A centralized database on a standard gigabit network can execute 710,000 transactions per second when transactions are no more than 176 bytes size on average. Without compromising decentralization, it is challenging for a blockchain to have such a high-speed transaction capacity. Solana has accomplished an impressive transaction per second capacity without compromising decentralization much. It is an open-source project that is a new permissionless and high-performance blockchain. The Solana Foundation manages the open-source project, situated in Geneva, Switzerland. It is the high-speed layer one blockchain, with a max capacity of 65,000 transactions per second. It has a transaction finality of around 13 seconds. How does Solana work? Proof of Stake (PoS) and Proof of History (PoH) are used by Solana Network to process its transactions efficiently with high speed. PoH is a simple method for validating all the transactions without communicating with other nodes. PoS is also used for validating transactions, for this, you have to stake your token. PoH is based on a simple method. It assigns a leader position randomly to a particular node after every new block creation. Any node which is the leader node must generate the whole proof of history statement. After being given the responsibility, the leader node coordinates with other nodes to construct a proof of history statement. The leader node also pushes the currently executed transactions, and then it publishes the transactions with verifiers in their final nodes. Verifiers repeat the process again to verify transactions. Verifiers also make copies of transactions and make them public. There is only one leader node in each Solana network at a time. The verifier node performs intelligently and has the same capabilities as a leader node; however, the verifier node can subsequently be elected as a leader through proof of stake elections. Compared to Bitcoin and Ethereum blockchain networks, a combination of PoH and PoS works well for Solana, allowing it to process data at a cheap cost. Solana’s high-speed blockchain is built using eight major technologies mentioned below: Proof of History: a clock before consensus. Tower Byzantine Fault Tolerance: a PoH-optimized version of PBFT. Turbine: a block propagation protocol. Gulfstream: a Mempool-less transaction forwarding protocol. Sealevel: the world’s first parallel smart contracts run-time. Pipelining: a transaction processing unit for validation. Cloudbreak: a horizontally-scaled accounts database. Archivers: Provide distributed ledger storage. Key characteristics of Solana:  Proof of History: For authorizing and restricting entries on its ledger, Bitcoin and Ethereum’s blockchain networks use a Proof of Work technique (proof of work means that every node on the blockchain network must reach consensus before every new entry). Proof of Work (PoW) is a complicated method that slows down the speed of transactions.  To address the drawbacks of the PoW system, Proof of History (PoH) was developed. Proof of history simply means that a new block can be added to the blockchain network without the need for mutual consent of other nodes. Every node in Solana has its clock and makes choices without consulting the others. Proof of History improves transaction speed while simultaneously ensuring an efficient blockchain network and recording all transactions.     Tower Byzantine Fault Tolerance: The BFT system functions as a safety net for the whole Solana ecosystem. It ensures that a single node failure does not disrupt the entire operation of the system. This approach enables the nodes to work even in case of multiple failures. Gulfstream: Gulfstream is a system that eliminates memepool requirements. Memepool can be viewed as a holding area where all unprocessed transactions await their turn. Solana’s network can handle a memory pool with a capacity of 1,00,00 transactions.   Validators are present in every blockchain ecosystem (validators select transactions and add them to the blockchain network). Solana’s network sends the transactions to its validators even before a new transaction is added. Validators empty the memepool region simultaneously, ensuring no ‘unconfirmed transactions’ in the Solana ecosystem. Sealevel: Solana allows for the simultaneous execution of numerous smart contracts. Solana becomes a time-saving and cost-effective blockchain network as a result of this. Sea level is the technology that allows Solana to run many smart contracts simultaneously. Cloudbreak: Solana uses a horizontal scaling method, which allows the blockchain to expand its scalability. Cloudbreak manages a database that can read and write transaction input data. It is also in charge of bridging the gap between hardware and software.  Pipeline: Most tasks in Solana’s ecosystem are separated for processing transactions quickly. Solana distributes the input data throughout the various hardware components of the network. It is a procedure that quickly checks the information blocks using various devices. Turbine: Solana splits various blockchain nodes into smaller packets. It helps in increasing the transaction speed of the network. Smaller data packets can be evaluated more quickly, which aids Solana in addressing bandwidth difficulties. Two main ways which make Solana … Continued

