What Is Solana (SOL)? How it Works & Where To Buy It?

Solana is a highly sophisticated and optimized open-source project that executes secure and high-speed functionality on its layer-1 blockchain.

Solana was created in 2017 by Anatoly Yakovenko, who was a former executive at Qualcomm. In theory, the Solana blockchain can facilitate 65,000 transactions per second – without needing any scaling solutions.

How Solana Works

The Solana blockchain endeavors to solve the notorious blockchain trilemma that all popular blockchains face – decentralization, security, and scalability.

Solana applies a unique hybrid consensus mechanism (algorithm) that utilizes an innovative proof-of-history algorithm (unlike Bitcoin which is proof-of-work) with a formidably-fast synchronization engine that is a version of proof-of-stake.

Solana’s novel third-generation blockchain architecture curates the seamless facilitation of smart contracts and decentralized application (DApp) creation.

Essentially, it aims to minimize the difficulty for developers using the blockchain and maximize the efficiency of the entire network – without forfeiting decentralization, security, and scalability.

The Solana network is optimized through a lucrative system where there is one leader node that delegates and orchestrates interoperability between nodes. Nodes are integral parts of a blockchain network because they store data and share data with other nodes – to ensure network efficiency and integrity.

In more technical terms, the proof-of-history algorithm relies on a cryptographic clock that gives a timestamp to every transaction that occurs on the network. The hybrid consensus mechanism incorporates the BFT algorithm (Tower Byzantine Fault Tolerance) to ultimately reach a unique consensus.

Additionally, the proof-of-history mechanism can be deemed as a high-frequency Verifiable Delay Function (VDF) that maintains sequence in a network by using principles that prove block producers have waited a sufficient amount of time before the network proceeds.

What Is Solana Used For?

The Solana network has more than 300 decentralized applications running on it. These include various blockchain games, NFT marketplaces, and decentralized exchanges among others.

Solana garners value by building applications with utility. Applications that allow individuals to participate in staking, minting, and selling NFTs, play-to-earn games, and various other uses.

Individuals are increasingly engaging in decentralized finance (DeFi), and Solana’s ecosystem is home to some of the most popular DeFi tools available.

In a nutshell, Solana is used because it has incredibly low transaction fees, processes more transactions than any other blockchain, and uses a novel proof-of-history algorithm.

Validators on the network validate transactions extremely efficiently and securely which has attracted more users to participate in the Solana network, compared to other blockchain platforms.

Individuals can easily interact with applications in the ecosystem but are required to use SOL tokens for interactions. The low transaction fees make using applications more viable than more expensive blockchains such as Ethereum.

Solana has become a popular choice for developers because of the abovementioned network characteristics – it’s also seen a rapid price increase in its native SOL token.

The Solana community continues to grow exponentially and Solana’s native cryptocurrency (SOL) is traded on most cryptocurrency platforms that exist.

Where To Buy Solana (SOL)?

SOL is the native token that individuals purchase on cryptocurrency exchanges. The SOL token is used to interact with decentralized apps (DApps) within the Solana ecosystem. You will need SOL tokens if you want to use DApps built on the Solana blockchain.

SOL can be purchased on several centralized crypto exchanges. Before you’re able to purchase, you’ll need to deposit funds on the crypto exchange and purchase the tokens by placing an order.

These crypto exchanges are the safest place where you can buy, sell and store the SOL token.

Five of the most popular crypto exchanges are:

1. Binance (US Customers use Binance.US)
2. Gate.io
3. Coinbase
4. KuCoin
5. Bitfinex

All of the above exchanges allow users to buy, sell, transfer and store SOL in a digital wallet, on the exchange. You can simply use your debit or credit card to purchase SOL.

If you want to use the Solana ecosystem, you need to use the Trust wallet or the native Phantom Wallet. You must use a wallet that is compatible with Solana.

How long has Solana existed?

Solana was created in 2017 by Anatoly Yakovenko, who was a former executive at Qualcomm. He envisioned a project where he could utilize his experience, skills, and knowledge to revolutionize the crypto industry.

Initially, the project required intensive planning and development before the launch. Yakovenko envisioned a novel blockchain capable of scaling to global adoption. The Solana foundation officially launched in March 2020.

The SOL initial coin offering(ICO) took place on Coinlist on March 16-24th, 2020. The ICO price was a mere $0.22 per SOL token.

Since the ICO, the price of SOL has rocketed and the current all-time high price is $260 – a significant increase of almost 1000x.

SOL is currently traded on most platforms and has accrued a significant amount of interest and investment, as a result of the innovative DApps piquing people’s interest in the Solana ecosystem.

What’s controversial about Solana?

It’s important to address any controversy surrounding a project – it can provide crucial insights and be an indicator of the future of the project. Let’s take a look at 3 of the top controversies surrounding Solana.

1. Claims That It Isn’t Decentralized Enough – Solana has suffered criticism f0r ‘sacrificing decentralization‘. Skeptics claim that its lightning-fast transaction speeds and processing capabilities are only possible because decentralization has been sacrificed. Around 19 nodes hold more than 33% of the cumulative stake which means that they process more than a third of all transactions.
2. Founders and VC Firms Own a Huge Portion Of The Supply – The initial token allocation data indicates that 48% of the supply is owned by insiders, including founders and VC firms. This has created extensive controversy, especially when comparing the token allocations of other projects – Tron 10%, EOS 10%, Tezos 10%, Cosmos 10%, and Cardano 17%.
3. Network Outages – Among the biggest controversies was the network outage that occurred in September 2021. The network experienced a 17-hour network outage caused by “resource exhaustion”.

