Guide to Solana
January 26, 2022
Solana is an open source project implementing a new, high-performance, permissionless blockchain.
An introduction to Solana and Proof of History (PoH)
Solana is an open source project implementing a high-performance, permissionless blockchain that processes 50k transactions per second with block times of 400ms. It is specifically built to scale transaction throughput without sacrificing decentralization or security.
The core Solana innovation is Proof of History (POH), a globally-available, permissionless source of time in the network that works before consensus. Proof of History is not a consensus mechanism in itself; it is a strategy to improve the scalability of the blockchain. PoH enables a consensus mechanism in which block production “leaders” continue to rotate regardless of network conditions and without the need to communicate with one another.
With PoH, leader nodes put a timestamp on a block using a cryptographic proof. This timestamp shows how long it has been since the last proof was performed. All data within that proof can be considered to have been generated before the proof, and therefore it represents an accurate order for the blocks. Validator nodes then verify these proofs. The blocks can arrive at the validators in any order because the timestamp in the proof allows the validators to identify the correct order. Because of this process, Solana can break blocks into smaller batches of transactions called “entries.” Entries are streamed to validators in real time, without concern for block consensus.
This process is profoundly different from every other proof of stake blockchain, in which block producers (validators) must communicate with each other to produce blocks and synchronize the state of the network. Solana side-steps this communication requirement and, therefore, can produce blocks much faster: the key to handling more transactions as the network scales.
How to participate on Solana
Validators perform consensus on the blockchain. Occasionally, a validator will be selected as a slot leader, the validator responsible for producing blocks during an assigned slot. Enabled by Proof of History (POH), leaders rotate as the network makes progress, regardless of network conditions; the network never stops. The other validator nodes, upon receiving the leader's broadcast, have the opportunity to vote on the current state and PoH height by signing a transaction into the PoH stream.
Data storage is offloaded from validators to a network of nodes called Archivers. The history of the state is broken into many pieces, erasure coded (a method of data protection), and stored on the Archivers. Every so often, the network will ask the Archivers to prove that they’re storing the data. Archiver nodes, which do not participate in consensus, use PoH to generate lightweight proofs showing that pieces of the ledger have been replicated, and validators are able to verify them in very large batches across GPUs.
Validators earn a stake-weighted reward for verifying proofs. It's estimated that Archivers will earn a smaller portion of the overall inflation rewards based on the number of successful submitted proofs.
To become a Solana validator, the node must deposit, or lock-up, a predetermined amount of SOL in a contract. This SOL will not be accessible for a specific period of time, divided into three phases.
The warm-up period is the time between when SOL is deposited and when it becomes active, typically in less than one epoch (~2.5 days). The stake becomes progressively effective until 100% is earning rewards.
The validation period, likely months to a year, is when the deposited SOL will be unavailable for withdrawal. It will be at risk of slashing and earning rewards for its participation on the chain. The length of the validation period is currently undefined by the protocol.
The cool-down period is the time following the submission of a “withdrawal” transaction, when validation responsibilities have been removed but the funds continue to be inaccessible. Accumulated rewards should be delivered at the end of this period, along with the return of the initial deposit.
Rewards on Solana
In February 2021, inflation was initiated at a rate of 8%; it is expected to decline 15% annually until inflation reaches a steady state of 1.5% in year 10. Of the total inflationary rewards available, 95% are distributed to token holders staking to a validator while 5% go into the treasury to fund development of the Solana ecosystem. With an expected staking rate of 70% in the first year, staked tokens can expect a reward rate of about 11.4%.
Validators can charge a commission on rewards earned by delegators to their nodes. If no commission fee is selected, it defaults to 100% — meaning all rewards earned on the node are given to the validator.
Validators must re-stake their rewards manually. Delegators, however, have their rewards compounded automatically.
Risks of participation on Solana
Slashing is not currently active on Solana. It is expected to be introduced at some point in the future. You can learn more about Solana's slashing roadmap in their documentation.
Governance on Solana
Solana uses feature proposals for governance, which are similar to governance proposals on networks like Cosmos or Celo. However, on Solana, instead of voting directly with one’s stake, validators vote with SPL tokens generated for each feature proposal. Tokens are minted to represent the total active stake on the network and are distributed to all validators based on their stake. Validators vote for feature activation by transferring their vote tokens to a predetermined address. Once the vote threshold is met, the feature is activated.
Only validators are able to vote, however, it is possible to allow delegators to vote by sending them SPL tokens.
Why run Solana nodes with Coinbase Cloud?
Participate with confidence based on Coinbase Cloud's experience and expertise with the Solana network. We operated one of the first validators on Solana’s Tour-de-SOL testnet validators on Solana’s Tour-de-SOL testnet. We continue to collaborate with the Solana team to help the network grow and scale securely, and to provide feedback on incentive design.
The Solana network utilizes complex technology, with validator and archive nodes requiring powerful machines, high bandwidth, and protocol expertise to manage participation. With our reliable infrastructure and technical knowledge of the Solana network, we are uniquely positioned to help customers manage their participation.
Easily run validator nodes to verify proofs, produce blocks, and participate in governance
Access data from the Solana blockchain to analyze trends and build robust applications
Stake to Coinbase Cloud's non-custodial public Solana validators to earn staking rewards
Manage participation with insights and guidance from our protocol specialists
"We’re proud to have the support of the Bison Trails team [now Coinbase Cloud], with both teams determined to do everything we can to expand the blockchain ecosystem as a whole. At Solana, we’re developing a scaling solution for blockchains that can uniquely capitalize on improvements in hardware and bandwidth. Because of this approach, the upfront and on-going resources required to participate as a validator in the Solana network can be more demanding than other protocols. Which is why the infrastructure developed by the Bison Trails team is critical to our network's long term success as their goal is to enable anyone to easily spin up a secure and cost-effective validator." — ERIC WILLIAMS, SOLANA CO-FOUNDER AND CHIEF SCIENTIST