What is Solana? A guide to the network and coin

You might have heard about it, but what is Solana? This guide aims to tell you

What is Solana                                 

In this guide

Solana was founded in 2017 by Anatoly Yakovenko, who had previously worked as a senior staff engineer manager at Qualcomm before moving to Dropbox to work as a software engineer. The idea behind Solana was to speed up the way transactions on a blockchain took place. 

What is Solana?

It is fair to say that Solana is part of the whole decentralised finance (DeFi) online ecosystem. The idea is to allow people to take part in financial transactions without necessarily having to go through banks. Probably the most notable thing in DeFi is the Ethereum network. Solana has been set up, at least partially, to serve as a rival to Ethereum. Whether it can serve as an “Ethereum Killer”, though, remains to be seen. The Ethereum ecosystem is massive and, as a newcomer, Solana will have some catching up to do if it wants to reach those heights. That is not to say that it can never happen, but it isn’t happening just yet. As we shall see, the most optimistic solana price prediction for the long term is far below the ETH price of around $2,270 as of 6 July at 12:00 UTC.

What potentially sets Solana apart from other similar systems is something called Proof of History, or PoH. Most crypto coins operate on something called Proof of Stake (PoS). This means that if someone holds a coin and wants to mine a coin, then the amount of coins they can mine is linked to the amount of coins they hold. It is used by altcoins and is designed to limit the amount of power used by miners. Proof of History is a little bit different. The idea is to create timestamps that show how much someone held and when they held it. This is to make sure that the data reflected is accurate and people are able to access coins and systems in a fair manner. PoH is built on the same basis as PoS, so the technology that is used can run smoothly. 

Proof of History has helped give birth to seven other concepts that Solana says make it different. These are:

  • The Tower Byzantine Fault Tolerance system, which allows the network to calculate a value

  • Turbine, which helps distribute data

  • Sealevel, a transaction processing engine

  • Gulf Stream, which moves transaction caching and forwarding across the network

  • Cloudbreak, which helps execute transactions

  • Archivers, a group of nodes which collect data storage

  • Pipeline, a transaction processing unit.

With these systems involved, we can see that Solana is at least attempting to come across as different to its rivals. Although the project was founded in 2017, it did not go live until March 2020. At first glance, it might seem unfortunate for the protocol to arrive before the public just as the COVID-19 pandemic was picking up pace in Europe. This was not necessarily the case, as we will see later on. 

Raising funds

Solana started to raise funds in 2018 and by July 2019 its originators had generated more than $20m through private sales. Multicoin Capital’s founder, Kyle Samani, speaking at the time, said he believed Solana was “the closest thing” to a world computer blockchain. Samani said:

“Solana has done it differently – and is one of the most compelling layer one platforms we’ve evaluated to date. We’re very proud to lead this round, and we encourage developers everywhere to take a serious look at Solana.”

The network continued its development and, after a Dutch auction on CoinList that raised $1.76m, it went live in March 2020.

It does seem like every protocol needs to have its own cryptocurrency, and Solana is no exception. The network’s own native crypto coin is the solana coin, or SOL. People who serve as validators on the network can earn SOL, which they can then use to pass to nodes within the protocol in exchange for running on-chain programs or validating its output. People can also stake their tokens in order to take part in decisions that will affect the future of Solana. It’s also important to mention that SOL can be purchased on exchanges – you don’t need to act as a validator on the network to get hold of SOL.

At the time of writing, there were 272.6 million SOL in circulation out of a total supply of just more than 494.5 million, according to CoinMarketCap. In terms of distribution, 16.23% went towards an initial seed sale, 12.92% of tokens were dedicated to a founding sale, 12.79% of the coins went to team members and 10.46% of tokens were given to the Solana Foundation. The rest have either been sold or are part of the 45% not yet in circulation.

Price history

Let’s take a look at the price history of Solana’s SOL. While there is no way that what has happened to the coin can have any impact on the SOL price today, tomorrow, or further down the line, it is still interesting to look at. But remember, past performance is no indicator of future performance. This is not going to be the answer to the question “Is solana a good investment?”, just a little history that might have an impact on an expert’s solana price prediction.

For much of its first nine months, the SOL was at a relatively low price. On 12 July 2020, it broke through the $1 mark for the first time, according to CoinMarketCap. It reached $4.78 on 31 August that year, but it was back down to $2.47 at close on 8 September. It went back below $2 in the middle of October and did not break back through $4 until the end of January 2021. However, the first few months of 2021 saw SOL go through the same sort of boom that the whole cryptomarket experienced. It hit $17.30 at close on 24 February, but then fell back to $12.61 at close on 5 March. April and May saw some serious growth, however, and the SOL price reached an all time high $55.91 on 18 May. That represented an increase of just under 3,602% from the $1.51 it started at on 1 January 2021.

However, the fall was about to come. The crash of late May hit Solana hard and by 23 May the SOL was trading at $24.69 at close, down from its all time high of just five days earlier. A recovery meant the SOL price hit a $44.10 intraday high on 7 June, according to CoinMarketCap. And it performed well on 8 June, rising by 8.52% on a day bitcoin dropped by 0.2% and ethereum (ether) fell 2.9%. A series of peaks and troughs ended when it fell to an intraday low of $20.38 on 22 June. SOL made a small comeback, hitting an intraday high of $32.99 on 24 June before dropping to an intraday low of $28.04  on 25 June, and then it bounced back to be around the $33 mark in the first week of July.

Where now?

With that in mind, let’s look at what people are predicting. Wallet Investor’s solana price prediction as of 6 July suggests it should reach $105.708 in a year and $391.385 in five years. DigitalCoinPrice says it can reach $51.36 in 2021, $63.68 next year, $125.47 in 2026 and $153.41 in 2028. Finally, gov.capital’s belief is that it will close 2021 somewhere between $54.51 and $73.74,, that it will stand somewhere between $106.33 and $143.86 on 6 July 2022, and it should be between $950.18 and $1285.53 in five year’s time. As you can see, the predictions vary considerably.

What we do need to remember, though, is this. As we have seen this year, cryptocurrencies can be extremely volatile and things will happen to markets that no one can predict. This means you need to do your own research. Always remember that prices can go down as well as up. And never invest more money than you can afford to lose. Coupled with SOL’s relative newness, it makes sense to be careful.

FAQ

Well, it might be, but it might not be. Cryptocurrencies can be incredibly volatile, and we don’t know what the long-term after-effects of the May 2019 boom-and-bust will be. You should make your own decisions and not invest more than you can afford to lose.

A lot of exchanges list solana, so you can find a reputable one that suits you. It isn’t available on Currency.com yet but when it is, we will let you know. The same goes if you want to know how to exchange solana, too.

Further reading

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