What Is Solana Used For

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

Over the last year, Solana has seen a huge influx of both individual and institutional investors, making it one of the most widely held cryptocurrencies. Solana is a strong challenger to Ethereum due to its substantially quicker transactions than both the Bitcoin and Ethereum networks and its complete environment for developing decentralized apps and producing non-fungible tokens (NFTs).

Solana isn’t the only Ethereum alternative, but it’s fast transactions and minimal costs have made it a popular favorite. For this reason, the value of the Solana native token (SOL) has skyrocketed over the past few years amid a surge in demand.

What is Solana, how does it function, why has it become a big rival in the cryptocurrency field, and how to invest in Solana will all be discussed in this article.

What Is Solana (SOL)?

For those unfamiliar, Solana is a blockchain-based platform that runs on a distributed network and fuels several distributed applications (dapps). Solana’s native token, SOL, is a cryptocurrency that can be used for making purchases and payments, as well as for securing the network and gaining staker incentives.

To process transactions and keep the Solana blockchain running smoothly, Solana relies on a distributed network of computer nodes (servers). Solana’s transaction rates are up to 710,000 per second, making it significantly quicker than Bitcoin and Ethereum. Solana’s transaction throughput is far higher than that of Ethereum (15 transactions per second on average) or even payment processor Vias (60,000 transactions per second).

The Solana Foundation oversees Solana, an open-source project. A grant program to fund initiatives to increase Solana’s censorship resistance is maintained and administered by the nonprofit foundation.

About Solana

Solana was conceptualized by Anatoly Yakovenko, who in 2017 used the term “evidence of history” in a white paper. The goal was to develop a distributed network of computers that could maintain synchronization with one another, facilitating the processing of transactions at a rate far higher than that of current blockchains like Ethereum and Bitcoin.

In 2018, Yakovenko and Greg Fitzgerald, a programmer who had worked with him at Qualcomm and was formerly known as Loom, launched the first version of Solana. Fitzgerald showed that Solana can process and validate 10,000 transactions in under one second on the test network.

Yakovenko’s Qualcomm colleague Stephen Akridge soon after demonstrated how the speed of Solana might be increased by employing graphics processors to offer signature verifications on transactions. This resulted in Solana, the fastest blockchain currently accessible, releasing on cloud-based networks in the middle of 2018 with the capacity to execute up to 250,000 transactions per second (in brief bursts).

The Solana network requires its users to utilize the network’s native token, SOL, for all financial transactions. A total of 511,000,000 tokens were issued, with somewhat more than 310,000,000 still in use.

Over a thousand different applications have been created on top of the Solana network, making it one of the most popular crypto platforms for developers. The original SOL token is now one of the most valuable cryptocurrencies, with a market valuation of over $30 billion as of 2022 and a per-token value that has increased from under $1 to over $100 in 2021.

Differences Between Solana and Bitcoin and Other Cryptocurrencies

Solana’s “proof of history” mechanism successfully synchronizes all transactions on its distributed network. Solana’s creator first suggested this concept in a whitepaper, and developer Greg Fitzgerald ultimately brought it to fruition for the 2018 launch of Solana.

Because every node in the Solana network is in sync at all times, the blockchain is able to operate more quickly thanks to proof of history. Solana’s new speed makes its payments and transfers more than 10,000 times quicker than those of its competitors (notably Bitcoin and Ethereum).

The processing costs for Solana transactions are designed to be extremely minimal, generally coming in at less than $0.01. Ethereum transaction costs, in contrast, are occasionally considerably greater than $100. With such a drastic price differential, Solana is an appealing platform for both programmers and regular people.

Finally, Solana provides access to several prominent NFT markets. Solana now hosts over 800 NFT projects, and that number grows every week. However, most NFTs are still created on the Ethereum blockchain.

Should You Put Money Into Solana?

By the end of 2021, Solana had become one of the year’s most talked-about endeavors, with the value of its SOL token having increased by more than 10,000%. Solana is attracting greater popular attention and institutional investment interest thanks to its established ecosystem, widespread developer acceptance, and growing services (including NFTs).

But, is it wise to put money into Solana? What if it’s already too late? Even though Solana’s adoption and price have skyrocketed, the company is still young and has plenty of opportunity to expand. When compared to its major competition, Ethereum, Solana’s market valuation is still barely a tenth as large. Solana’s future expansion might be aided by its over a thousand new projects and competitive advantage of substantially faster transaction speeds.

Therefore, anyone thinking about putting money into Solana, or cryptocurrencies in general, should know that doing so is very speculative. The entire crypto sector is inherently more volatile than most other assets, so although Solana might see enormous gains, it could also experience massive downward swings. Investing in Solana is not without risk, so think carefully about your decision and get expert advice if you’d like.

Where Can I Buy Solana?

Tokens for Solana (SOL) may be acquired on many different markets. Distributed markets like Raydium provide trading in Solana as well.

If you plan to store your cryptocurrency assets in your own digital wallet, it may be best to purchase via a decentralized exchange. To convert cryptocurrencies in your Solana wallet (such Bitcoin) to SOL tokens, for instance, you may link your wallet to the Raydium platform.

Buying via a centralized exchange provides further security, such as safekeeping of assets, identification verification to avoid fraud, and account security safeguards like two-factor authentication. Your Solana holdings may be eligible for interest payments at some exchanges.

On the Solana platform, users may stake their coins to earn interest. This works like a CD in that Solana investors can earn interest on their SOL token holdings for a certain length of time. In order to stake SOL tokens on the Solana platform, a user must first move SOL coins to their own Solana digital wallet.

Bottom Line

Solana is a rapidly growing cryptocurrency because it facilitates cheap, lightning-fast transactions. Solana is gaining ground on rivals like Ethereum and Cardano thanks to its expanding ecosystem of use cases and nascent NFT marketplace.

Solana is one of the more recent ecosystems, and despite having numerous advantages over previous blockchain-based endeavors, it is continually expanding and improving. Most of the existing Solana projects are supported by the Solana NFT marketplace, making it one of the platform’s most dynamic components. Additionally, hundreds of decentralized finance apps are already being developed, expanding Solana’s potential as a financial infrastructure platform.

Solana is now one of the most exciting cryptocurrency projects, but whether or not its meteoric rise will continue into the future remains to be seen.

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