What Is Solana (SOL) And How Can You Invest?

In recent months, some of the major cryptocurrencies have cooled down a bit. But SOL, the original currency of the Solana blockchain, is a major exception. This relatively new currency had a huge run between early 2021 and early September.

But this hot raw material is not without its problems. On September 14, the entire Solana Blockchain was shut down for 17 hours after a Denial of Service (DoS) attack.

That could prove that SOL was overhyped. Or it could indicate that the SOL coin is experiencing growing pains as it scales. If you are interested in investing in SOL and the Solana Blockchain technology, here’s what you need to know.

What is the Solana blockchain?

The Solana Blockchain is a technology created by the Solana Foundation. This organization uses open source code to create and improve the blockchain.

Like all blockchain technologies, the Solana Blockchain uses distributed ledger technology. That means transactions on the blockchain are validated by “validators” in a way that ensures that information is distributed across different nodes rather than centralized.

Unlike the oldest blockchain technologies, Solana uses the more updated approach called “strike.” When staking, validators provide proof of stake (basically proving they have SOL tokens) to keep the blockchain up and running.

This allows the blockchain to function faster and with less energy costs than traditional mining technologies. The result, when it works, is an extremely fast blockchain with transaction costs averaging less than $0.01.

However, the staking method has some drawbacks. In a September 2021 DoS attack (basically, a bot sent tons of traffic to the network), caused the network’s validators to crash, leaving the blockchain subsequently offline for 17 hours.

How does the Solana Blockchain differ from the SOL token?

The Solana Blockchain is a fast, low-cost, open-source technology that allows developers to build their blockchain technologies. Many of the apps built so far are related to DeFi (Decentralized Finance), but others are NFTs, WB3s, and more.

So far, Ethereum is still the leading blockchain in terms of the number of digital apps and smart contracts already built. But Solana’s speed and low transaction costs attract many developers. Solana says its blockchain already has more than 400 blockchain projects and that it is the “fastest growing ecosystem in crypto.”

The Solana Token, SOL, is the “value” or token that keeps the Solana Blockchain going. Since validators have to offer SOL as a proof-of-stake, the SOL token is a critical component to keep the blockchain running.

SOL has grown at a rapid pace

When Solana was first launched in April 2020, it was trading at a price of $0.78 per SOL. The token experienced steady growth for the rest of 2020 and then started an exponential growth curve in 2021.

On September 7, SOL was trading at over $190 per SOL. The token has subsequently experienced wild, mostly downward volatility and is trading at $140 as of now.

While the wild volatility of the SOL token is nothing new in the cryptocurrency world, the token itself has some interesting features. SOL’s critical role in validating the Solana Blockchain gives owners the opportunity to invest in a specific blockchain rather than owning generic cryptocurrency.

How to invest in Solana (SOL)

The easiest way to invest in Solana is to join a cryptocurrency exchange that supports the token and purchase the desired amount. As with all cryptocurrencies, you can buy fractions of SOL if you don’t want to spend the necessary money to buy one full coin.

Here is a short list of some of the best crypto exchanges that currently support SOL in the US:

Investors can also earn SOL by becoming a validator. The directions to become a validator are easy if you are familiar with both open source and cryptocurrency jargon. You must run a validator software program on a local computer to receive a base bet. You earn more with more validation.

Whether you invest in Solana by buying tokens on an exchange or become a validator, you need to decide where to store your coins. Storing your SOL on an exchange is often the easiest option, but it’s also the riskiest because you don’t actually own your private keys.

For better security, you can purchase a hardware wallet. It is important to note that you can use a Ledger or other hardware wallet for SOL, but you must access it via a Solana wallet (eg Ledger Live does not support SOL). A popular option is solar flare

Check out our list of the best crypto wallets here >>>

Are you too late to invest in Solana?

Given the run-up of SOL prices (compared to USD), it is worth considering whether you are too late to invest in this hot coin. Some coins trade at much higher prices and experienced wild growth for nearly a decade before cooling off (at least for the time). Still, others saw increases in price before crashing.

In the world of crypto, anything is possible. The unique relationship between SOL and the Solana blockchain makes it a cryptocurrency with a unique investment angle. But there is no guarantee that the token will continue to rise in price. After all, the code that serves the blockchain is open source and another company can copy it to produce something better.

Final Thoughts

As with all cryptocurrencies, Solana is an alternative investment. It should therefore only have a limited presence in a well-diversified portfolio.

Ultimately, SOL can take off and make you a crypto millionaire. But it can also crash. Hedging your Solana bets with traditional investments (such as stocks, mutual funds and ETFs) is the safest way to protect your finances.

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