A Beginners Guide to Buying Solana

Founded in 2017, Solana has become one of the most popular coins on the market. The team at Solana have created a new process of dealing with slow transaction times and throughput issues. Solana's team recognised that time is a major issue facing more popular currencies, as such, a new timekeeping technique referred to as 'Proof of History' was introduced to resolve this issue.

Not only is Solana currently the fastest blockchain in the world, it is also an open source programmable blockchain which allows developers to build D'Apps and crypto marketplaces. This open-source platform allows for a high level of scalability.

Step one: Understand what you're buying

What is Solana?

Solana is a layer-one blockchain developed by Solana Labs in 2020 and operates on a Proof-of-Stake consensus model.

Solana’s Proof-of-stake network minimises its impact on the environment. Each Solana transaction uses about the same amount of energy as a few Google searches. Moreover, the blockchain incorporates Proof-of-History and time-stamping transactions to enhance its scalability. Computational load is also reduced, as validators can only process a small number of transactions at a time. Solana primarily serves smart contract applications with much more cost-effective transactions, compared to Ethereum. NFT trading and DeFi activities on Solana are also praised for the blockchain’s creative and supportive ecosystem.

Solana’s native token is SOL, which is used to cover gas fees and staked by validators to secure the network, with penalties for malicious behaviour similar to Ethereum.

A Brief History of Solana

Anatoly Yakovenko and his team at Solana Labs first launched the Solana blockchain in 2017. Yakovenko’s vision was to build a blockchain that could address the limitations of existing layer-1 networks (Ethereum, for example), especially the scalability and transaction speed.

To ensure its high throughput, Solana employs a unique consensus mechanism called Proof-of-History (PoH) as a part of the Proof-of-Stake validation. Since 2020, Solana has experienced rapid growth within its ecosystem, attracting developers and users due to its faster speeds and lower fees. However, the network has faced periodic outages, leading critics to question the platform’s reliability and security. Recently, the blockchain has undergone a significant rally and continued to stay bearish despite market volatility as a proof for its robust resilience and practical utilities.

Solana’s Significant Features

• Scalability
  Solana is now ranked as the fifth largest crypto with a market cap of $69,073,715,088 USD or $103,155,030,642 AUD. The blockchain is a leading network designed for flexible speed expansion as more validators join the project.
  This implies that the more transactions performed on the platform, the faster and more scalable Solana will be. Therefore, there is no limit to Solana’s growth.
• Speed
  Solana’s speed is just the beginning. The project is designed to increase speed as more validators process transactions thanks to its innovative Proof-of-History. Solana has block times of 400 milliseconds — and as hardware gets faster, so will the network.
  As it is, Solana can process over 2,800 transactions per second.
  However, some analysts say that theoretically, it can process up to 710,000 transactions per second, although this has only been achieved in test net conditions.
  The beauty of this is that Solana can ensure fast payments for its users as well as applications built on it in less than 0.01 seconds.
• Ecosystem
  Solana’s ecosystem is significantly impressive. This platform accommodates several projects across multiple sectors in the crypto industry such as Dapps, DeFi, NFTs, and Web3. Some prevalent projects include Pyth and Wormhole in Infrastructure, Helio and Circle in Payments, or Tensor in trading NFTs.
  This community makes Solana appealing to both start-up organisations and investors, as well as crypto-savvy investors.
• Low Fees
  Solana is one of the cheapest, most affordable, and most efficient networks out there. A single transaction conducted on the platform can cost about $0.00064.

Some transactions on Solana might incur additional fees when users want to boost their transactions against other users for quick execution. The prioritisation fee is calculated by multiplying the requested maximum compute units by the compute-unit price (specified in increments of 0.000001 lamports per compute unit) rounded up to the nearest lamport. Lamport is a fractional native token with the value of 0.000000001 SOL. Thanks to Solana’s Proof-of-History (PoH), and its Proof-of-Stake (PoS), the platform has been able to peg transaction costs to a fraction of a penny.

What Makes Solana Unique?

The main concept that sets Solana apart from any blockchain is the Proof of History, which provides Solana with one of the highest throughputs of any Layer-1 blockchain at time of writing. This also applies to smart contracts, thanks to Sealevel, which is the world’s first parallel smart contracts runtime.

The primary method to reach consensus on blockchains has been through 'proof-of-work' (PoW), where network members (miners) solve complex mathematical puzzles to process and validate transactions. This approach was used by Bitcoin and Ethereum (historically). However, this method has drawn criticism for its energy inefficiency, high costs, and lack of scalability.

