In this article, we’ll cover:

• History of Solana
• How Solana works
• Solana vs. Ethereum
• Pros and cons of Solana

History of Solana

Founded in 2017 by Anatoly Yakovenko, Solana is named after the small northern California town of Solana Beach. Solana was designed to speed transaction times without needing any scaling solutions due to its unique hybrid consensus model. In general, developers face three primary challenges when building blockchains: decentralization, scalability, and security. Developers are usually able to prioritize only two of these three; Yakovenko opted to sacrifice some decentralization when creating the Solana blockchain, which resulted in a secure platform with faster transaction times and greater scalability than some other crypto platforms.

How does Solana work?

Like other cryptos, Solana is built on blockchain technology: a distributed database, or ledger, that is shared among many individual nodes of a computer network. The blockchain stores digital information in groups called blocks, and strings them together to form a chain of digital information. All this information can be distributed and recorded, but not edited after it is initially created. Each time a transaction is made, a validator ensures the information is accurate and adds the data to the blockchain. Users can buy and sell Solana’s tokens on a crypto exchange, and they store the keys to access their crypto in a crypto wallet. Similar to other cryptocurrencies, Solana also supports smart contracts, or programs stored on a blockchain that run when predetermined conditions are met.

What makes Solana unique is the use of a hybrid proof-of-stake and proof-of-history verification model that relies on a standardized clock to speed up the process of verifying transactions. Another unusual feature of Solana is that the Solana Foundation is the only entity developing core nodes on its blockchain; some in the crypto world see this concentration of control as leading to a less decentralized model.   

Proof of history

Most altcoins operate under a proof-of-stake algorithm that requires validators to pledge a “stake” of digital currency before they can validate transactions. Solana has created a hybrid approach to validation that uses proof of stake, plus a proof-of-history algorithm that adds timestamps to the blocks to prove the date and time the block was created. This ensures a reliable ordering of transactions based on a standardized clock. Proof of history allows nodes to bypass the time-consuming step of validating timing and sequences, thereby improving transaction speeds.

SOL token: Solana’s native crypto

Solona’s native crypto coin, SOL, fuels the Solana network. Transaction fees are paid to validators in SOL, and anyone can trade the cryptocurrency, execute smart contracts, share NFTs, participate in decentralized finance, and run other digital applications on the Solana blockchain. A proof-of-stake system is used to verify transactions, manage coin supply, and create new coins. SOL is limited to a total of 489 million tokens, with more than 350 million currently in circulation.  

Solana vs. Ethereum

While the blockchains are similar in construction, Solana was built with the intention of improving on Ethereum. Solana’s cheaper fees and faster transactions have caused some in the crypto world to describe it as the “Ethereum killer.” However, Ethereum remains the more popular platform, second only to Bitcoin, and transaction times are expected to improve with Ethereum’s recent transition to a proof-of-stake model. 

Pros and cons of Solana

As with all potential crypto investments, Solana has pros and cons in the realms of efficiency, reliability, security, and scalability.

Pros of Solana:

• Decentralized blockchain: Each member in the blockchain network has a copy of the same data in the form of a distributed ledger instead of relying on a central authority to own the data. 
• Permissionless: There are no gatekeepers. Anyone can participate in validating and mining transactions and use the system to buy, sell, and trade assets.
• Highly efficient: The proof-of-history model bypasses the time-consuming step of validating timing and sequences, thereby improving transaction speeds and reducing fees.

Cons of Solana:

• Limits to decentralization: Solana has been criticized for not being as decentralized as other altcoins because the Solana Foundation acts as a central point of control.
• Reliability concerns: Several outage incidents in 2022, including a 17-hour complete network shutdown, have undermined some investors’ confidence in Solana’s dependability. 
• Less secure: The Solana Foundation is the only entity developing core nodes on the blockchain itself, so there’s nowhere to move data in the case of an attack.

