What is Solana (SOL) and How Does it Work?

Cryptocurrencies change how people think about money and technology every day. They offer a new way to pay, invest, and build systems without banks or middlemen. People now use digital coins for shopping, saving, or even creating apps that run on their own. This shift excites many because it puts power back in users’ hands.

Blockchain technology fuels this revolution, and some coins stand out for their unique strengths. Solana is one of them, grabbing attention in the crowded crypto world. In this guide, we will review what Solana is and how it works, its pros and cons, and whether it has a future in this busy crypto space.

What is Solana (SOL)?

Solana is a blockchain platform designed to handle many transactions quickly and cheaply. It was created in 2017 by Anatoly Yakovenko and launched in March 2020. The main goal was to solve the problems of slow speeds and high costs seen in other blockchains, such as Bitcoin and Ethereum.

Solana uses a unique system called Proof of History to keep track of time and order events, allowing it to process transactions faster than many competitors.

The network can handle up to 65,000 transactions per second. That’s a huge number compared to Ethereum’s 15 or Bitcoin’s 7 tps. It keeps costs low too – about $0.00025 per transaction. This makes it attractive for developers building apps like decentralized finance tools, NFT marketplaces, or games. 

So, what is SOL? Solana’s native token is called SOL. It’s used to pay for transactions and interact with smart contracts on the Solana network.

Developers like Solana because it supports Rust and C programming languages for building smart contracts. It also has a growing ecosystem with over 400 projects, including Serum, a decentralized exchange, and Raydium, a trading platform. The block time is also super fast (400–600 milliseconds).

Solana Ecosystem

The Solana ecosystem is all the projects, apps, and tokens built on the Solana blockchain. The ecosystem has over 400 projects, including decentralized finance apps, NFT platforms, and games.

Two big parts of the Solana ecosystem are meme coins and DePIN narratives. Memecoins are tokens based on jokes or internet memes, like BONK or POPCAT. They are super popular on Solana because the blockchain is fast and cheap, so anyone can make and trade them easily. A platform called Pump.fun, built on Solana, lets people create meme coins quickly, and over 3 million tokens have been made this way.

DePIN stands for Decentralized Physical Infrastructure Networks. These are projects that use blockchain to manage real-world stuff like internet networks or computing power. Examples of Solana include Helium, which provides wireless coverage, and Hivemapper, which maps roads.

How does Solana work?

Solana is a layer-1 blockchain, meaning it’s its own standalone network (not built on top of some other blockchains). The goal? Make decentralized systems fast and cheap enough for real-world use, like payments, gaming, or NFT marketplaces.

Solana uses validators, which are computers that confirm transactions and keep the network secure. These validators work together using the delegated Proof of Stake (PoS) mechanism, but with a twist: Solana adds Proof of History to it. This means the network splits transactions into small batches and processes them fast, keeping fees very low. 

That’s the basics – now let’s zoom into its key working tech:

Proof of History

Proof of History is Solana’s way of tracking time. Most blockchains need nodes to agree on when transactions happen. This takes time. Solana skips that part and each validator makes a timestamp using a function called SHA-256. 

This function hashes data into a unique code. Each hash links to the one before it. This creates a chain of timestamps. It proves the order of events without extra checks. Validators use these timestamps to process transactions fast. PoH works with Proof of Stake to make Solana secure and quick.

Sealevel

Sealevel lets Solana handle many tasks at once. Most blockchains process transactions one by one. Sealevel runs multiple smart contracts at the same time. Smart contracts are the code for dApps. 

Sealevel finds transactions that don’t conflict. For example, a payment and an NFT mint can happen together. This uses modern hardware like GPUs with thousands of cores. Solana can process thousands of smart contract calls per second.

Solana’s Technology

Solana’s tech is a combo of Proof of History, Sealevel, and a few other tricks working together. Here’s how it all connects:

Proof of History gives the network a built-in clock, slashing the time validators spend syncing up. It’s like every transaction comes with a “time tag” that’s impossible to fake, so the network can move fast without tripping over itself.