In response to these challenges, many blockchains have transitioned to a different consensus mechanism called 'proof-of-stake' (PoS), which involves users locking up cryptocurrency assets to become validators. These validators perform similar tasks to miners but with greater energy efficiency and lower entry barriers, as less computational power and hardware are required. Ethereum is adopting PoS as part of its Ethereum 2.0 upgrade.

Solana's Proof-of-History (PoH) breaks from the sequential block production model used by both PoW and PoS. Instead of relying on blocks to establish time and order, Solana chains messages together to create a historical record that establishes the relative order and time of each message. This 'cryptographic timestamp' enables Solana validators to verify proofs in any order, leading to superior throughput and efficiency.

This innovation allows Solana to handle up to 710,000 transactions per second with 400-millisecond block times.

These are just two of the eight core innovations that give Solana unique selling points to attract global businesses. Additional initiatives are Tower BFT, which is Solana’s custom implementation of Practical Byzantine Fault Tolerance; Pipeline, a web-scale transaction processing unit; Turbine, Solana’s block propagation protocol that solves the blockchain scalability trilemma; Cloudbreak, the project’s horizontally-scaled accounts database; Gulf Stream, a mempool-less transaction forwarding protocol; and Archivers, Solana’s blockchain data storage solution.

Solana vs Ethereum: A thorough comparison

Non-Fungible Tokens

Solana and Ethereum offer characteristic NFT features. While Ethereum has long dominated the NFTs market, Solana's rapid transaction speeds and lower fees have become compelling factors.

• Network Size and Popularity: Due to its longstanding establishment, Ethereum now boasts the largest NFT ecosystem. This translates into a wealth of existing users and supporting services.
• Growth and Scalability: Solana's NFT ecosystem is experiencing swift expansion driven by its scalability. The feature allows for faster NFT transactions execution and significantly facilitates growth within the Solana community.
• Transaction Speeds: Solana stands out with a rate of nearly 2,900 transactions per second compared to Ethereum's significantly slower rate of around 15 transactions per second. This unmatched speed has enhanced user experience and drawn a giant new user base for the blockchain.
• Transaction Fees: Ethereum's congestion and slower speeds often lead to higher transaction fees. By contrast, Solana's lower transaction costs make it more accessible to a broader audience.
• Enabling Creativity: Solana's speed and affordability stimulate freedom in NFT creation. For instance, in the crypto gaming area, the fast speeds are particularly advantageous for NFT game developers since it allows them to explore any potential in the most comfortable way.

Consensus mechanism: PoS vs. PoH

Solana and Ethereum are both fueled by cryptocurrencies, but they employ different mechanisms. Ethereum has recently transitioned from Proof of Work (PoW) to Proof of Stake (PoS) with its Ethereum 2.0 upgrade for a more sustainable and scalable network. In PoS, validators stake their ETH to validate transactions and uphold network security.

Solana, however, was initially designed with a PoS model. The blockchain’s uniqueness lies in the Proof of History (PoH) model. PoH creates a historical record to verify events happening at precise time. This innovative approach not only ensures network security but also helps Solana to process transactions with exceptional speed and efficiency.

Throughput

Ethereum: As of March 2024, Ethereum network could handle approximately 15-30 transactions per second (TPS).

Solana: Solana is designed for high throughput. Theoretically, it can process up to 710,000 TPS thanks to its PoH mechanism. This makes Solana one of the fastest blockchains available.

Gas Fees

Ethereum: Among blockchains and decentralised finance projects, Ethereum is known for having the top highest fees.

Largest fees by blockchains and DeFi projects. Source: Crypto Fees.
Transaction fees on Ethereum can vary widely based on network congestion, but they usually cost more than $1 for. The transition to PoS and the introduction of layer 2 scaling solutions aim to reduce these fees, but they have historically been a significant cost for users and developers.

Solana: Solana's architecture supports significantly lower transaction costs of around 0.0001 SOL. The low gas fees on Solana make it attractive for developers and users, especially for high-frequency transactions.

