Solana Coin: A Smart Investment Decision?

Solana (SOL) is a cryptocurrency that has been making waves in the crypto industry. With its innovative approach to blockchain technology, Solana offers unparalleled transaction speeds and scalability, providing a robust platform for decentralized applications (DApps) and cryptocurrencies without compromising security or decentralization. In this topic, we will explore whether SOL is a good investment option, considering its recent performance, unique features, and potential in the decentralized world.

Solana's blockchain technology

Solana (SOL) is a blockchain platform designed to host decentralised, scalable applications. It was founded in 2017 and is currently run by the Solana Foundation, based in Geneva, while the blockchain itself was built by San Francisco-based Solana Labs.

Solana is a proof-of-stake (PoS) blockchain that uses a mechanism called proof-of-history (PoH), which verifies when transactions occur using hashed timestamps. This innovation was designed by co-founder Anatoly Yakovenko, who previously worked in distributed systems design. Yakovenko's experience made him aware that a reliable clock simplifies network synchronisation, and when that occurs, the network becomes exponentially faster.

Solana's blockchain operates on both a proof-of-history (PoH) and proof-of-stake (PoS) consensus model. PoS permits validators to verify transactions based on how many coins or tokens they hold, while PoH allows those transactions to be timestamped and verified very quickly.

Solana's design uses algorithms to remove performance bottlenecks caused by blockchain software, making it scalable, secure, and decentralised. Its architecture theoretically allows for a limit of 710,000 transactions per second on a standard gigabit network and up to 28.4 million on a 40 gigabit network.

Solana's network is validated by thousands of nodes that operate independently of each other, ensuring data remains secure and censorship-resistant. The network is also energy-efficient, with each transaction using about the same energy as a few Google searches.

SOL token price predictions

The SOL token is the native cryptocurrency that powers the Solana ecosystem, a breakthrough in blockchain technology emphasizing unparalleled transaction speeds and scalability. Its architecture is designed to handle thousands of transactions per second, providing a robust platform for decentralized applications (DApps) and cryptocurrencies without compromising security or decentralization.

Solana's operation is distinguished by its innovative approach to blockchain technology, focusing on high throughput and scalability without sacrificing security or decentralization. Its consensus mechanism is a combination of proof of stake and proof-of-history for transaction validation.

Solana's unique features have positioned it as a formidable competitor in the decentralized world. Its transaction speeds are superior to Ethereum, the number two cryptocurrency by market cap. Additionally, transaction fees on Solana are significantly lower than Ethereum, with fees estimated at $10 for a $1 million transaction compared to $300,000 for the same transaction on Ethereum.

The SOL token has experienced a surge in value, with a year-to-date increase of over 1,850% as of April 2021. The token reached an all-time high of $29.90 before pulling back, and analysts predicted further growth in the near term.

Technical analysis of the SOLUSDT weekly chart indicates an uptrend, with the crypto-pair exiting the oversold area and entering the oversold zone in late December 2020 and early January 2021, respectively. The Inside-bar candlestick pattern signals increased buying activity and a rise in demand for the SOL token.

Based on the technical chart setups and GitHub page activities, the SOL price was projected to reach approximately $50 in 2021. The SOL token is considered a good investment for the long term, with expectations of a 4X increase in market cap in 2021.

However, it is important to note that Solana has faced challenges with network stability, experiencing several notable outages due to high transaction volumes and congestion. These incidents highlight the trade-offs in its design between achieving high throughput and maintaining network reliability.

SOL token's market cap projections

As of 1 September 2024, the market cap of SOL was $61,735,166,849, with a circulating supply of 466,585,162 SOL coins. The current market cap of SOL ranks it at #5 on CoinGecko and CoinMarketCap.

The all-time high of SOL was $260.00, and its all-time low was BTC0.00004553, recorded on 11 May 2020. The current price of SOL is 48.90% below its all-time high.

SOL's market cap has been projected to reach a new all-time high in the future. On 27 March 2024, SOL's market cap hit a new record, boosted by rising prices and an increased number of tokens in circulation compared to the previous bull cycle.

The price of SOL has been predicted to reach $250 by the end of 2024 and $300 in 2025. These projections are based on the assumption that the SOL token will continue to gain traction and that the Solana blockchain will continue to be adopted and used by developers and institutions.

It is important to note that cryptocurrency investments are subject to market risk, and the above projections may not be met.

How to buy SOL

There are several ways to buy SOL, the native coin of the Solana blockchain. Here are some of the most popular methods:

Using a Centralized Exchange

You can buy SOL on centralized exchanges such as Coinbase or Binance. Here's a step-by-step guide using Coinbase:

• Create a Coinbase account by downloading the app and signing up. You will need a valid ID and proof of address to transact.
• Add a payment method such as a bank account, debit card, or wire transfer.
• On Coinbase.com, select "Buy & Sell". On the mobile app, tap the "+" Buy button on the Home tab.
• Search for Solana by typing its name into the search bar.
• Enter the amount you want to buy in your local currency. The app will convert it into the equivalent amount of SOL.
• Finalize your purchase by previewing the details and confirming your buy.

Using a Decentralized Exchange

You can also buy SOL on a decentralized exchange (DEX) such as Binance. Here's how:

• Create a free account on the Binance website or app. You will need to verify your identification.
• Choose your preferred payment method, such as a debit/credit card, Google Pay, Apple Pay, or a third-party payment channel.
• Navigate to the "Buy Solana with USD" page on Binance and select Solana and USD from the dropdown menu.
• Choose your payment method and confirm the order.
• Verify the payment details and confirm the order within the given time limit.
• Follow the instructions to verify the payment through your bank.
• Once verified, the SOL will appear in your Spot Wallet.

Using a Trusted Global Exchange

Another option is to use a trusted global exchange like Kraken. Here's the process:

• Sign up for a Kraken account by providing an email address, username, and strong password.
• Verify your account by providing your name, date of birth, country of residence, and phone number. You can deposit crypto to buy SOL and other cryptocurrencies. To use fiat currency, you'll need to provide additional documents for identity verification.
• Add funds or a payment method to your account. The options will depend on your location and preferences.
• Purchase SOL on the Kraken platform or through the official Kraken app.

Regardless of the method you choose, always ensure that you understand the risks involved in investing in cryptocurrencies and conduct your own research before making any purchases.

Solana's consensus mechanism

PoH is a simple hashing algorithm akin to a Verifiable Delay Function (VDF) that is run on a single core of each validator. It is not a consensus mechanism or algorithm in and of itself, but rather a tool used by Solana’s consensus mechanism for synchronization. It allows validators to verify the order of transactions efficiently, even when they receive them out of order or with a significant delay. This results in faster overall transaction processing and eliminates the need for large block sizes and long block times.

While Proof-of-Stake (PoS) is the core consensus mechanism that ensures network participants reach an agreement on the state of the blockchain, PoH enables synchronization for continuous block production. Solana skips slots with slow or unresponsive slot leaders without waiting for a synchronized round of consensus.

Solana has two primary confirmation rules: one for short-term fork selection (optimistic confirmation) and another for full PoS consensus for finality (finalized/rooted). Clients and users can adhere to these confirmation rules for desired security properties and customized UX selections, which are reflected by two commitment levels: "confirmed" and "finalized".

Frequently asked questions