FAQ 

1. What is Solana being used for?

In addition to Solana’s native currency, SOL, the Solana blockchain is used by developers for a wide range of projects, including decentralized finance, lending protocols, NFT marketplaces, Web3 apps, and more. 

2. Is Solana a good investment?

As with any crypto investing, Solana can carry significant risks, including volatility and a lack of regulation. That said, its rapid growth and scalability have made it attractive to many investors. 

3. Is Solana better than Ethereum?

It depends on what you value in a cryptocurrency. Solana is known for having faster transactions and lower fees than Ethereum. However, Ethereum has a higher market cap and remains more popular.

4. Is Solana a coin or token?

Solana’s native cryptocurrency, SOL, is a coin native to the Solana network. Digital tokens, such as NFTs, can also be built on the Solana blockchain.

The post What Is Solana? appeared first on Stash Learn.

In this article, we’ll cover:

• How altcoins work
• Altcoin examples
• Types of altcoins
• Pros and cons of altcoins

How do altcoins work?

Like Bitcoin, altcoins are a form of currency used in decentralized finance that rely on blockchain technology. Altcoins generally work the same way that Bitcoin does: the blockchain acts as an incorruptible distributed public ledger that records and validates authorized transactions. However, altcoins are designed to work on alternative blockchain systems while iterating on Bitcoin’s original technology. Altcoins may speed up transaction times, execute smart contracts, improve storage efficiency, or perform some kind of additional function. Many altcoins can be purchased on a standard crypto exchange, just like Bitcoin.

As with many types of cryptocurrency, as well as traditional currencies, altcoins can be used as a way to make and receive payments as well as an investment opportunity. The value of any given coin is generally based on supply and demand; when demand for a coin increases, its value usually does too. Various cryptocurrencies use different methods to influence the supply of coins in circulation, such as issuing a cap on the number of new coins that can be minted through mining, “burning” existing coins to reduce supply, or releasing more coins to increase supply.  

Ethereum example

Ether is the cryptocurrency of the Ethereum blockchain, and it’s one of the most popular altcoins. Ethereum was the first cryptocurrency to offer a programmable blockchain upon which developers can build and run distributed applications, which can be applied in a vast number of ways. Ether differs from Bitcoin in that it enables the execution of smart contracts and decentralized applications, and it relies on a proof-of-stake model.

Top 9 popular altcoins

Since the creation of Bitcoin in 2009, the crypto market has grown exponentially. As of July 2023, more than 26,000 types of altcoins exist. However, not all altcoins are created equal. Thousands of types are inactive, and only a handful of cryptocurrencies outside of Bitcoin have amassed significant market value. Bitcoin remains the market leader, but altcoins are gaining ground. 

Altcoins by USB market cap:

• Ethereum
• Tether
• XRP
• BNB
• USDC (US Dollar Coin)
• Solana
• Cardano
• Dogecoin
• TRON
• Toncoin

Types of altcoins

The types of altcoins available are nearly unlimited, but they can generally be divided into three categories: mining-based, staking-based, and stablecoins. These categories are based on whether the altcoin relies on proof-of-work, proof-of-stake, or a fiat currency to confirm its value.

Mining-based coins

Bitcoin and some altcoins operate on a decentralized, mining-based proof-of-work model. Mining is the “work” in the proof-of-work mechanism; it’s a process by which new coins are created and entered into circulation, and the way the network confirms new transactions. Mining relies on sophisticated hardware and software that solves complex computational math problems. Each time a transaction is requested on the blockchain, the first computer to find the solution receives the next available block of coins. Mining-based altcoins include LiteCoin, Dogecoin, Bitcoin Cash, and Solana.

One of the main advantages of mining crypto is the potential to yield high profits, but the downsides are that it calls for a sophisticated degree of tech know-how, requires expensive equipment, and demands a lot of electricity, which adds to the cost of mining and contributes to pollution. 