Sealevel takes that speed and multiplies it by running thousands of smart contracts in parallel. It’s built to use modern tech – like high-end CPUs and GPUs – pushing performance to levels older blockchains can’t touch.

Other pieces fill in the gaps:

• Tower BFT: Solana’s version of Proof of Stake, optimized with PoH, to keep validators honest and the network secure.
• Gulf Stream: A system that pushes transactions to validators before the current block is even done, cutting wait times even more.
• Pipeline and Turbine: These split up the work of processing transactions and sharing data across the network, like an assembly line for a blockchain.

All this runs on a network of high-spec validators – think machines with 12-core CPUs, 128 GB of RAM, and fast SSDs. That’s a lot beefier than what Bitcoin or Ethereum nodes need, but it’s why Solana can hit those 65,000 TPS numbers in theory (real-world peaks have been closer to 2,000-3,000 TPS so far, still impressive).

History of Solana

Solana started in 2017 when Anatoly Yakovenko, a former engineer at Qualcomm and Dropbox, wrote a whitepaper. He proposed a new idea called Proof of History (PoH) to fix blockchain scalability issues. Bitcoin and Ethereum were slow because nodes had to agree on transaction orders through heavy communication. He began coding in C in late 2017 in a private project.

In early 2018, Yakovenko teamed up with Greg Fitzgerald, another ex-Qualcomm engineer. Fitzgerald suggested switching the code to Rust, a faster and safer programming language. Yakovenko rewrote it in two weeks.

Stephen Akridge, also ex-Qualcomm, joined later and boosted performance by offloading signature checks to GPUs. The trio – Anatoly, Greg, and Stephen – founded a company initially named Loom. They renamed it Solana after Solana Beach, California, where they’d lived and surfed, to avoid confusion with an Ethereum project called Loom Network. Solana’s mainnet beta launched on March 16, 2020. 

Key Milestones

• 2021 Boom: Solana’s token, SOL, soared 12,000% in value. Its market cap hit $70 billion in November 2021, driven by NFT and DeFi hype. Visa added Solana support for USDC payments in September 2023.
• Outages: The network faced issues. In September 2021, it went down for 17 hours due to a transaction surge. More outages hit in May 2022 (7 hours), June 2022 (4.5 hours), and October 2022 (6 hours), caused by bugs or bot attacks. Another outage occurred on February 6, 2024.
• FTX Crash: In November 2022, the FTX exchange collapse tanked SOL’s price by 40% in a day. FTX and Alameda Research held $982 million in SOL. Solana’s market cap dropped from $55 billion in January 2022 to $3 billion by year-end.

As of February 26, 2025, Solana is a top blockchain for speed and low costs. Its market cap fluctuates but ranks it among the biggest cryptocurrencies. It’s used for DeFi, NFTs, and gaming, though outages and centralization critiques linger. The network keeps growing, backed by a strong developer community.

Solana vs Ethereum

Feature	Solana	Ethereum
Smart Contracts	Uses Rust and C languages.	Uses Solidity language.
Consensus Mechanism	Proof-of-History (PoH) + Proof-of-Stake (PoS).	Proof-of-Stake (PoS).
Speed	Faster (65,000 transactions per second).	Slower (About 30 transactions per second).
Cost	Very low fees (Less than $0.01).	Higher fees (Can be $1–$50 or more).

Smart contracts

Solana uses Rust and C programming languages for smart contracts. These languages are harder to learn but can be more efficient. Ethereum uses Solidity, which is easier for developers to use and more popular in the crypto space.

Consensus mechanism

Solana combines Proof-of-History (PoH) and Proof-of-Stake (PoS). PoH helps order transactions quickly, while PoS secures the network. Ethereum uses only Proof-of-Stake (PoS), which is energy-efficient but not as fast as Solana’s system.

Speed and Cost

Solana processes about 65,000 transactions per second, making it one of the fastest blockchains. Ethereum processes only about 15-30 transactions per second, which makes it slower. Solana has very low fees, usually less than $0.01 per transaction. Ethereum has higher fees, which can range from $1 to $50 or even more during busy times or network congestion.

