What is Solana (SOL) and its 'proof of history' mechanism?

Solana’s third-generation blockchain architecture is designed to 

Facilitate smart contracts and decentralized application (DApp) creation. The project supports an array of decentralized finance (Defi) platforms as well as non-fungible token (NFT) marketplaces.

Founded in 2017, Solana is an open-source project currently run by Solana Foundation based in Geneva, while the blockchain was built by San Francisco-based Solana Labs.1

Solana is much faster in terms of the number of transactions it can process and has significantly lower transaction fees compared to rival blockchains like Ethereum.

Solana implements an innovative hybrid consensus model that combines a unique proof-of-history (PoH) algorithm with the lightning-fast synchronization engine, which is a version of proof-of-stake (PoS). Because of this, the Solana network can theoretically process over 710,000 transactions per second (TPS) without any scaling solutions needed.

proof of History (PoH) protocol-based blockchain relies on a cryptographic way to create a reliable ordering of transactions/events recorded to the ‘ledger to solve the issue of agreement on time, and it allows for almost instant finality of hundreds of thousands of transactions per second.

This time problem gets pretty difficult in distributed systems. When you need to move fast and process transactions as soon as possible, you need to be able to time in small units. But many programmable blockchains, like Ethereum, rely on outside programs to assign a “median” timestamp — which they then use to validate transactions in the order they were received.

But referring back to a centralized source defeats the purpose of a decentralized system. Solana solves this problem by using an innovative technology called Proof of History, which allows these “timestamps” to be built into the blockchain itself. This is done through a verifiable delay function, a VDF.

For those who want their plunged headfirst into the blockchain space in depth, resources like Solana’s website, the whitepaper, and the various conversations on Solana’s Telegram have given a more technical breakdown of how PoH works, to understand its complexity in-depth, since it is kinda complex to comprehend and understand, but to put it in the simplest terms lets relate it with an analogy….

The way an ancient water clock worked is that a regulated flow of water would drip into a vessel at a constant rate. Marks on the vessel and the rising level of the water would allow the ancient Greeks to record the passage of time.

Similarly, to record the passage of time, Solana’s PoH based blockchain uses a verifiable delay function, whose output cryptographically verifies that real-time has passed in the process of generating that output (i.e., running the function). In this case, the blockchain’s rising ‘levels’ aren’t seconds or a unit of time, but simply sequential outputs of hashed blockchain state and count. In this way, just like the water clock, you know that the lower levels or ‘marks’ (hashes) had to come before the higher levels or ‘marks’ (hashes).

Given this, if we run this function in a loop, taking a previous output as an input, and do this as fast and as we can, there is no way to know exactly what the output will be, oh let’s say, a million hash functions from now. If we run this with a counter and record how many times it’s been looped and the current state(hash value), together these pieces of information represent the data structure that tells us time has passed. We can also ‘append’ external data into this stream of hashes, by hashing the data together with the current state (hash). Because the PoH stream is verifiably ordered, we can then know exactly where in time any appended event and/or message was inserted into the stream.

While running this function does take real-time to generate eventual ‘blocks’ in this digital ledger, we can take each slice of the data structure and verify them separately, in parallel, on GPU cores. For example, if your laptop boasts an 8 core processor, it can run multiple parallel processes at the same time. A modern GPU card can verify the transactions on this time-based digital ledger almost instantly. This kind of verification method is also much faster than bitcoin's blockchain PoW protocol.

Now, when a decentralized network receives the various pieces of the data structure, because of the cryptographically reliable ordering of events encoded in the blockchain, all the nodes are able to receive and trust the order of the structure without having to re-verify them.

To return to our analogy, the various nodes on the decentralized network are essentially receiving a snapshot of a cryptographic ancient water clock with the up-to-date, verified ledger of events, data, and messages that have been added to the blockchain.

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