Network Congestion

• Ethereum: Network congestion has been a persistent challenge for Ethereum, especially during times of high demand. This congestion often results in slower transaction processing times and increased gas fees. The popularity and heavy usage of Ethereum, particularly for activities like decentralised finance (DeFi) and NFT transactions, contribute to these issues.
• Solana: Solana's high throughput typically helps prevent congestion on the network. However, as Solana scales and experiences rapid growth, it has encountered performance issues and occasional outages. These incidents underscore the difficulties of maintaining network stability while operating at extremely high speeds. Solana's approach to handling these challenges will be crucial in ensuring the reliability and scalability of its platform as it continues to expand its user base and ecosystem.

Programming Language and Smart Contract Capabilities

Smart contracts can be likened to self-executing agreements that exist on the blockchain, and they play a fundamental role in decentralised applications (dApps). Ethereum, known as a pioneer in smart contract technology and dApp development, has a wealth of experience and a vast library of dApps written in languages like Solidity and Vyper.

• Ethereum's Solidity: Solidity is Ethereum's primary programming language for crafting smart contracts. It's tailored for the Ethereum Virtual Machine (EVM) and draws influence from languages like C++, Python, and JavaScript. This design choice makes Solidity relatively accessible to developers familiar with these languages, facilitating the creation of complex smart contracts and dApps on Ethereum.
• Solana's Sealevel and Rust: Solana's smart contract platform, Sealevel, stands out for its parallel processing capabilities, significantly boosting the network's throughput. Solana employs Rust as its primary language for smart contract development due to Rust's emphasis on memory safety and performance. Rust's growing popularity and supportive community make it an appealing option for blockchain projects. In analogy, Solana's use of Rust can be likened to acrylic paint compared to Ethereum Solidity's oil paint—versatile, fast-drying, and conducive to rapid development, which makes it ideal for constructing high-speed dApps on Solana's platform.

Use Cases for Native Tokens (SOL vs. ETH)

Tokens on Ethereum and Solana play vital roles—they are essential for powering decentralised applications (dApps), facilitating transactions, and representing ownership or stake in their respective networks. Let’s have a closer look at these two tokens’ employments:

1. Ethereum (ETH):
   • Utility: ETH is used to pay for transaction fees and computational services on the Ethereum network.
   • Staking: ETH is also used for staking in Ethereum's Proof of Stake (PoS) consensus mechanism, where validators lock up ETH to participate in network security and earn rewards.
   • Store of Value: Beyond its utility within the network, ETH is recognized as a store of value and serves as an investment asset, attracting investors and speculators.
2. Solana (SOL):
   • Multi-purpose Utility: SOL serves multiple functions within the Solana ecosystem. It is used to pay for transaction fees incurred by dApps and users.
   • Staking: Similar to ETH, SOL can be staked to secure the Solana network and participate in consensus, allowing validators to earn rewards.
   • Investment Asset: SOL is considered an investment asset and store of value, reflecting the growing confidence in Solana's technology and network.
   • Integral to Efficiency and Scalability: The efficiency and scalability of Solana's network make SOL essential for developers and users alike, powering a wide range of applications from decentralised finance (DeFi) to non-fungible tokens (NFTs).

Both ETH and SOL play crucial roles in their respective ecosystems, underpinning the functionality and growth of decentralised applications while also serving as investments and stores of value within the broader crypto landscape.

Ethereum vs. Solana: Ecosystems and Development

Both Solana and Ethereum boast vibrant and diverse dApp ecosystems, each offering unique advantages for developers and users. These platforms have become hotbeds for innovation in decentralised finance (DeFi), non-fungible tokens (NFTs), and beyond. Let’s explore how each blockchain fares in terms of dApp development, community support, prominent projects, suitability for various dApps, and their total value locked (TVL) in the ecosystem.

1. Ethereum:
   • dApp Ecosystem: Ethereum boasts the largest and most diverse dApp ecosystem, with over 4,500 dApps and significant user activity (584,000 Unique Active Wallets - UAWs). It was the first blockchain to support smart contracts, attracting a wide range of applications across various sectors.
   • DeFi Pioneer: Ethereum is the birthplace of decentralised finance (DeFi), hosting major platforms like Uniswap, MakerDAO, and Compound, which have transformed lending, borrowing, and trading in the cryptocurrency space.
   • NFT Leadership: Ethereum is a pioneer in the NFT space, with platforms like OpenSea dominating the market for non-fungible tokens.
   • Security and Compatibility: Ethereum's network security and compatibility with the Ethereum Virtual Machine (EVM) make it a preferred choice for developers, offering a robust and familiar environment for building decentralised applications.
2. Solana:
   • Growing dApp Ecosystem: Despite being newer, Solana has rapidly developed a strong dApp ecosystem with over 350 dApps and a significant number of Unique Active Wallets (1.28 million UAWs). Solana's focus on high throughput and low transaction costs has attracted developers and users seeking a smoother experience.
   • DeFi Expansion: Solana has become a hub for DeFi projects such as Jupiter, Raydium, and Orca, leveraging its speed to offer efficient and cost-effective decentralised financial services.
   • NFT Advancements: Solana is making strides in the NFT space with platforms like Solanart and Metaplex, providing alternatives to Ethereum's higher gas fees and enhancing accessibility for creators and collectors.
   • Mainstream Integrations: Solana has embarked on significant mainstream integrations, including launching the Solana Saga smartphone to promote mobile blockchain adoption and partnering with the Helium network to enhance decentralised wireless infrastructure.

