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Solana Explained | A beginner’s guide

Solana is a blockchain platform that supports smart contracts and decentralised apps (Dapps). Solana (SOL) is also the eleventh largest cryptocurrency by market cap. The Solana network is similar to Ethereum in many ways – it’s proof-of-stake, supports Dapps and more – but Solana has a unique additional consensus mechanism called proof-of-history, making it incredibly efficient. 

Proof-of-history is a concept laid out by Solana founder Anatoly Yakovenko in the Solana whitepaper. Proof-of-history can be seen as a sort of ‘decentralised clock’ that verifies the order and passage of time between events. The mechanism improves upon proof-of-stake and helps the Solana network run quicker and cheaper. In fact, Solana aims to increase its transaction speed up to 600,000 transactions per second, a rate that outcompetes Visa and Mastercard.

Solana is a popular choice for NFTs and other Dapps due to its low transaction fees.

Solana now supports more than 1000 Dapps, including:
  • Audius, a creator-friendly decentralised music streaming platform that gives fair royalties to its artists.
  • Raydius, a powerful DeFi platform with advanced features including trade, yield, pool and AcceleRaytor.
  • High-profile metaverse games including Star Atlas, Aurory, Panzerdogs.
  • 14 DAOs managing $1bn+ in assets.
Star Atlas has partnered up with Solana to build out its metaverse.

While Solana has the advantage of speed and cost, it has faced several shortcomings since its launch, most notably outages. 

In September 2021, a surge of transactions on Solana caused the network to fork, resulting in a one-day outage. The blockchain went offline again twice in May: firstly because of bots, and secondly because of a bug. The last outage was in October, which resulted from a consensus bug (the outage lasted for six hours). 

These outages tend to negatively impact the trading price of SOL.

Good to know

Solana stayed under the radar for its first two years, but it underwent a huge rally in 2021, shooting from $1 to $260 within a year.

What is SOL?

Sol (SOL) is the native currency of the Solana network. It’s used to pay transaction fees within the network and it can be traded on all major exchanges. 

Solana trades at $23.24 (February 6, 2023) – 91.07% behind its all time high of $260.06. Like most other cryptocurrencies, 2021 was a great year for Solana, which saw a 1200% increase in value. 

The FTX collapse had a severe impact on the value of SOL, wiping 40% of the value from the network in one day. Solana was the second-largest holding of the now-defunct Alameda Research, and FTX held $982 million in SOL at the time of the crisis.

Advantages of Solana
  • Solana is one of the fastest and cheapest blockchain networks. The average transaction fee is $0.00025 per exchange, and the network can reach 50,000 transactions per second at its peak. 
  • It’s a highly scalable blockchain that uses an energy efficient consensus mechanism.
  • Solana has a thriving ecosystem with exciting Dapps.

Good to know

Solana was initially called Silk, then Loom, until the team rebranded to Solana – a nod to a small beach town north of San Diego where Anatoly, Greg and Stephen lived and surfed for several years while working for Qualcomm.

Disadvantages of Solana
  • The extent to which Solana is truly decentralised is unclear as it uses validator clusters rather than nodes. Solana is operated by just 3,400 validators, whereas Ethereum is run by over 500,000. 
  • The platform has a history of outages that damage the trading price of SOL.
  • Solana is less transparent than other blockchains. Messari found that 48% of Solana’s initial token allocation went to project insiders, and 13% went to the Solana foundation.

Where can I buy SOL?

SOL is available to purchase on most major exchanges including Binance, Coinbase Pro, Kucoin, OKX, Kraken, Bybit and more. You can read a full list of exchanges that list SOL here.

To buy SOL, you will need to create an account on one of the listed exchanges. You will then need to verify your identity and deposit your local currency into your account to purchase the token. Once you have purchased the token, you will need a wallet that supports SOL, such as Solflare, Exodus, Atomic Wallet, Phantom Wallet, MathWallet, Binance, Coinbase or 

If you purchase SOL through an exchange such as Binance, the token will be automatically stored in your Binance wallet. If you purchase a large sum, it’s best to transfer your funds to a non-custodial cold wallet such as Ledger or Trezor.

Our top three SOL wallets are:

  • Solflare (non-custodial, best for multi-platform use) 
  • Exodus (non-custodial, beginner-friendly) 
  • Phantom Wallet (non-custodial, best for staking)

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