Solana itself, like Ethereum.
Exists in the blockchain world as a smart contract network.
The roles and functions of both are completely identical.
Its original intention was to replace Ethereum.
Thus, the two are in a 100% competitive relationship.
Unlike Ethereum's transition from POW to POS.
Solana is inherently a POS validation model.
Moreover, it is one of the few blockchains to adopt two consensus mechanisms.
To ensure the effectiveness and security of the public chain.
That is, the two mechanisms of POH (Proof of History) and POS (Proof of Stake).
Solana uses POH as a timekeeper.
Created an orderly transaction history.
This advanced time recording method.
Enables network nodes to efficiently and accurately confirm transaction order.
No need for frequent broadcasting communication.
Simply put, it is to maintain high throughput while.
Can provide all nodes with a unified verifiable timeline.
Thus helping the network efficiently process transactions and data.
At the same time, it has reduced the communication burden between nodes.
POS allows the network to operate securely.
Validators participate in network verification and maintenance by staking tokens.
Decides the selection rights based on the amount of collateral.
To complete basic block creation and verification operations.
Other validators validate the effectiveness of new blocks.
And ensure that the transaction order strictly follows the record order of the POW H system.
Ultimately, all validators are rewarded based on their contributions.
Receive corresponding rewards based on work roles and workload.
A penalty mechanism will be implemented for malicious validators by deducting tokens.
The main development risks it faces.
First of all, there are internal network technology issues.
As mentioned earlier, Solana uses a mixed model of POW H and POP, S.
This is a highly centralized consensus mechanism.
Although it can achieve high-speed, low-cost transactions.
Actually sacrifices decentralization features.
In contrast, Ethereum has over 12,000 validator nodes.
Each node can cross-verify the authenticity of transactions.
Network security depends on the number and reliability of nodes.
Based on this consideration.
The current Solana mainnet.
Only 2,340 validator nodes have been deployed.
The issue of a weak base of nodes is significant.
For example, in 2022, Solana experienced five network outages and nine partial outages.
It has triggered widespread skepticism about the network's reliability.
However, so far this year there has only been one network-wide crash in February.
The subsequent network operation is relatively stable.
This is mainly due to the access to Amazon AWS and Google Cloud services at the beginning of the year.
Effectively defended against the frequent DOS attacks that occurred earlier.
However, excessive centralization still exposes the blockchain to systemic risks.
This issue is difficult to fundamentally resolve.
Because its expenditure structure is designed that way.
Including an increasingly expanding ecosystem, including their wallets and Dapp functionalities.
It has begun to pursue more cross-chain functionalities, which can only be achieved by increasing the network's complexity.
Will inevitably face more challenges in security and stability.
Currently, Solana's biggest competitive advantage comes from its transaction fees being lower than Ethereum's.
This is primarily based on the current scale of the ecological network and its high market value of tokens.
Imagine if its ecosystem scale reaches the current level of Ethereum.
Especially when the coin price is close to Ethereum's price level.
The rate advantage will not be as absolutely significant as it is now.
Additionally, after Ethereum's Cancun upgrade.
Ethereum's fees have decreased significantly.
For Dapp projects that have been deployed on the Ethereum network, considering the cost fluctuation risks.
It may not migrate to other networks again.
And other contract networks similar in scale.
For example, Avalanche.
Its fee structure may be more competitive than that of Solana.
Another unstable factor for Solana is the whales.
It was just mentioned that this mining pool design has a high degree of price centralization.
Compared to the Ethereum network.
Its computing power is more concentrated in the hands of a few active whales.
The core driving force behind this round of pump in mining pool coin prices is meme coins.
Its hype and concentrated bursts.
For example, Bonk, a Solana version of Dogecoin.
Behind it are these whales and KOLs driving and redirecting traffic.
When Solana surges.
Whales will inevitably need to liquidate positions or reallocate.
To rotate funds to other projects.
In fact, before mainstream capital entered the crypto market in large quantities.
Or before the approval of spot ETFs.
This surge is essentially a zero-sum game.
The profits earned by institutional traders actually come from retail losses.
Thus, the operations of whales constitute another layer of uncertainty.
The ultimate source of risk lies in regulatory policies.
Unlike Ethereum.
Solana has too close a relationship with U.S. regulators.
In the eyes of many insiders, this is not a good thing.
Must rely on the entity company behind Solana.
Solana Labs itself is a local American company.
Its main investment capital primarily comes from within the United States.
The founder also immigrated to the United States from the former Soviet Union at age 11.
And its cloud service infrastructure basically relies on Google Cloud and Amazon AWS.
These projects highly tied to the state are actually very vulnerable to policy changes in their respective countries.
Especially many Dapps in Solana are actually closely related to gambling businesses.
These businesses belong to highly sensitive market sectors in the United States.
As for the previously very popular NFT market.
Because its transaction fee rate is extremely low, nearly free.
In fact, there is a lot of speculation on pre-sale tokens (wash sale).
These are all risk points that can easily lead to severe sanctions and deep regulation.
Not to mention that Solana has previously had disputes with FTX.
If it cannot establish a good relationship with domestic regulatory authorities in the future.
It is likely to trigger a major crisis.
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