What Is Solana?

Written by

Tamara T.

Crypto Analyst

This site contains affiliate links. If you click on one, we may earn a commission.

What is Solana and how does it work? 

This sounds like a logical question, especially for beginners who don't know a lot about cryptocurrency.

When was Solana launched and how many Solana coins are there? 

To answer these questions, I have prepared a guide for you, so you can dive into a detailed explanation of SOL.

By reading this guide, you can also learn:

  • The Solana history
  • Benefits and drawbacks of the coin
  • Solana  price history
  • How to use Solana 

Let's start! 
 

What Is Solana?: A Quick Explanation

Solana is a fast-rising cryptocurrency and blockchain platform. Its role is to host decentralized and scalable applications. 

Since its inception in 2017, Solana has operated as an open-source protocol. 

Solana Labs built its blockchain, while Solana Foundation from Geneva is the owner of the platform.

SOL stands out because of its speed and the number of transactions it can tackle. It continues to make staggering progress and has turned into the fifth-biggest cryptocurrency on the market.

Solana uses a Proof-of-History (PoH) mechanism that facilitates automatic transactions. 

Additionally, it uses a Proof of Stake (PoS) algorithm for enhanced security of the network.
 

Solana History

If you intend to use SOL for the first time, you may want to know who created Solana.

Solana dates back to 2017, when Anatoly Yakovenko introduced its whitepaper.

As part of the paper, he represented the authentic timekeeping technique Proof of History (PoH) to automate the order of transactions process.

He believed that it was the key to improved scalability of crypto networks.

Yakovenko soon joined forces with Greg Fitzgerald, his Qualcomm’s colleague, to develop a PoH blockchain Testnet. They published the first official paper and the Testnet in February 2018.

Stephen Akrige was another colleague to join them after proposing the outsourcing signature verification for enhancement of performance. 

Fitzgerald, Akrige, and Yakovenko later founded the company that has become Solana Labs.

The Solana founders and their new company started collecting money for the development of its crypto network in 2018.

Multicoin Capital then conducted a financing round for SOL, which resulted in $20 million in private token sales by the end of July 2019.

In 2020, the company also disclosed the Tour de SOL public incentive Testnet.

Solana's beta Mainnet appeared in March 2020, with brand-new contract features and basic transaction options, soon after collecting $1.76 million from the auction.

Currently, Solana Labs is a key contributor to the SOL network, while the Solana Foundation supports regular development and building efforts.
 

How Does Solana Work?

Do you want to know how Solana works?

It uses proof of history alongside delegated proof-of-stake mechanism.

According to the words of an associate professor of finance, Bryan Routledge, Solana is trying to tackle a lot of transactions in a record time.

It wants to mirror transactions of large systems such as Visa, while maintaining its level of decentralization. 

This also leads to enhanced scalability, as well as low environmental and monetary costs.

The speed of adding blocks to Solana’s blockchain also requires a higher level of security.

Therefore, SOL’s proof of history algorithm ensures better security, as it timestamps every block.

Upon the staking process, SOL coins serve as collateral to process network transactions. 

This includes the validation of smart contracts and using the token as a non-fungible token (NFT).

In this section, we should also answer the question: What is Solana coin?

SOL is a native token of cryptocurrency and a means of conveying value. 

Launched in 2020, it has become one of the leading cryptos in the marketplace.

The SOL token scheme resembles Ethereum's.  

Holders of the token stake it to validate all transactions via the PoS mechanism. In addition, the token is a means of rewarding and paying transaction fees.

How many Solana coins are there? is the next useful piece of information to find out.

Estimates say that there will be over 500 million coins in circulation. At the moment, the total supply of Solana exceeds 511 million coins.

Out of this number, about 60% of SOL belongs to the founders and the Solana Foundation. The community owns 38%.
 

Solana Advantages 

What is Solana crypto is not the only thing you should ask about.

Before using this popular coin, you also need to be aware of its benefits. 

Below you will find some of them.
 

Swift Transactions and Low Fees

Solana is more efficient than Ethereum when it comes to the number of transactions it can tackle per second.

SOL can tackle 50,000 transactions per second, which is incomparable to ETH’s 14 transfers per second.

In addition, customers verify and secure the entire network by ownership of coins.

As for the costs, they are lower than one cent per transaction.
 

Smart Contracts and NFTs

Solana is known for supporting smart contracts and non-fungible tokens.

At the moment, SOL is getting market share with NFT marketplace Solanart. 

The huge bonus for NFT buyers on  Solanart is prompt transactions and low fees.

Furthermore, SOL is a faster option for smart contracts than Ethereum.
 

Environmentally Friendly

Solana has solved one of the biggest challenges of other cryptos - negative environmental impact.

It is a more sustainable solution than Bitcoin and alternative cryptos.

Customers can benefit from its speed thanks to the consensus mechanism and no requirement for significant computing power.

Based on the proof of stake model, SOL customers only secure and authenticate the network from staking.
 