Quick Verdict: Solana is faster and cheaper, while Ethereum is more popular and widely used for smart contracts.

Advantages & Disadvantages of Solana

Advantages:

• Processes over 65,000 transactions per second (TPS) using Proof of History (PoH) and Proof of Stake (PoS)
• PoH creates a timeline for quick transaction confirmation by validators
• The average block time is 400 milliseconds, faster than Ethereum’s 10-15 seconds
• Transaction fees average $0.00025, much lower than Ethereum’s $0.30 or more
• Supports developers building dApps like DeFi and NFT marketplaces

Disadvantages:

• The network faced multiple outages, like a 17-hour downtime in September 2021 from a transaction surge
• Only around 4,500 validator nodes secure it, compared to Ethereum’s 100,000 validators for network security
• 48% of initial SOL tokens went to insiders, raising centralization concerns
• Reliability issues question long-term stability
• Less decentralized than competitors due to fewer validators and high hardware demands.

Solana Price

Solana’s price has seen dramatic changes since its launch in 2020. It started at around $0.22 during its initial coin offering. By January 2021, it was $1.50, but it surged to a peak of $259.96 in November 2021.

This 12,000% rise was driven by growing interest in its fast transactions and NFT boom. However, the price crashed in 2022 after the FTX collapse, as FTX and Alameda Research held large SOL stakes worth $982 million. By December 2022, SOL dropped to $10, with a market cap of $3 billion. In 2023, it recovered to around $23 by March, reaching a $7 billion market cap as the crypto market rebounded.

As of Feb 2025, SOL’s exact price is $139.96 (at the time of writing) with a market cap of $69.73 billion.

Partnerships

Solana Foundation has built key partnerships to boost SOL’s real-world use. In 2020, it teamed up with Circle to bring USD Coin (USDC) to its blockchain, enabling fast, stable payments. This tied into a bigger deal when Circle partnered with Visa in 2021, letting Visa merchants settle USDC payments on Solana. Visa confirmed moving millions in USDC during pilots.

Another major partnership is with Chainlink, integrating its Oracle network in 2021 to update price data every 400 milliseconds, critical for DeFi apps. Solana also joined forces with Tether to add USDT, expanding stablecoin options.

Beyond finance, Solana partnered with Google Cloud in 2022, integrating BigQuery for analytics and running a validator node. Amazon Web Services (AWS) supports Solana nodes via its Node Runner App, easing setup for developers. 

In 2023, Shopify adopted Solana Pay, letting users pay with USDC instantly. Solana Mobile’s Saga phone, launched in May 2023, comes with preinstalled dApps, sold in regions like the US and EU. These partnerships with tech giants and payment firms show Solana’s push for mainstream adoption, though their success hinges on network reliability.

Solana Wallet

Solana wallets let users store, send, and stake SOL tokens securely. The best Solana wallets are:

• Phantom Wallet is a popular choice, a browser-based wallet launched in 2021, supporting SOL and Solana-based tokens. It integrates with dApps like Raydium and offers staking with over 50 validator options, averaging 5-7% annual rewards. 
• Solflare Wallet also supports staking and NFT management. It has a simple interface and works on desktop or mobile. 
• Solana’s command-line wallet provides access to new features before they hit third-party apps, though it requires technical know-how.
• Ledger and Trezor hardware wallets also support Solana and SPL tokens.

How to Invest in Solana (SOL)?

Here is a step-by-step guide on how to buy Solana:

1. Choose a Crypto Exchange: Select a cryptocurrency exchange that supports SOL. Coinbase serves over 100 countries and accepts USD or EUR. Binance offers low trading fees starting at 0.1% per trade and supports debit or credit card payments. Bybit and MEXC are also reliable options.
2. Create an Account: Sign up by providing an email, password, and identity verification documents like a driver’s license or passport. Verification takes a few minutes on Binance or up to a day on Coinbase depending on volume.
3. Deposit Funds: Add money to your account using bank transfers, debit cards, or credit cards. Binance accepts card deposits with a 1-3% fee.
4. Find SOL/USDT: Go to the trading section and search for SOL/USDT pair. 
5. Place an Order: Use a market order to buy instantly at the current price. A limit order lets you set a specific price, such as $140. Binance processes trade in seconds due to its high-speed system.
6. Confirm Purchase: Check your order details and confirm. SOL appears in your exchange wallet instantly. 