How many SOL Tokens are there?

At the time of writing, SOL has a circulating supply of 325 million tokens.

SOL has a total supply of 511 million.

Can Solana be mined?

Solana can’t be mined. It uses a proof of history and proof of stake model which makes it incapable of being mined.

Individuals can receive rewards in SOL if they validate transactions or if they stake Solana.

What is the market cap of Solana?

The market cap of SOL is:

Market cap = total amount of coins in circulation x current market price of SOL

SOL = 325,000,000 x $112 = $36.4Bn

The market cap fluctuates according to circulating supply and market price.

Biggest Competitors Of Solana

Solana network has been making promising strides by garnering popularity and users. The number of daily active SOL users currently exceeds 230,000.

In contrast, Ethereum has around 550,000 daily active users. Although Ethereum has a higher number of daily active users, it should also be considered that is an older project which has been around significantly longer than Solana.

In terms of processing transactions, Solana is currently unrivaled in competition.

Bitcoin can process roughly 7 transactions per second and Ethereum can process 13 transactions per second.

However, many skeptics believe that Solana can only achieve these incredibly high throughput rates because it lacks decentralization.

In terms of DeFi, Ethereum leads with $92.87B in total value locked.

Solana has roughly $7.6B in total value locked.

It’s also important to consider the amount of DApps in each network. At the time of writing, the Ethereum ecosystem is home to 2,945 DApps. The Solana ecosystem has just over 350 DApps.

What are the future plans for Solana?

The ability to handle thousands of transactions per second, affordably, and securely primes Solana for payment processing. Its unique proof of history consensus mechanism has proven to be reliable and efficient – let’s look at the future plans for Solana.

Solana network plans to introduce Solana Pay, which will allow merchants to accept various tokens including USD coin, maximizing the speed and low transaction fees of Solana.

Another development includes the world-famous festival, Coachella, which announced that it will be releasing an NFT collection that was built using Solana. Among the NFTs, some have real-world utility and will serve as lifetime festival passes, and others soon to be announced benefits.

Pros and Cons of Solana: Solana Blockchain, Solana Network & Solana Foundation

Pros

• Superior Transaction Capabilities – Solana can process 65,000 transactions per second. Compared to Bitcoin which can process 7 transactions per second, and Ethereum which can process 13 transactions per second – Solana’s transaction capabilities are unrivaled.
• Proof of History Consensus Mechanism – Solana has a novel consensus algorithm that allows it to validate transactions extremely efficiently and process thousands of transactions per second. The fact that it has its own consensus algorithm also indicates it’s incredibly innovative and authentic.
• Rapidly Growing Ecosystem – Although Solana was only launched in 2020, it has already garnered a substantial amount of developers building on Solana and deploying more than 350 DApps to date. The total value locked in DeFi in the Solana ecosystem is $7.6B.
• Major Partners & Investors – Solana has tied up some significant partnerships including leading crypto exchange FTX, Audius, PUBG Developer Krafton, Opera, and many more top-tier companies and firms.
• SOL Is Available On Most Crypto Exchanges – SOL can be purchased on the majority of crypto exchanges and is currently one of the top 10 biggest cryptocurrencies by market cap. It’s listed on all of the top 10 crypto exchanges including Coinbase, HTX, and Binance.

Cons

• Many Claim It Isn’t a Decentralized Network – 19 nodes process more than a third of the transactions on the Solana network. The network processes more than just Solana coins (SOL), and Solana’s blockchain architecture is used by a multitude of developers – some developers are wary because they fear a lack of decentralization. However, this hasn’t hindered the growth of the Solana ecosystem, and to date, more than 350 DApps have been deployed in the Solana ecosystem.
• Network Outages Are a Worry – Although Solana aims to maintain an efficient network, verifying transactions at such an enormous capacity has previously led to “resource exhaustion” which caused a 17-hour network outage. Merchants relying on Solana to process payments are especially wary of network outages which can hinder their businesses. Merchants rely on Solana to verify transactions and choose Solana because it’s much more affordable to pay transaction fees that are significantly lower than VISA and Mastercard.
• SOL Could Suffer a Major Price Correction – Solana’s native cryptocurrency, SOL is incredibly volatile as are other cryptocurrencies. Although it has grown by more than 13,300% since the start of 2021, many investors are worried that there won’t be much more growth and that it is at risk of an enormous correction. However, opinions are speculative and therefore can’t be considered as a matter of fact.
• Insiders Were Allocated 48% Of Tokens – One of the major concerns surrounding Solana is the fact insiders own a huge portion of the tokens. Insiders, namely VC firms and founders can single-handedly manipulate the price and cause an enormous dump if they chose to sell. Solana has received a significant amount of criticism for allowing VC firms such a major portion of the tokens.

  Anatoly Yakovenko responded to critics by mentioning how incredibly difficult it was to achieve their desired goals for Solana without acquiring funding from VC firms. The fact that insiders own such a large share has also led to many top influencers calling the project ‘centralized’ and claiming that a massive price decline is ‘programmed‘. The price of SOL would sequentially crash if only a portion of insiders decided to take their profits and sell their share of SOL tokens.

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