solana beginners guide

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What is Solana? The Beginner’s Guide

Solana is one of Ethereum’s biggest challengers in the platform category. It is also touted as the fastest blockchain in the market! Solana is also supported by many institutions, so it is overall a very interesting project. This article is a Solana beginner’s guide. We will go through Solana’s history, technology, and potential as an investment.

What is Solana?

Let’s first put Solana into the correct category in the crypto space. We divide projects into three clear categories: currencies, platforms, and tokens.

Solana undoubtedly falls into the platform category. It is one of the best-known challengers of Ethereum. Other well-known platforms are BNB Chain, Avalanche, Cardano, and Terra. Platforms are ecosystems for decentralized applications. You can think of them as being like iOS or Android operating systems.

Bitcoin, Litecoin, and Monero are examples of currencies. Their role is mainly to transfer & store value. Tokens, on the other hand, are utility or governance tokens of a single application. Aave and Uniswap are good examples of tokens.

Solana is therefore not competing with Bitcoin or DeFi tokens. There are a couple of dozen other major projects in the race of smart contract platforms, so Solana has plenty of challengers in its own sector.

The name Solana can refer to the project itself, the Solana ecosystem (blockchain), or its native token. This token uses the ticker SOL in the exchanges. It is used in the Solana ecosystem for transaction fees and staking. Native tokens of rivaling platforms have similar uses cases.

The history of Solana

Solana came into the spotlight during the altcoin boom of 2021. The history of the project can be traced back to 2017. Solana is therefore a relatively recent project when compared to older cryptocurrencies.

Solana is strongly identified with Anatoly Yakovenko. He has a long history of working in the IT sector and with computer networks.

Yakovenko graduated from the University of Illinois in 2003 with a Ph.D. in Computer Science. He joined Qualcomm for about 13 years in December 2003. Qualcomm is a US-based technology company that manufactures technology for wireless networks. Yakovenko also worked briefly for Dropbox in 2017.

Solana was launched in autumn 2017 when Yakovenko had a vision of synchronizing time in a decentralized network. In November 2017, he published a whitepaper describing this theory, which Yakovenko called Proof of History (PoH). Below is a short presentation of this concept.

Yakovenko’s experience at Qualcomm helped him to understand that reliable timestamps would be the key to scaling blockchains. If the synchronization problem could be solved, a network could become lightning-fast and scalable.

Yakovenko’s colleague from Qualcomm, Greg Fitzgerald, also joined early on. Under his guidance, Solana’s code was compiled into the Rust programming language. In the spring of 2018, more colleagues from Qualcomm joined the team. The project was eventually named Loom.

Around the same time, another project called Loom Network also emerged. This caused confusion, so Yakovenko’s team decided to rebrand. This is how Solana was born. The name comes from Solana Beach near San Diego, where Yakovenko & co. used to go surfing back in their Qualcomm days.

Solana’s development took off at the end of 2018. Test networks reached up to hundreds of thousands of transactions per second at best. At the same time, the team also raised money from investors. Solana raised just over $25 million in 2018-2019 through private funding rounds.

Solana also organized a $1.76 million ICO in early 2020. Just moments later, in March 2020, Solana’s MainNet was launched. It still goes by the name MainNet Beta to this day.

The project is being developed by Solana Labs in San Francisco. The project is managed by the Swiss non-profit Solana Foundation. Founder Anatoly Yakovenko remains the figurehead of Solana.

The price development of the SOL token

Solana’s SOL token was launched in March 2020 in conjunction with the MainNet release. Its price was $0.78 at the time. The year 2020 was a very quiet one. At the end of the year, SOL was trading at $1.6 with a market value of less than $100 million. Solana wasn’t even on the top 100 ranking list.

Solana’s price exploded at the beginning of 2021. That was also the start of an enormous altcoin boom. SOL was definitely one of the biggest winners of that rally.

sol price

The price of Solana was already close to $50 in April 2021, an increase of around 30x in four months. The price fell with the rest of the market to almost $20 in the summer of 2021. The autumn of 2021 saw another rally, during which the Solana rose all the way to $260. The SOL token thus offered investors a return of over 100x in 2021.