Staking-based coins

A different approach to mining is crypto staking, which is based on a proof-of-stake model. With this approach, users, known as validators, “stake” their coins by locking them in an exchange for a fixed period, during which they may earn interest on their stake. The blockchain network assigns a validator to confirm blocks on the chain and rewards them with additional coins when they do so. Proof-of-stake altcoins include Ethereum, Luna, and Cardano. 

One major pro of crypto staking is that it requires much less processing power than mining, making it more accessible and cost-effective for validators. Staking-based coins also represent an opportunity for investors, who can loan coins to specific validators in the hopes of earning interest or rewards when the validator does. A disadvantage is that validators and investors have to lock their assets into staking for a fixed period of time, during which they cannot spend or withdraw their coins. 

Stablecoins

Stablecoins are digital currencies pegged one-to-one to a fiat currency, such as the US dollar or another form of collateral. Stablecoins provide the privacy and security of crypto with the flexibility of fiat currency to pay for everyday goods and services. Types of stablecoins include Tether, USD Coin, and Binance.

Because they’re tied to tangible assets, stablecoins are generally less volatile than other forms of cryptocurrency, which many people see as an advantage. Some investors see a benefit in holding stablecoins as a hedge against other more volatile cryptocurrencies in their portfolio. That said, the stability of stablecoins’ value may be a downside in the eyes of investors who hope to realize returns on their crypto holdings. And the tie to fiat currency also means that their value is, in effect, governed by a centralized system, which is a turn-off to people whose interest in crypto is based on a completely decentralized approach unencumbered by traditional financial systems.

Pros and cons of altcoins

Like every form of investing, there are pros and cons to investing in altcoins. On the plus side, there are a wide variety of altcoins available, and many of them were created specifically to improve on aspects of Bitcoin, such as higher transaction speeds and lower fees. Some are also built with additional functions that enable a broader array of use cases beyond finance.  

On the other hand, some altcoins may be difficult to purchase on an exchange. Their value is often even more volatile than Bitcoin’s, and they may have a higher chance of failing. The large number of altcoins also means that it can be harder for them to gain market value. So while there is potential for reward, there is also significant potential for risk. 

Is altcoin investing right for you? 

If you’re curious about crypto investing beyond Bitcoin, altcoins may be an avenue you’d like to explore. There’s no clear answer as to which altcoins are the best for investors; it comes down to your risk tolerance and the specific features that matter most to you. 

When it’s time to put your crypto wallet to work, remember that a diversified portfolio can be an important way to mitigate risk. Stash recommends holding no more than 2% of your overall portfolio in any one crypto in order to limit crypto-specific risks. 

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The post What Are Altcoins? Alternative Coins, Explained appeared first on Stash Learn.

In this article, we’ll cover:

• History of Ethereum
• How Ethereum works
• Use cases for Ethereum
• Pros of Ethereum
• Cons of Ethereum

History of Ethereum

Ethereum was conceived in 2013 by programmer Vitalik Buterin, developed by Gavin Wood, Charles Hoskinson, Anthony Di Iorio, and Joseph Lubin throughout 2014, and launched its cryptocurrency in 2015 at a price of $0.31 per coin. It was designed to build on what Bitcoin had started back in 2009, but with a few key differences. Buterin believed that Bitcoin’s blockchain functionality was too limited. The Ethereum blockchain provides flexibility because it is programmable and allows the execution of smart contracts and the building of many types of decentralized applications. Buterin has compared the differences between Bitcoin and Ethereum to the differences between a pocket calculator and a smartphone.

How does Ethereum work?

Like other types of cryptocurrency, the Ethereum network relies on blockchain technology. Blockchain uses cryptography to keep the network secure and verify transactions. Users keep the keys to access their crypto coins and tokens in a crypto wallet. Transactions on the blockchain are validated by a peer-to-peer network of independent computers, or nodes, running automated programs that verify each transaction, then bundle the data into blocks and add them to the chain. The entire Ethereum blockchain is public: anyone can join the network and view the ledger. The network’s security hinges on the fact that no changes can be made to the ledger once a transaction is validated. 