How to Store SOL Coin?

You have two main options to store your SOL coins: software wallets and hardware wallets. 

Software wallets are free apps or browser extensions. Phantom is a popular choice built for Solana. It supports SOL, NFTs, and token swaps with a simple interface. 

• How to Store SOL on Phantom: Download Phantom from its official site, create a wallet, and save your 12-word seed phrase offline. This phrase recovers your funds if you lose access. You can send SOL from an exchange to Phantom by copying your wallet address and pasting it into the exchange’s withdrawal section. Transactions cost less than $0.01 and complete in seconds due to Solana’s speed.

Hardware wallets offer more security by keeping SOL offline. Ledger Nano X is a top option costing $149. It stores SOL and over 5,500 other cryptocurrencies. 

• How to Store SOL on Ledger Nano X: Connect it to your computer, install the Solana app via Ledger Live, and generate a wallet address. Transfer SOL from an exchange to this address. Ledger’s keys stay offline, protecting against hacks.

Avoid keeping large amounts on exchanges like Coinbase. They control your keys, and hacks have happened – like the recent $1.4 billion Bybit breach in 2025. 

Is Solana a good investment?

Solana is a good investment depending on its performance, technology, and risks. Solana’s price hit $250+ in November 2021 but sits at $140 today at the time of writing. It ranks among the top 5 cryptocurrencies by market cap. Solana hosts many decentralized apps and a booming NFT market, with sales overtaking Ethereum sometimes. However, risks exist as Solana faces outages.

Conclusion: Does Solana have a future?

In a nutshell, Solana’s future looks bright because of its powerful technology and real-world use. Its blockchain uses Proof of History and Proof of Stake to process 65,000 transactions per second with fees under $0.01, beating many rivals in speed and cost. 

This makes it perfect for decentralized apps, NFTs, and DeFi, supporting over 400 projects already. Staking lets users earn 7% yearly returns, adding value for holders. While it’s had some network hiccups, its ability to handle huge volumes and stay eco-friendly keeps it ahead.

FAQs

How much is Solana worth?

Solana (SOL) is currently priced at around $140 per coin, according to live data from CoinMarketCap. Its market capitalization stands at approximately $70 billion, making it one of the top cryptocurrencies by value.

Is Solana a buy, hold, or sell?

Determining whether Solana is a buy, hold, or sell depends on your financial goals and risk tolerance. Its price of $140 and a market cap of $70 billion show a strong market presence, but it’s down over 52%% from its all-time high of $294.33, per CoinMarketCap data.

Can I make passive income with Solana?

Yes, you can earn passive income with Solana by staking your SOL tokens. Platforms like Binance offer around 7% annual returns for staking, where you lock up SOL to support the network and earn rewards. You can check out our guide on the best crypto staking platforms.

What is Solana used for?

Solana is used to power fast, low-cost transactions and decentralized applications (dApps). It supports over 400 projects, including DeFi platforms, NFT marketplaces, and gaming ecosystems, with a capacity of 65,000 transactions per second, per Solana’s official claims. SOL tokens pay for fees, staking, and governance on the network.

What blockchain is Solana on?

Solana operates on its own native blockchain, designed as a Layer-1 network. Unlike Ethereum, which uses rollups, Solana relies on its Proof of History and Proof of Stake mechanisms for scalability. It’s a standalone chain, not built on another blockchain.

What makes Solana unique?

Solana stands out due to its Proof of History (PoH) combined with Proof of Stake (PoS), enabling it to handle 65,000 transactions per second with fees below $0.01, per Solana Labs. This hybrid consensus, unlike Ethereum’s slower 15 tps, boosts speed and efficiency.