At the time of writing (April 2022), the entire crypto market has been in a downward spiral for six months. Solana has followed its rivals downwards. The SOL token is currently trading at $96, about 63% below the all-time high price.

Solana updates

Let’s look at some of the recent Solana updates. You can check all the events of the last few months in the video below (should start at timestamp 4:59). You can find the updates for autumn 2021 in this video from Coinbureau.

Unfortunately, the biggest headlines have been negative news. Solana has suffered a number of issues over the past six months. Some of these have also been attacks on the network, as seen in December 2021.

In February, Solana was in the headlines for the Wormhole hack. This was a token bridge between Solana and Ethereum, where more than $320 million worth of WETH tokens were hacked. This was not Solana’s fault as such, but the fault of the software company that built the bridge.

Despite its problems, Solana has received strong support from institutional investors. It is also the official blockchain of the USDC stablecoin. Solana Pay, launched in February 2022, is an integral part of this. The service enables USDC to be used as a means of payment.

Perhaps the best example of institutional interest is the funding round in the summer of 2021. Solana raised a whopping $314 million from some of the most prominent VC firms in the industry.

One of the best-known supporters of the project is the FTX exchange. Its founder Sam Bankman-Fried is one of the richest people in the industry. FTX chose Solana as the platform for its DeFi app called Serum.

Solana’s official Phantom wallet has also been a remarkable success. It achieved Unicorn status in January 2022, signaling a start-up with a billion-dollar valuation. Phantom has already more than two million users.

Solana’s technology: Proof of History

The aforementioned Proof of History is at the heart of Solana. This technology enables exceptional capacity compared to alternative blockchains. Solana scales up to 65,000 transactions per second with less than half a second block time and at near-zero cost (one-thousandth of a cent). All this is achieved without Layer 2 or sharding solutions.

Each transaction in the Solana network gets a universal timestamp. This allows network nodes to organize transactions in a flash without having to wait for confirmation from other validators. This makes the system so fast.

You can find a lot of material on this topic on YouTube. Below is one example video.

Solana’s clock ticks every 400 milliseconds. This means the time when a new block is created in the blockchain.

A slot leader is selected from the validators to create blocks. This task lasts for four blocks or 1.6 seconds. Such a fast-switching cycle makes it very difficult for hostile nodes to corrupt the network.

Solana’s nodes use a universal timestamp to know in advance which slot a transaction belongs to, even if it does not see them in chronological order. In addition, the slot leaders can be selected several blocks in advance.

There are also clusters of nodes in the Solana network. This means a set of validators that focus on maintaining, for example, a single application. This solution further speeds up transaction processing.

Solana’s Proof of Stake

Solana uses a Proof of Stake consensus algorithm like its competitors. It is also often said to be a hybrid of Proof of History and PoS. The symbiosis of the two can be seen in slightly different ways.

Proof of Stake means that the network is maintained by a group of validators. An alternative to this solution is the Proof of Work used by Bitcoin, which requires physical mining equipment to operate.

By staking the SOL token you can become a network validator. There is no minimum limit, but in practice, your chances of becoming a slot leader (creating blocks) are proportional to the number of SOL tokens you have staked.

The image below is from

sol staking

Solana’s stakers get a yield of around six percent. The SOL token has one of the highest staking rates of any platform.

It is also worth mentioning the problems that Solana’s exceptional capacity brings. The massive transaction capacity puts heavy demands on the nodes and especially on the communication links. This definitely drops small investors out of the field. You can find more information on the requirements of validators on YouTube & Google.

Like Ethereum, Solana has annual inflation and no maximum number of tokens. Inflation is currently around 8% and will fall to 1.5% per annum over time. Half of the transaction fees are burned – the other half goes to the validator that built the block.

There are currently around 1700 validators. You can find the exact statistics on

DeFi & NFT on Solana

Solana is currently one of the strongest challengers of Ethereum. However, it is not competing in the same weight class for a long time (if ever). Solana is part of a group of challengers that have captured almost half of Ethereum’s market share in the DeFi sector since 2020.

