    

Headwinds/risk - ETH 2.0 in 2022 or 2023 challenging speed and scalability issues’ other ETH killers like Algorand/Cardano etc.

`Additional Appendix: Context on Blockchain Layers`

Layer 1: **BTC, ETH** - basically blockchain’s ledger to ensure integrity of chain and consensus mechanism.

Layer 2: **BTC’s lightning network, ETH2.0’s Plasma, Polygon as independent project** - basically a protocol on blockchain that builds scalability.

Later 3: **Serum, AAVE** - mainly Dapps using underlying layers 1 and 2 to solve a problem for user. If one uses a Dapp, they are interacting with a web interface.

→ SOL integrates functions of layer 2 into layer 1 via PoH + PoS to create smart contracts at scale, high processing speed and low gas fees.

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*Originally published on [Degenerate Dan](https://paragraph.com/@degenerate-dan/d1-1-solana-sol)*