Historically, Ethereum operated under a proof-of-work model, in which mining is performed by nodes on the network solving complex equations to validate transactions and mint new coins. But as of September 2022, it transitioned to a proof-of-stake model, which does not require the mining of new coins. This approach, which is used by most altcoins, requires nodes to pledge a “stake” of coins; once they validate a transaction, they’re awarded with additional coins. This change, referred to as The Merge, was intended to be faster, cheaper, and more environmentally friendly since the proof-of-stake model requires less energy. Ethereum estimates that The Merge reduced the network’s energy consumption by over 99%. 

Smart contracts

Smart contracts are the foundation of the Ethereum network. These contracts are self-executing lines of code containing the terms of an agreement between any two users. If certain conditions are met, smart contracts will automatically execute transactions without the need of an intermediary. They are traceable, transparent, and irreversible. Smart contracts can be used by buyers and sellers to trade coins and tokens, but they also have a wide variety of other applications for many industries. 

Ethereum use cases

The Ethereum network can be used to buy and sell crypto: ether coins as well as many other cryptocurrencies. You may also use a multitude of other decentralized finance applications. Other use cases enabled by smart contracts on the Ethereum blockchain include:

• Exchanging NFTs (non fungible tokens) and other tokens
• Decentralizing and securing domain names 
• Protecting and trading intellectual property
• Voting in decentralized autonomous organizations (DAOs) 
• Verifying digital identities
• Tracking items in a supply chain 
• Facilitating insurance policies
• Executing a variety of functions for loans and mortgages

Ether: Ethereum’s native cryptocurrency

Ether, the native cryptocurrency of the Ethereum blockchain, is the second most popular digital currency behind Bitcoin. Ether can be traded on a cryptocurrency exchange or used as payment for peer-to-peer transactions or at merchants that accept it. Investors can also use ether for crypto staking on the Ethereum network. 

Ether is the fuel that supports the Ethereum ecosystem. Users pay transaction fees in ether, and validators are rewarded with coins when they add blocks to the chain. Ethereum refers to the cost required to conduct a transaction or execute a contract on the blockchain as a gas fee, and it’s determined by the computational cost of validating a specific transaction as well as supply and demand.  

For many investors, Ethereum’s appeal is the opportunity to buy and sell crypto coins in the hopes of making money. Like other types of investments, the value of ether fluctuates based on market supply and demand. Investors may buy ether and hold onto it in the hopes that the crypto asset will increase in value over time. 

Advantages of Ethereum

Ethereum shares the advantages of many other forms of crypto: a permissionless, decentralized ledger that’s considered both secure and efficient. It also has a tremendous amount of flexibility for use cases beyond finance.   

• Decentralized: Because there’s no central body controlling or regulating Ethereum, authority is distributed to no one and everyone simultaneously. 
• Secure: Established blockchains like Ethereum are considered highly secure. Data cannot be taken away, only added, which makes altering the system extremely difficult. 
• Permissionless: Ethereum is open for anyone to participate in the network and view the ledger. This provides anonymity, greater privacy, and increased accessibility. 
• Efficient: With the switch to the proof-of-stake validation model, the Ethereum network is expected to run more quickly while using less energy.
• Flexible: Unlike crypto blockchains that were built specifically for cryptocurrency and other financial transactions, the blockchain supports a wide range of use cases for developers who want to build apps on the network.

Disadvantages of Ethereum

• Stability concerns: With recent changes to the network’s validation model, some worry that Ethereum could be less stable than in the past. 
• Less scalability: Because each Ethereum transaction on the blockchain is validated by a single node, Ethereum is seen as less scalable than some other crypto networks. 
• Potential vulnerabilities: There are separate platforms for smart contracts, the ledger, and more, which some say could make Ethereum more vulnerable to malfunctions and hacks.
• Volatility: Like other cryptocurrencies, the value of ether tends to be highly volatile. While all investing involves risk, including the risk that you could lose money, crypto investing is often considered higher risk due to the rapid swings in the value of assets.

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