At the time of writing, Ethereum’s market share is 55%. Solana is currently in fifth place. You can find up-to-date data at


Solana is not an EVM-compatible blockchain, unlike Avalanche, BNB Chain, and Polygon. EVM compatibility allows Ethereum dapps to be easily cloned to other platforms. This has slowed down the development of Solana’s DeFi sector.

This will be improved in the future with the help of Neon Labs. This company is building an EVM-compatible environment in Solana.

neon labs

The Neon Labs solution promises a capacity of up to 4500 TPS (Transactions Per Second). This would make Solana the fastest EVM environment in the market. The timeline for this ecosystem is June 2022.

Solana’s strength is more in the NFT sector. Ethereum dominates the NFT market too, but Solana is the only other proper platform where NFT trading has taken place in significant volume. The other ones, Ronin and Flow, are designed only for a specific NFT collection, Ronin for Axie Infinity and Flow for NBA Top Shot.

Solana NFTs have been sold for almost two billion dollars. This is about double the combined sales of competing platforms. Solana’s NFT sector was further strengthened in April 2022 when leading marketplace OpenSea integrated Solana NFTs.

The future of Solana

Solana looks like quite a package for potential investors. It is a project loved by institutions with strong tech, but this comes also with many challenges. Solana’s exceptional Proof of History solution is also not easy to understand either down to the smallest detail.

Let’s start with the uses of the Solana native token. The SOL token is needed for transaction fees and for staking. The uses are exactly the same as for almost all competing tokens.

Strong institutional support is definitely a plus. It will attract more professionals to Solana with the potential to make large-scale investments. There are also a number of instruments suitable for institutions, such as the Grayscale fund and the recently launched CoinShares Solana ETP, which buys actual SOL tokens.

Popular exchanges for buying the SOL token:

Binance is the world's leading crypto exchange. Hundreds of trading pairs and the best liquidity with small fees. Buy Solana
Kraken is an exchange built for traders. Great liquidity with low fees. Also easier GUI for newbie investors. Buy Solana
Coinbase is a Nasdaq-listed crypto exchange with over 10 years of operation. It is great for newbies and active investors. Buy Solana

If you want detailed instructions on buying Solana and information about Solana as an investment opportunity, please refer to this article: how to buy Solana.

Let’s not forget the partnerships with the FTX exchange and Circle (USDC stablecoin). These are really important players in the crypto market. USDC could theoretically even become the de facto U.S. stablecoin, which could raise the importance of Solana to new heights.

The technical implementation of Solana is also one of the project’s strengths. Its Proof of History-based solution offers a different solution from the competitors. With a block time of less than half a second at near-zero cost and theoretical scalability of 65,000 TPS without Layer 2 solutions, it will appeal to many.

The aforementioned position in the NFT sector is also a good thing for the future. NFT is here to stay, and more and more people are choosing Solana as an alternative to Ethereum. It is massively ahead of the competitors of its size (Avalanche, Polygon, etc.).

The Aurory NFT collection is currently a hot seller. They are avatars from the Aurory Play-To-Earn game running on the Solana platform.


What about the negative aspects? Solana’s technology also brings its own challenges, which were also mentioned in the history section. Solana has suffered by far the most outages of any smart contract platform over the last year. These have clearly damaged its reputation.

The lightning-fast blockchain also has the problem of data storage. The blockchain becomes so large so quickly, that the historical data needs to be stored by a third party. Solana uses Arweave as a solution. This creates new challenges in terms of technical implementation.

The second is Solana’s poor performance in the DeFi sector. While the success of the NFT business is good news, the DeFi sector is where the big money is. Solana’s most popular DeFi app barely makes the top 50 in terms of liquidity.

The poor performance of DeFi is partly due to a lack of EVM compatibility. This will be solved by the aforementioned Neon Labs. Solana is currently fighting for Rust developers with Near Protocol, which seems to have eaten into its market share in a significant way.

In theory, EVM compatibility could boost Solana to a whole new level. It will be worth following the development of this project in the coming months.