In summary, Ethereum maintains its position as a pioneer with the largest and most diverse ecosystem for dApps, DeFi, and NFTs. Solana, on the other hand, is rapidly growing and distinguishing itself with a focus on high throughput, low costs, and emerging innovations in DeFi, NFTs, and mainstream integrations. Both platforms offer unique advantages and cater to different needs within the decentralised application space, appealing to developers and users seeking specific functionalities and user experiences.

Developer communities and support

Ethereum's developer community benefits from its longstanding presence in the blockchain space, offering a wealth of resources and hosting prominent events like ETHDenver to support innovation. Solana's developer community is growing rapidly, fueled by initiatives from the Solana Foundation and supported by projects like mtnDAO, which emphasise decentralisation and community-driven development. Both platforms provide valuable opportunities for developers to engage, learn, and contribute to the evolving blockchain ecosystem.

Ethereum:

• Vast Developer Community: Ethereum has a large and established developer community that has grown over the years, benefiting from extensive resources, tools, and documentation. This longevity has cultivated a supportive ecosystem for developers, offering grants, hackathons, and educational resources to encourage innovation and growth.
• Prominent Events like ETHDenver: Ethereum hosts prominent events like ETHDenver, an annual hackathon and community gathering in Denver, Colorado. ETHDenver focuses on Ethereum development, providing a platform for building new applications, networking, and learning from industry leaders through workshops and presentations. Events like ETHDenver catalyse innovation within the Ethereum ecosystem, supporting the launch and development of numerous projects and fostering community cohesion.

Solana:

• Growing Developer Community: Solana's developer community is rapidly expanding, supported by initiatives from the Solana Foundation aimed at attracting and retaining talent. These initiatives include funding, hackathons, and educational programs to empower developers interested in building high-speed and cost-effective decentralised applications (dApps).
• mtnDAO and Community-Driven Approach: Solana's mtnDAO embodies a decentralised autonomous organisation focused on fostering a community-driven approach to blockchain projects. It prioritises decentralisation, collaboration, and community building across various initiatives, including NFTs, DeFi, and educational resources. mtnDAO's impact lies in promoting decentralised governance and nurturing long-term collaborative relationships within the broader blockchain ecosystem.

Decentralisation levels

Solana:

• Focus on Network Security: Solana's architecture emphasises high transaction throughput, which demands significant computational power from validators. This requirement has raised concerns about potential centralization, as running a high-performance node can be costly.
• Increase in Validators: Solana has been actively working to increase the number of validators on its network to enhance security and censorship resistance. More validators contribute to decentralisation by distributing control across a larger number of participants.
• Efforts to Improve Stability and Performance: Solana continues to focus on improving network stability and performance. Initiatives like the introduction of the Firedancer validator client are designed to enhance throughput and reliability, addressing challenges associated with high transaction speeds.
• Emphasis on Transaction Speed and Low Costs: Solana's upgrades prioritise high transaction speeds and low costs, with ongoing optimizations to improve runtime and reduce network outages while maintaining efficiency.

Ethereum:

• Wide Distribution of Nodes: Ethereum has a vast number of nodes compared to Solana, contributing to its robust decentralisation. The Ethereum network allows anyone with the necessary hardware and software to participate as a node, fostering a distributed network control model.
• Transition to Proof of Stake (PoS): Ethereum's shift from Proof of Work (PoW) to Proof of Stake (PoS) with Ethereum 2.0 is expected to further enhance its decentralisation. PoS lowers the barrier to entry for validators compared to PoW, promoting wider participation in network validation.

