Solana is a well-known blockchain platform and a growing rival to Ethereum. While Solana claims to be the fastest blockchain in the world, the platform’s popularity and scalability have propelled its native token, SOL, into the top ten cryptocurrencies by market capitalization.
When compared to well-known cryptocurrencies like Bitcoin and Ethereum, Solana’s price is relatively low, trading at around $40 at the time of writing, making it an appealing option for new investors. If you want to invest in Solana, here’s what you need to know about buying and selling SOL.
SOL’s History
While the Solana (SOL) cryptocurrency token will not be available until 2020, the Solana Foundation has been working since 2017. Anatoly Yakovenko and Greg Fitzgerald left Qualcomm in 2017 to establish the Solana Foundation. Solana is a strong supporter of Sam Bankman-Fried, the centi-billionaire and CEO of FTX Exchange. He reportedly bought his position in Solana for $3 and has held it through the most recent price increase. Solana traded for more than $250 at its peak and is now trading at a significant discount to its all-time highs.
The token will be available for purchase in April 2020 for approximately $0.75. Over the course of the year, the price of Solana nearly doubled. Solana did not gain mainstream attention until 2021, when it quickly rose to the tenth largest cryptocurrency in terms of market capitalization. Solana is one of the top ten most valuable cryptocurrencies by market cap at the time of writing, with a valuation of more than $14 billion.
What Is Solana?
Solana is a smart contract-enabled cryptocurrency that uses proof-of-stake and proof-of-history consensus to secure its blockchain. Ethereum is currently proof-of-work, which significantly contributes to the network’s high gas costs. To understand the differences between other cryptocurrencies and Solana, you should become acquainted with these various consensus models.
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Proof-of-work secures blockchain transactions by utilizing computational power. Bitcoin, Litecoin, and Dogecoin all use proof-of-work, and Ethereum is in the process of switching from proof-of-work to proof-of-stake.
Validators with a financial stake in the cryptocurrency verify proof-of-stake blockchain transactions. Anyone with enough cryptocurrency to stake on the blockchain can often become a validator. This staked cryptocurrency is used to ensure the integrity of validators. If they attempt to engage in fraudulent transactions, their staked cryptocurrency assets will be confiscated as punishment.
Proof-of-history works by adding a timestamp to the blockchain. Using a verifiable delay function, transactions can be verified based on when they are sent. The sequence of transactions is determined by the time the transaction is sent, as opposed to proof-of-work and proof-of-stake.
To differentiate itself, Solana introduces a combination of architectural design choices aimed at providing faster transaction settlement times and an infrastructure that enables developers to launch and write customizable applications in multiple programming languages. Solana is one of several layer 1 blockchain projects vying for attention, including Cardano, Ethereum, Avalanche (AVAX), and Binance Smart Chain, all of which aim to create an ecosystem of cryptocurrency-powered products and services.
Where to buy SOL?
You must first open an account with a cryptocurrency exchange in order to purchase the Solana token SOL. The following are the top exchanges where users can buy and sell SOL in US dollars (USD):
- Coinbase Exchange
- Kraken
Solana can be purchased and sold on some cryptocurrency exchanges in conjunction with Tether (USDT), a stablecoin. A stablecoin is a cryptocurrency with a more stable valuation if you’re new to the cryptocurrency world.
SOL and USDT are traded on the following exchanges:
- Binance.US
- KuCoin
How to buy Solana
Step 1: Choose an exchange
Solana is still one of the most popular cryptocurrencies, so finding it on an exchange should be simple. Many of the centralized exchanges reviewed accept SOL, and centralized exchanges are a popular way for cryptocurrency newcomers to get started.
Centralized Exchanges
A centralized exchange is a company-run platform that creates a cryptocurrency market and charges transaction fees. Some traditional brokerage firms run cryptocurrency platforms, while others are solely involved in the cryptocurrency world.
These mainstream platforms provide some benefits in terms of simplicity due to their centralized nature. You can purchase cryptocurrencies with cash, for example, if you do not already own any cryptocurrency. Furthermore, while cryptocurrency is not regulated in the same way that stocks are, crypto exchanges may offer some customer protections that are not available elsewhere in the cryptocurrency space.
