GUIDE: How Solana Works

The origin: an engineer, time, and a speed problem

The idea for Solana was born in 2017 in the mind of Anatoly Yakovenko, an engineer who had spent over a decade at Qualcomm working on wireless communication systems. His intuition came from that world: in telecommunications, fast systems don't constantly argue about what time it is; instead, they share a common clock and leverage that agreement to coordinate without negotiating every step.

Applied to a blockchain, the problem was the same. Bitcoin and Ethereum were slow largely because the computers in the network had to agree on the order of transactions before validating them, and that agreement costs time and messages. Yakovenko proposed to reverse the order: first create a cryptographic proof of the passage of time and use it as a kind of shared, verifiable clock.

This mechanism was called Proof of History. It doesn't replace consensus; it accelerates it: since all validators can independently verify when each operation occurred, they don't need to exchange as many messages to order them. With this design, Yakovenko founded the company with former Qualcomm colleagues, including Greg Fitzgerald and Raj Gokal, and the project took the name of a beach near San Diego.

Key dates in Solana's development

November 2017: Anatoly Yakovenko publishes the whitepaper describing Proof of History as a way to order transactions without constant negotiation between nodes.

2018: The founding team is formed, the company is incorporated—which would later be called Solana Labs—and the first internal testnets are launched.

March 2020: The mainnet launches in beta phase, with SOL as the native currency for paying fees and participating in staking. The adjective «beta» accompanied the network for years as a reminder that it was still maturing.

2021: Year of explosion. The network filled with decentralized finance applications, NFT marketplaces, and games, and the price of SOL reached its all-time high in November, above $250.

2021-2022: Problems also arrived. The network suffered several outages that left it without producing blocks for hours, caused by avalanches of automated transactions that saturated the validators.

November 2022: The collapse of the FTX exchange, one of the ecosystem's biggest promoters, heavily impacted the project. The price of SOL fell more than 90% from its highs, and many considered the network dead.

2023: the ecosystem rebuilds without that support. Compressed token markets emerge, drastically lowering the cost of issuing digital assets, and the first network-linked mobile phone is launched.

2024: congestion control improvements—priority fees and local fee markets—enter production, and the network completes a full year without total outages. Stablecoin payment activity soars.

2025-2026: Firedancer, a second validator client developed by Jump Crypto, is deployed, increasing throughput and, critically, eliminating the risk of a single program failure bringing down the entire network.

How it works internally

Solana combines two mechanisms. The consensus itself is Proof of Stake: validators lock SOL as collateral, and if they act incorrectly, they risk a portion of that deposit. The more SOL a validator has delegated, the more often they are chosen to propose blocks, and the more rewards they receive.

Underpinning this is Proof of History, a chain of cryptographic computations that can only be performed in sequence. Each result demonstrates that a specific amount of work—and thus time—has passed since the previous one. Transactions are inserted into this sequence, so their order is proven by mathematics rather than by voting.

Added to this are other components: an execution engine that processes all transactions not touching the same data in parallel, instead of one after another; a propagation protocol that fragments blocks and distributes them among validators like a distributed download system; and blocks that are produced approximately every four hundred milliseconds.

The practical result is a network that confirms operations in less than a second with fees almost always measured in fractions of a cent. The price of this performance is a higher hardware requirement for validators, which makes it more centralized than Bitcoin in terms of node count, and a history of outages that the network has taken years to overcome.

What Solana is used for and what SOL is

SOL serves three functions: paying transaction fees, acting as collateral in staking—directly or by delegating to a validator—and participating in the informal governance of the ecosystem. It does not have a fixed supply limit like Bitcoin: new units are issued each year at a decreasing rate, and a portion of the fees are burned, partially offsetting this inflation.

In terms of uses, the network excels in four areas. Stablecoin payments, where the combination of low cost and instant confirmation has made it one of the preferred ways to move digital dollars. Decentralized exchanges, with volumes competing with any other network. Consumer applications, from games to social media, that require thousands of cheap operations. And asset tokenization, with funds and bonds issued directly on the chain.

As an investment, SOL is a volatile asset highly sensitive to market cycles: it rises more than Bitcoin in bull markets and falls more in bear markets. Its history also reminds us of something important: a network can lose more than 90% of its value and recover, or never do so. Only invest what you can afford to lose and keep important balances in your own wallet.