In summary, Ethereum currently boasts a more distributed node network compared to Solana, which has been working to increase its validator numbers to enhance decentralisation. Both networks prioritise decentralisation as a core aspect of their architecture, with Ethereum's transition to PoS and Solana's efforts to optimise network performance and security contributing to their respective decentralisation goals.

Solana Use Cases

1. Lending Protocol Functions

Lending protocols let users deposit assets in a liquidity pool for other users to borrow. Borrowers pay depositors a fee, which fluctuates depending on the utilisation rate. The rate is determined by how much of the assets deposited in a liquidity pool is borrowed.

If 100 USDC is deposited and 90 USDC is borrowed, the utilisation rate — and ultimately the borrow rate — will be higher than if that same pool had 100 USDC deposited and 10 USDC borrowed.

Solend, marginfi, and Kamino offer users an annual percentage yield on USDC deposits of 39%, 35%, and 24%, respectively. The utilisation rate for the USDC market on marginfi is now 86%, which is relatively high, resulting in the 35% yield it offers.

2. NFT Applications -Arts and creators

Solana is home to a thriving ecosystem of artists and creators with 110M+ NFTS minted, 350K total creators, and $1.3B earned by creators.

On Solana, users have the option to develop customised NFT products and stores and to find the marketplace that best fits your creations. Solana platforms make it easier and more rewarding for artists to discover new ways to curate your collections and connect with audiences around the world.

3.Games and Entertainment

Solana now accommodates more than 88 live games with just $0.00012 to mint in-game assets using Solana or approximately $110 to mint 1 million NFTs with state compression.

Imagine a world where you can play and own your favourite games, or fans can set the direction of their favourite franchises. Solana empowers it with a high-throughput, low-cost blockchain designed for web3 experiences at scale. The blockchain is built for in-ecosystem composability using ownable digital assets to bring together the metaverse meetups of your dreams.

If you are not familiar with Web3, refer to our Web3 explanation with a plausible explanation.

Step two: Get a wallet

After you have a basic understanding of Solana you will need to find a compatible wallet. There are two important things to consider when selecting a wallet:

1. How will you be trading your Solana?
2. Did you want your coins easily accessible?

If you would like easy access to your holdings with a high level of security, CoinSpot is a great choice. Being able to deposit, buy, sell, and then withdraw back to your bank account is as easy as it seems! There are also a multitude of security options and coins to swap back and forth between. This option is known as a software wallet and is the most popular choice for regular cryptocurrency investors. The alternative is a hardware wallet, sometimes known as a cold wallet. These wallets are not connected to the internet, thus are more secure. However, you are not able to react to the movements of the market as quickly.

Step three: Buy Solana

This final step will outline how to buy Solana. With CoinSpot, it is extremely safe and easy! We will include some screenshots below to walk you through the process, step by step!

First navigate to the “Coins” tab or “Buy/Sell” page , where you will see Solana listed:

Once you have selected Solana you will have the option to buy:

Enter the of AUD worth of Solana you wish to buy, and select “Buy” to confirm:

Review the transaction details to ensure that everything is correct, then select “Confirm”.

That is all! You now have Solana in your CoinSpot account!

Ready to buy but don't have an account yet? Sign up for free & start trading Solana today.

Solana FAQs

Who can be a validator on Solana?
Anyone can run a validator node on the Solana network. Solana provides documentation and resources on their website to help individuals get started with setting up and running a validator node. Unlike many other crypto projects, there is no minimum stake required to become a validator on Solana.

What are clusters on the Solana network?
Clusters on the Solana network refer to groups of validators that work together to maintain a single ledger with a specific category of transactions. For example, one Solana cluster might be responsible for maintaining a virtual world application, while another could focus on hosting a decentralised exchange.

How to Sell Solana?
If you already own SOL and want to sell it, you can do so through CoinSpot. CoinSpot offers both Buy/Sell and Swap features so be free with your choices! Simply click on these features on the interface and choose your desired payment option to sell your SOL.

Solana Price and Market Data:
The price of Solana (SOL) is influenced by various factors including project news, development updates, market sentiment, trading volume, and broader economic conditions.

SOL's price dynamics are further affected by factors like token inflation rate, amount being burned, and the growth of the Solana ecosystem.

As of the current information provided, the price of Solana (SOL) is $217.24 AUD

The 24-hour trading volume of SOL is$3.0B AUD, and it is ranked #5 among all cryptocurrencies by total market capitalization, which is currently $94.6B AUD.