Decentralized Exchanges
A decentralized exchange (DEX) connects people who want to trade one cryptocurrency for another. By requiring only a network fee to complete a transaction, decentralized exchanges can reduce costs. While network fees on some platforms can be prohibitively expensive, Solana is one of the least expensive major cryptocurrencies.
However, it should be noted that decentralized exchanges do not accept cash. To use one, first obtain some cryptocurrency. To make matters even more complicated, DEXes that sell Solana may not accept the cryptocurrency you own.
When using a DEX to buy SOL, keep in mind that transactions (even errors) can be irreversible. Conduct research to ensure you’re using a reputable exchange. Solana’s website includes a research tool for DEXes and other projects that make use of its technology.
Step 2: Buy Solana
Solana can be bought using USDT or Bitcoin. Tether (USDT) is a stablecoin that is pegged to the US dollar, simulating the purchase of fiat currency. Some cryptocurrency investors prefer to trade against Bitcoin because it provides a measure of how well a cryptocurrency investment performs in comparison to Bitcoin.
Your purchase order can be either a market or a limit order. Limit orders are filled when the cryptocurrency reaches a predetermined price, whereas market orders are filled instantly at the market price. Your order will be cancelled if the cryptocurrency never falls to that level.
Step 3: Store your Solana
To store your tokens when investing in Solana or other cryptocurrencies, you must use a crypto wallet.
There are several cryptocurrency storage options available; which is best for you depends on your risk tolerance and intended use for your cryptocurrency:
Hardware Wallets: A hardware wallet is a physical device that functions similarly to a flash drive. Because hardware wallets are not connected to a network or the internet, they are considered “cold” storage and are generally more secure.
Paper Wallets: As the name implies, a paper wallet stores your private keys on paper or with a printed QR code. Make a plan for where you will keep your paper wallet if you decide to use one; if you lose that paper, you will lose access to your cryptocurrency.
Software Wallets: A software wallet may be preferable if you want more convenient ways to access your cryptocurrency and buy and sell your holdings. You can use a software program or a downloadable app to store your cryptocurrency. The software is less secure than hardware or paper wallets because it is linked to the internet, but it allows you to use your cryptocurrency more easily.
Crypto Exchanges: Some cryptocurrency exchanges, like CoinBase, will store your cryptocurrency holdings. Using an exchange for storage, on the other hand, can be risky, and is usually only recommended for small amounts and short periods of time.
Funding your account
You can create an account fairly quickly if you use a centralized exchange, but you may be required to provide some information, such as a picture of your ID. While this may appear to be intrusive at first, it is standard practice on centralized exchanges. Anti-money laundering and “know your customer” regulations must be followed by these businesses.
Exchanges provide a variety of options for depositing funds into your account. Some encourage bank transfers, debit card payments, or credit card payments. Depending on whether the exchange has previously worked with your bank, initiating a transfer may be as simple as filling out paperwork or calling your bank.
Check the fees before deciding on which exchange to use. Moving money can be costly with some providers.
You can exchange Solana for another cryptocurrency if you don’t want to use cash. Moving a cryptocurrency onto a platform can be a convenient way to pay for Solana; however, not all cryptocurrencies can be directly exchanged for one another, and the options vary depending on the exchange.
Consider whether you want to increase your overall crypto holdings or simply add Solana to the investment mix in your existing crypto portfolio when deciding whether to buy with cash or cryptocurrency.
If you use a decentralized exchange, you will not need to create an account. All you typically require is a cryptocurrency wallet containing cryptocurrency that can be exchanged for Solana.
Again, if you don’t already have a wallet or don’t know how to conduct transactions on your own, you should investigate centralized cryptocurrency exchanges.
Is Solana a good investment?
Solana could be a good long-term investment if it can truly compete with cryptocurrencies like Ethereum and Bitcoin. Ethereum’s blockchain continues to have the most infrastructure, which includes decentralized exchanges (DEXes), non-fungible tokens (NFTs), and automated lending protocols. Given the importance of network effects in the crypto industry, it is unlikely that Solana will be able to compete with their network if they are unable to build out their infrastructure before other cryptocurrencies migrate to proof-of-stake.