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Cryptocurrencies such as Bitcoin and Ethereum are traded on hundreds of various exchanges globally, and the price of a cryptocurrency on one exchange may differ from that on another exchange. Cryptocurrency arbitrage is a method in which traders purchase a cryptocurrency on one exchange and quickly sell that cryptocurrency for a higher price on another exchange.  This is where the old Wall Street tactic of ‘arbitrage’ comes into play. ‘Capturing the arb’ refers to profiting from the fact that an asset is selling for a low price in one exchange but a greater price in another. Traders use crypto arbitrage to take advantage of cryptocurrency’s lower price on one exchange by buying and selling it instantly for a higher price on another exchange.  Why are the Prices of Cryptocurrencies on Crypto Exchanges so Different? Centralized Exchanges The first thing to understand is that cryptocurrency pricing on centralized exchanges is determined by the order book’s most recent bid-ask matched order. So, the most recent price at which a trader buys or sells a digital asset on an exchange is termed the exchange’s real-time price. For example, if the most recently matched market order on an exchange is to buy bitcoin for $40,000, this price becomes the platform’s newest bitcoin price. The next matching order will determine the cryptocurrency price after that. Therefore, price discovery on exchanges is a constant process of deciding a cryptocurrency market price based on its most recent selling price. Decentralized Exchanges On the other hand, decentralized crypto exchanges utilize a different approach to price crypto assets. This is referred to as an ‘Automatic Market Maker’ approach since it relies on crypto arbitrage traders to keep prices consistent across exchanges. Decentral exchanges use liquidity pools rather than using an order book system to match buyers and sellers to trade cryptocurrencies at a specific price and volume. A separate pool must be set up for each cryptocurrency trading pair. What Are Different Types of Cryptocurrency Arbitrages? The most popular cryptocurrency arbitrage techniques used by crypto traders are discussed below: Deterministic Arbitrage This is the most common arbitrage technique. It entails traders purchasing and selling a digital asset on two exchanges at the same time to profit from market inefficiencies. The trader finds arbitrage opportunities on two different exchanges, buys the asset on the lower-priced platform, then sells the asset at a higher price on the higher-priced platform. Triangular Arbitrage It is also possible to profit from the uncorrelated pricing of three cryptocurrency pairs on an exchange, particularly if one of the cryptocurrencies is underpriced on the platform at the time. A trader may, for example, exchange BTC for ETH, convert ETH to SOL, and then trade SOL back to BTC. To summarise, this procedure entails shifting funds between BTC/ETH, ETH/SOL, and SOL/BTC combinations to accumulate more BTC. Decentralized Arbitration Traders use this approach to perform arbitrage trades on decentralized exchanges (DEXs) like Uniswap, Balancer, and Curve. Arbitrageurs can buy and sell pooled digital assets undervalued or overvalued on these various DEX platforms. These activities inevitably lead to price uniformity across Dexes like centralized crypto exchanges.   Statistical Arbitrage   This entails leveraging quantitative data models and algorithms to profit from large-scale arbitrage possibilities. Because the process is automated, an arbitrageur can make hundreds of deals in a matter of minutes, significantly increasing his or her profit potential.    Risks involved in Cryptocurrency Arbitrage  Losses   To be successful in crypto arbitrage, traders must execute trades fast so that they can profit from cryptocurrency price disparities across exchanges while they are still profitable.   A trader must be careful not to boost the buying price and decrease the selling price of a token by their own trades, especially in the thinly traded types of crypto that provide the widest spreads. Volume All crypto exchanges work similarly, and the pricing of crypto depends on the exchange’s most recent trade. It is important to remember that all trades are not made equal. Some trades happen with massive amounts of money, while others don’t trade with larger amounts. The trading volume on each influences the liquidity and accessible prices on a given exchange. Low volume could indicate that the exchange cannot execute a large enough trade to generate an investor’s profit. Low volume could also indicate that the trade is doable but will take too long to execute. Costs of Transactions Simultaneously, traders must watch the transaction fees associated with buying cryptocurrencies on different trading platforms. These fees will continue to fluctuate as the cryptocurrency markets develop, changing from exchange to exchange. Hacks & Fraud The cryptocurrency industry is mainly unregulated. There are also more chances of hacking, fraud, and monetary collapse. As a result, storing cryptocurrency safely is a hot topic among investors.

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