Bitcoin has changed the financial world considerably over the past decade and a half. However, the blockchain underlying the most dominant cryptocurrency in the world can only treat five to seven transactions per second. On the other hand, an imminent Solana update will allow the blockchain to treat around a million transactions per second.
In the report Understand Solana for financial servicesJoel Hugentobler, cryptocurrency analyst at Javelin Strategy & Research, examined work upgrades for Solana, its potential to have a significant impact on financial services and emerging use cases for this powerful technology.
Robust architecture
The Solana blockchain will not only be much faster than Bitcoin, but it will also be 10 to 15 times faster than credit card rails like Visa and Mastercard. This substantial increase in Solana flow will materialize thanks to the upgrade of the firedancer.
“It’s not just theoretical,” said Hugentobler. “Jump Trading – The brains behind this upgrade – they are notorious for high frequency trading. Coming and providing this additional validator not only diversifies the code base, which adds additional security, but obviously adds this crazy start with an end of 400 milliseconds. It is not only theory.”
The scale of this speed would not be possible if Solana did not already have a robust architecture in place. One of the main advantages of the network is that it reduces the risk of consideration – the chance that a third party unknown does not hold the end of the transaction.
In addition to speed and safety gains, Solana is cheaper than the main blockchain, Ethereum. Solana costs are less than one penny compared to Ethereum transaction costs, which may vary from $ 1 to $ 50.
The speed, security and the advantages of Solana costs make blockchain an adjustment for financial services applications. Once the upgrade of firedancer is upgraded, Solana can do even more to eliminate many of the problems to which financial service companies have been confronted.
“Their architecture, with this upgrade, supports the regulations in real time in traditional payment rails,” said Huntentobler. “But what is really cool in all of this is that it eliminates treatment with lots, which is an important point of pain in inherited systems.”
Compliance in a box
An important obstacle which has prevented many institutions from investing fully in digital assets concerns the security of financial data. Although blockchain is intrinsically a secure and transparent network, financial institutions have specific risk management and risk management requests.
To meet this need, Solana has introduced technologies such as token extensions, which can protect private blockchain data. Token extensions allow developers to create tokens with unique features designed for specific use cases.
For example, token extensions can give institutions the capacity for confidential transfers, which allow traders to maintain the confidentiality of transaction amounts while financial institutions have visibility on other transaction details for compliance purposes.
The tokens extensions can also allow fields of service notes, which allow the inclusion of additional information with payments.
The blockchain tokens extensions were a key factor in Paypal’s decision to bring his stablecoin, Pyusd, from Ethereum to Solana. The payments giant credited the speed and efficiency of the blockchain as engines of the success of Pyusd and said that the additional personalization provided by token extensions meant that Solana essentially ensured “compliance in a box”.
A convincing hybrid
As powerful as the token extensions are, they are also due to an upgrade. Helius Labs and Solana Labs recently announced an extension of the Confidential TRANSFERS extension called confidential balances.
Confidential sales are built to allow private token transfers to institutional compliance. In addition to the tools that protect data, confidential sales also allow partial confidentiality, which means that organizations can determine whether to fully hide specific token amounts or simply to hide certain aspects.
Some of the use cases for this additional feature are in pay, B2B payments and other scenarios where specific regulatory requirements come into play. Solana has also developed keys to listeners, which give institutions more information on transactions without exceeding compliance.
All these innovations mean that Solana is about to meet more the needs of an institution.
“Solana with this upgrade has allowed tokens extensions that allow KYC, AML, compliance, transaction frost, things like metadata taggation, confidential transfers and real confidentiality transfers – all on a public blockchain,” said Huntobbler. “These popularization capacities allow financial institutions to operate as a private blockchain, but everything is on a public blockchain, which is a convincing hybrid model in my eyes.”
Move speculation
These characteristics have made Solana a leading choice for active world token – which can be an intensive process. For example, Franklin Templeton recently moved the third fund on the tokenized monetary market, worth $ 594 million, on blockchain.
However, use cases for Solana can go much further.
“Solana is used by big names like Visa, Paypal and Franklin Templeton,” said Huntentobler. “They use it for stablescoins, cross -border payments, token funds, treasury regulations, that kind of thing. He went before the speculative phase; It is used for real use cases. “
The upgrade of the Firedancer should make Solana an even more convincing choice for financial services companies, once live.
“Frankendancer is the hybrid upgrade between Firedancer and what exists, a smooth process entirely live,” said Huntentobler. “He has a consensual live vote and all this kind of thing in the back. Firedancer is live, but he does not have the fully live consensus model, so voting and things like that are not yet 100%, but they should be completely alive.”