SOL Rewards

Customers who engage in SOL staking can benefit from excellent awards.

The process is relatively simple; you just need to open a crypto wallet before you buy some coins and send them to the wallet.

When you are in the wallet section, just choose the delegate option and pick a validator, as well as the amount you want to stake.
 

Solana Disadvantages 

Asides from the benefits of SOL, potential customers should find out about its drawbacks.

That's the reason to delve deeper into the topic and decide whether you should use it for regular transactions.
 

Low Stability

Solana has a shorter track record than Ethereum.

The crypto community is also smaller, so you may want to consider more trusted options for investment purposes.

However, you should be aware that SOL is still new in the market, so it's not realistic to expect a flawless performance.

With the additional upgrades of the network, the crypto is set to become a more secure option. 
 

Limited Number of Projects

Solana has a limited number of active projects. According to information on the site, it has around 350 projects, including NFTs, DEX, DeFi, games, and Metaplex.

 Also, the crypto will soon be receiving more projects thanks to its benefits. 

An increase in the number of projects will also allow Solana to challenge ETH. 
 

Inflation

Solana stands out as a crypto with low inflation.
 
It doesn't have a fixed supply and its total amount gets bigger every year.

As a result, inflation declines at 15% a year until it reaches 1.5%.
 

Low Level of Decentralization

The Solana network boasts only 1000 validators. With more validators, the network will become more secure.

An increase in the number of validators will also enhance trust among investors.
 

Solana Price History

Why is Solana going up? 

If you want to understand its movements, it would be useful to familiarize yourself with the SOL price history.

You should follow the same advice when exploring why Solana is going down.

After the initial coin offering in 2020, SOL started trading at around $0.22. It reached $1 and hit $1.50 on the first day, but returned to $0.50 before the end of the same month.

From June 2020, SOL started to recover and traded for over $4 in August. The peak occurred in September 2022, when one coin was equal to $5.10.

During 2021, the price of SOL  fluctuated. The year started very well for crypto, and the price tripled, reaching $19 in February. 

Its staggering increase continued in the next months, which led to a price of $61.44 on May 18.

After a huge decline in the following days, the value returned to $40 in June 2021.

This same year saw the Solana all-time high of $259.96 on Nov 06, 2021.

During 2022, the value of SOL significantly oscillated, and the end of the year was pretty challenging.

The Solana´s lowest price ever was $8.14 on 29 December 2022.

At the moment of writing this review, the price of SOL was $13.03 with a 24-hour trading volume of $1,082,243,120.
 

How Many People Own Solana?

If you are now aware of who owns Solana, you may also want to know how many people hold the crypto.

You should know that Solana’s ownership is significantly fragmented. This means that individual wallet addresses hold large percentages of the total supply. 

CoinCarp data reports 9,154,449 active wallets with SOL.

The first 100 holders hold about 32% of the total token supply. 

At the time of writing this review, the wallet with the most SOL was BQeizWYD2dHmQq1b6HQqwBPrLWKitnhv5K82ZnRNPL8z, having 9,515,694 or 1.86 of the total supply.

The second position took the wallet 8BseXT9EtoEhBTKFFYkwTnjKSUZwhtmdKY2Jrj8j45Rt, with 4,776,940     coins or 0.93% of the total supply.
 

What Is Solana Used For? 

What is SOL crypto’s scope of use?

This is quite an intriguing topic for anyone interested in buying some coins.

Below you can find the most frequent fields of application: 

  • Spending SOL at businesses
  • Using Solana to earn a passive income
  • Using apps on the SOL ecosystem
  • Trading it on popular exchanges 

As opposed to Bitcoin, Solana is not designed as a payment method. 

However, you will find many merchants accepting it as an option.

In addition, you will see that many crypto platforms have cards or apps for transferring the crypto or using it at certain locations.

As for the brands accepting SOL as a payment method, you will find companies from different sectors, including beauty, food, drinks, health, music, software, travel, NFT, and more.

Some of them are Mineshop, Northern VoIP, The Sun of Soul, Serpent Publishing, Pita Barcelona, High Life Goods, and Upper Limits, among others.
 

What Is the Future of Solana?

The future of Solana is bright, and many experts believe in its potential.

Even Ethereum’s founder Vitalik Buterin tweeted support for Solana on December 29, 2022.

He said: 

“Some smart people tell me there is an earnest smart developer community in Solana, and now that the awful opportunistic money people have been washed out, the chain has a bright future.”

According to CoinPriceForecast, the price of Solana will reach $33.52 by the end of 2025.

The same source states that the SOL price could reach $74.78 by the end of 2030.

All these predictions should be taken with a pinch of salt. 

We all believe that Solana has a great future ahead, but estimated prices are not fully accurate.

Keep in mind that the cryptocurrency market remains highly volatile, and prices could change on a daily level.

Always prioritize your research if you plan to buy any coin including Solana and check different sources before making investment decisions.