Solana is a cryptocurrency and the blockchain platform created for decentralized applications (DeFi) fastest growing in the world. It competes with Ethereum, the largest decentralized application platform in the global crypto space – and, in fact, promises faster operations and much lower transaction fees.
After achieving a market capitalization of $42 billion in just 18 months, its Solana coin has captured the attention of the entire crypto community. This “Ethereum Killer”, as it has been dubbed, was spuriously launched into cryptocurrency stardom by its rapid valuation and well-cemented project.
All the other value propositions put forward by blockchain ecosystems have attempted to solve the same common problems of scalability and transaction speed. But Solana has been the most successful so far, as evidenced by its acceptance and its position in the top ten of cryptos.
In this article, we’ll help you navigate the Solana project, the blockchain of the moment launched in April 2020 in Switzerland. We’ll lay out everything you need to know about this booming digital asset so you can make an informed decision on whether buying Solana is a suitable option.
Who created Solana and for what purpose?
With a market capitalization of $46.8 billion, Solana is currently the seventh-largest cryptocurrency in the world. It is a highly functional open source project. It is based on the permissionless nature of blockchain technology that provides decentralized financial solutions (DeFi).
The project had its origins in 2017 when the idea began to mature and initial work started. But it was not until the first quarter of 2020, when the Solana Foundation based in Geneva, Switzerland, launched it definitively. It was created by American engineer Anatoly Yakovenko, current CEO of Solana Labs.
Solana’s blockchain was designed to facilitate the creation of decentralized applications (DApp). It aims to improve scalability by introducing a proof-of-history consensus (PoH, short for Proof of History), which works in combination with the proof-of-stake consensus (PoS, short for Proof of Stake), as detailed in Solana’s whitepaper.
How do Solana’s consensus mechanisms work?
Proof of History (PoH) is a mechanism that helps to order and verify transactions on the blockchain. Rather than creating a unified time for all participants, it allows each node to single-handedly verify the validity of the transaction independently.
Proof of Stake (Proof of Stake – PoS) is a technological resource that allows Solana to be greener than the traditional consensus system PoW (Proof of Work), used by Bitcoin. In a decentralized blockchain system, a group of servers (nodes) are responsible for validating each transaction.
This makes it possible to prevent a bad actor from wanting to aggregate a large number of nodes in order to monopolize and control the network. To make this possible, the nodes running the network must work incessantly solving a mathematical puzzle (proof of work) so that it is very costly to attack the network.
While proof-of-work is effective for that purpose, the network ends up consuming a lot of electricity. Solana does it differently. The network’s validation nodes (miners) get rewarded for simply holding SOL tokens and helping to validate transactions, a mechanism known as staking. Although they also consume energy during the operation, it is a much lower percentage than that used by the traditional Proof of Work validation system used by Bitcoin.
What peculiarities does Solana have and what differentiates it from other cryptocurrencies?
Both Solana mechanisms (PoH and PoS) offer rewards to validators or miners for their work. While Bitcoin miners get BTC, Solana miners get SOL parts.
Let’s look at some of these particularities:
- One notable difference is that Solana blockchain users do not need to work on a validation node to earn rewards through staking. They can delegate this function to another validator who will charge them a fee for earning the reward. (We tell you about it in detail below).
- Solana’s PoH technology has the function of helping the network to determine more efficiently the time of each transaction and with lower energy consumption.
- According to Solana this and other proprietary innovations make its blockchain more secure, scalable and operate better than that of other projects.
- Solana offers much lower transaction costs and times than Ethereum. Because it has a higher throughput than ETH in transactions per second its fees are significantly lower. Around $0.00025 per transaction.
At present almost all recent blockchains use some form of PoS. However, Ethereum, Solana’s biggest competitor, still relies on the PoW mechanism, despite the fact that it has already been announced that with the future Ethereum 2.0 update it will migrate to the PoS mechanism.
Another advantage of Solana is that the end-user can use SOL to interact with a lot of decentralized applications. Almost all are linked to the financial area, such as platforms that allow borrowing or lending, trading cryptocurrencies, or getting rewards through Solana’s staking.
It is also an extremely fast blockchain. Solana has the capacity to process 50,000 transactions per second, and this figure is expected to increase to 700,000 as the network grows.
Buy Solana: 5 reasons to invest in this promising cryptocurrency
1. Solana’s share price is in an uptrend
Since January 2021, the price of Solana has steadily increased. It went from $1.50 to $212 in the second week of September, an increase of more than 14,000%. From there, its price began to retreat, along with the other digital assets, to $157.85 at the time of this writing. Why did this happen?
After its entry into decentralized finance and non-fungible tokens (NFT), its price skyrocketed in 2021. In August, digital currency jumped more than 200%. From that moment it entered the Top 10 cryptocurrency ranking and became the seventh-largest cryptocurrency in the world.
During the first eight months of the year, Solana gained an impressive 5,970%. This caught the attention of institutional investors who were in search of promising investment assets. Such exponential growth in SOL’s price speaks volumes about how this crypto has been making its way into the crypto space.
In early September, the Solana network made a stellar debut in this space with the launch of the Degenerate Ape Academy, a compilation of around 10,000 unique images of simians cartoons. As a fun fact, the works in their entirety sold out in just 10 minutes.
