Many crypto investors are hoping their cryptocurrency portfolios will go to the moon. But with the growth of Solana (SOL), perhaps they should be aiming for the sun (“sol” in Spanish), instead.
Solana is a relatively new cryptocurrency that, until recently, didn’t garner much attention. And given that there are so many new types of cryptocurrency out there, with more hitting the market seemingly every day, it’s hard to blame investors for missing it.
But Solana is now on most crypto traders’ radar. But what is Solana, what does it have to do with blockchain, and how can you invest in it? We’ll cover it all below.
What is Solana Crypto?
Solana is a platform built on a blockchain network that allows users to build decentralized applications. In that respect, it’s similar to (and also rivals) Ethereum, which is designed to do more or less the same thing.
Solana utilizes a proof-of-stake blockchain system — as opposed to Bitcoin’s proof-of-work model — to validate and secure its network. Solana’s native token is called SOL, and the network’s main purpose is to handle smart contracts, which allows it to facilitate transactions of SOL and other assets, like non-fungible tokens (NFTs). It’s fast and secure, thanks in part to its distinct “proof of history” concept, which makes it attractive to those in the crypto space.
Recommended: What Are NFTs (Non-fungible Tokens)?
History of Solana
Solana dates back to November 2017, when founder Anatoly Yakovenko published a paper describing the “proof of history” concept, which timestamps each transaction, so they’re recorded on the blockchain chronologically. The goal: to create faster transaction times.
In February of 2018, Yakovenko and colleagues Greg Fitzgerald and Stephen Akridge launched a prototype of the project, originally called Loom. It was soon rebranded “Solana” after the small town in California where the three men had lived for a few years.
From there, the project grew legs and found funding, and in a few years it has become one of the better-known blockchain networks and cryptocurrencies.
Solana’s Price Surge
Solana wasn’t a big market-mover for some time. But that changed during late summer of 2021. In mid-August, Solana’s price was around $44, but by September 8, it peaked at nearly $215 — a roughly 489% increase. It did come down a bit shortly after, however.
As of late September 2021, SOL’s price is bouncing around between $140 and $160, and its market capitalization, or market cap, is roughly $43.5 billion. But, as any crypto investor knows, that can change quickly.
This surge in price is one of the reasons that Solana has become a household name for crypto investors.
Features of Solana That Make it Unique
So, what exactly makes Solana such a big deal? The answer is that it’s faster and cheaper to use than its competitors, including Ethereum. Solana can handle more transactions than Ethereum can, and it can process those transactions more quickly.
Solana’s proof-of-history feature plays a big role in speeding up consensus on the blockchain. Proof of history acts as a sort of clock that creates timestamps and moves transactions faster to get recorded on the blockchain.
How Does Solana Work?
Solana uses a proof-of-stake validation system in conjunction with a couple of components called “tower consensus” and “verifiable delay record”, timestamping transactions and efficiently recording them in blocks on the blockchain.
Solana sequences and organizes data, and then verifies and confirms it, using its timestamp ability. The timestamp feature also frees up nodes to start creating the next block in the blockchain, without worrying about keeping order among the transactions in the queue. The network already knows the correct order because of the timestamp.
As a result, the entire network can move along at a speedier pace.
What Does Solana Do?
The Solana blockchain has a couple of key potential use cases.
1. It could be used to create a decentralized finance (DeFi) network. Traditional financial networks sometimes use intermediaries and outdated protocols — two areas where Solana believes it can modernize and make more efficient and transparent. In fact, many DeFi projects are already using Solana’s network to do just that.
2. It could create NFT marketplaces. NFT investors and collectors are using Solana to create digital marketplaces. Solana was even the official blockchain of Lollapalooza, which created its own “Lolla NFT Marketplace ” specifically for artists and fans at the event.
As for Solana Coin’s use cases, they can primarily be used to stake, or pay transaction fees on the network — similar to Ether.
Solana Benefits and Disadvantages
Solana has pros and cons, like all other cryptocurrencies and networks. Here are the highlights.
Benefits of Solana
• Transaction speed: Speed is the biggest advantage that the Solana network has over similar networks.
• Scalability: The network’s design is built to overcome congestion issues, thanks to timestamps. That scalability gives it an advantage over other networks, which are more likely to get log-jammed by slow transaction speeds.
• Economies of scale: Solana has a big user base, with millions of users already on the network, and a goal of reaching a billion users overall.
Disadvantages of Solana
• Beta stage: For prospective investors, it’s worth knowing that the project is still in beta.
• Network outages: In September, the Solana Network saw a transaction overload and was out of service for more than 16 hours. So there are still some kinks to work out.
Solana vs. Ethereum
How does Solana stack up against Ethereum? It’s often referred to as an “Ethereum killer.” It all comes back to the fact that Solana was designed to excel where Ethereum falls short in terms of speed and costs.
Recommended: What is Ethereum and How Does it Work?
Solana’s throughput is 50,000 transactions per second (TPS), with average block times of 0.4 seconds. The average cost per transaction is $0.00025. Compare that to Ethereum: Throughput is 15 TPS, and average transaction costs are more than $3.70, depending on network congestion.
How to Invest in Solana
Getting started investing in Solana is relatively easy. You can sign up for and use a crypto exchange to buy Solana Coins. This is the easiest and most low-effort way to add Solana to a crypto portfolio. From there, it’s a matter of transferring your holdings to a crypto wallet.
Another way to get your hands on Solana is by staking. Staking is a process that involves “locking up” your coins or tokens and earning rewards. The Solana network supports staking (not all networks do). Assuming your wallet is supported by the network, you can delegate your coins to stake either through an exchange or on your own.
Recommended: A Guide to Crypto Staking
Solana may still be technically in its beta stage four years after it was created, but thanks to its proof of history concept, it’s getting a lot of attention for being faster and cheaper than competitor Ethereum.
For investors looking to trade Solana, SoFi Invest® may be a good place to start. With SoFi, you can trade cryptocurrency like Solana, Enjin Coin, Bitcoin, Cardano, Litecoin, and more.
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