The price of the SOL token immediately skyrocketed, as bidding for NFTs required first buying this cutting-edge digital asset. The foray into DeFi and NFTs has undoubtedly boosted the enthusiasm of Solana’s faithful believers, who are adding more followers to his project every day.
2. Solana has the support of many players
One event that Solana has enthusiastically promoted this year and contributed to raising his stock price and fan base has been Ignition. The virtual hackathon launched by Solana at the end of August and available until October 8, 2021, was undoubtedly another platform hit that allowed him to gain popularity.
But undoubtedly, the reasons for its gigantic growth are to be found in the backing received from the cryptocurrency exchange FTX. From there, an interesting group of Solana-based projects has been launched.
On the other hand, Alameda Research which also supports FTX stands out among the partners and major investors in Solana. It is followed by other firms such as Project Serum, Polychain, Andreessen Horowitz, Terra, Chainlink, Civic, Akash Network, Tempest, and many more. Another compelling reason is its diversity and innovation.
Solana has also recently found support from institutional investors: in early October fund manager Grayscale Investments decided to add Solana to its Digital Large Cap Fund. This decision will allow many institutional investors who cannot or do not want to invest directly in cryptocurrencies due to regulatory issues to do so within the traditional financial circuit. In other words, it implies a considerable flow of money flowing into Solana.
3. Solana has an ecosystem of more than 400 DApps supported by innovation
The Solana network is very versatile. It has almost 400 DApps and its blockchain is still in beta. There are currently a huge variety of applications running on Solana’s blockchain.
Its ecosystem is wide and varied and includes AMMs (Automated Market Makers), decentralized exchanges, NFTs trading platforms, games, investment funds, DeFi platforms… In total, applications running the Solana, still in beta, move billions of dollars.
On the other hand, its ongoing efforts to innovate blockchain technology set this project apart. Solana boasts eight major innovations that make it unique, including Proof of History (PoH):
- Tower BFT, the PoH-optimized version of PBFT.
- Sealevel: Parallelizes transactions and smart contract execution time.
- Turbine: a block propagation protocol.
- Gulf Stream: a Mempool-free Transaction Forwarding Protocol
- Cloudbreak: horizontal scale account database.
- Pipelining: is a transaction processing unit for validation optimization.
- Archivers: Distributed accounting warehouse.
In short, there is no doubt that Solana, while still in beta, has managed to attract an infinite number of developers to its platform. This fact only confirms the enormous potential of the cryptocurrency and gives us a glimpse of the promising future that lies ahead.
4. Solana buyers can earn additional rewards through staking
As mentioned a few paragraphs above, Solana makes use of the proof of stake (PoS, Proof of Stake) mechanism to validate transactions on its network. As the name suggests, any Solana network “participant” can validate transactions and become a network miner, earning money without investing in expensive equipment.
And what is meant by “participant”? Anyone who owns Solana, simple as that. To validate transactions and earn rewards you only need to have Solana coins in a staking-compatible wallet.
As long as the cryptocurrencies are still standing there you will periodically get your reward. According to StakingReward.com, currently, Solana’s staking earns annual interest of between 6.53% and 7.24%.
The amount of annual interest paid tends to fluctuate and depends on whether the user decides to set up his own node (technically more difficult solution in which the integrity of the rewards is charged) or to join a “delegator” node (easy solution and within the reach of anyone), which will take a part of the profits for its intermediation.
5. Solana is not an “Ethereum killer”
Although the Solana platform is seen by many market players as a clear competitor to Ethereum, Yakovenko, Solana’s CEO, doesn’t see it that way. He prefers to say that they are rather competitors and compares the bet to a field hockey game, his favorite sport.
“Competition is awesome, I love competition,” he said in an interview with Blockworks. “I played field hockey my whole life, so anything you can compete in, I’m happy to compete in, whether it’s field hockey or building blockchains,” Yakovenko says.
According to Solana’s creator, nothing is further from reality than wanting to be an “Ethereum killer.” Rather he believes that thanks to the technologies currently available both blockchains will be successful.
“I think both visions [that of the Solana developer team and the Ethereum team] are interesting approaches to the same problem, they are two sides of the same coin. A lot of people are passionate about both approaches and are happy to compete. It just makes us both better,” he notes.
In short, it’s not easy to say that Solana is better than Ethereum or vice versa. Both blockchain projects have their advantages and disadvantages. It may even be, as Yakovenko suggests, that there is feedback between them, a sort of synergy that makes each cryptocurrency benefit from the existence of the other, and thanks to this they achieve greater growth than they would have achieved alone.
How to buy Solana with a regulated broker
For anyone thinking of diversifying their current portfolio and trying out a decentralized application project, which is revolutionizing the blockchain space, Solana is an excellent investment proposition.
If you want to buy Solana (SOL), the option recommended by Investor Times is broker eToro.com, an investment platform used by more than 20 million users, based in London and authorized by CySEC and the FCA (the UK regulator).
If you want to know more about this broker, you have an eToro review at your disposal.
When it comes to buying cryptocurrencies like Solana, eToro offers us great advantages over its competitors: It is one of the few regulated brokers that allows us to invest in real cryptocurrencies and not in derivative products (such as CFD, which have more risks and much higher commissions).
Another great advantage offered by this broker is that it allows you to add funds to the account instantly by credit card, Paypal, or bank transfer (among others). In a few minutes, you will be able to deposit funds and buy Solana or other cryptocurrencies from its wide catalog.