What Is Solana (SOL)? How It Works and What to Know

Solana is a layer-1 blockchain designed for fast, low-cost crypto transactions. Its native token is SOL. The network supports DeFi, NFTs, games, payments, and decentralized apps.

What makes Solana unique?

Solana uses proof of stake for consensus. Proof of history, a cryptographic clock, records the order and timing of transactions before validators vote on them. Its Sealevel runtime executes many non-conflicting transactions in parallel on a single global state, which helps keep confirmations fast and fees low.

Consensus and timing

• Proof of stake selects validators to propose and vote on blocks.

• Proof of history provides a verifiable sequence that orders transactions efficiently.

Execution and fees

• Parallel execution on one global state targets high throughput.

• Local fee markets and priority fees help mitigate congestion.

Staking and validation

• Anyone meeting hardware and operational requirements can run a validator.

• Holders can delegate SOL to a validator to earn staking rewards, minus the validator's commission, while retaining ownership of the delegated SOL.

Developer stack

• On-chain programs are primarily written in Rust, most often with the Anchor framework.

• The SPL token standard and broad Solana wallet support power DeFi, NFTs, and consumer apps.

• Fast confirmations and typically low fees can make on-chain actions practical for payments, games, and consumer apps.

• A growing ecosystem of wallets, marketplaces, and developer tools supports many use cases across DeFi and NFTs.

2017 to 2019
Anatoly Yakovenko published the proof-of-history whitepaper in November 2017, and Solana Labs formed in 2018 to build the network.

2020 to present
Mainnet beta launched in March 2020, followed by ecosystem growth, performance work, and reliability improvements, including the Firedancer validator client.

Here is a comparison table of Solana and Ethereum.

• Solana operates its own independent layer-1 blockchain, commonly referred to as Solana mainnet-beta.

• Assets and applications are native to Solana unless bridged, and users interact directly with Solana validators and RPC nodes.

Potential positives
Low fees, fast confirmations, and active developer momentum can support real-world app usage and user growth.

Major considerations
Past network reliability issues, including a full network halt in February 2024, and concerns about infrastructure concentration are risks, and competition from other high-performance chains and Ethereum rollups remains significant.

We do not offer investment advice, and this article is for educational purposes only. Always do your own research before investing in any cryptocurrency, and understand the risks involved.

What gives Solana value?

SOL is the native asset of the Solana network. It pays transaction fees and can be staked with validators to help secure the network.

SOL's supply also changes through issuance and fee burns. New SOL is issued on an inflation schedule that declines over time toward a long-term rate. Half of each base transaction fee is burned, while priority fees go to validators in full.

How many Solana (SOL) coins are there in circulation?

Circulating supply changes over time based on issuance, staking dynamics, and fee burns. Solana’s monetary policy features inflation that decays toward a long-term rate and a mechanism that permanently destroys a portion of transaction fees. For the latest figure, consult a reputable Solana explorer or market-data source.

For US federal taxes, the IRS treats SOL as property. Buying SOL with US dollars and holding it isn't a taxable event, and moving SOL between your own wallets isn't taxable either.

Selling SOL for dollars, swapping it for another token, or spending it is a disposal. If you hold SOL as a capital asset, you report a capital gain or loss equal to the difference between what you receive and your cost basis.

Staking rewards are generally ordinary income at their fair market value when you gain dominion and control over them (Rev. Rul. 2023-14), and that value becomes your cost basis in the new SOL. Solana pays staking rewards once per epoch, roughly every one to two days, so keep a record of each reward's date and value. Our Solana tax guide walks through examples.

• Open and verify an account at a regulated platform that lists SOL, fund it, and place a market or limit order.

• You can hold SOL on a custodial platform or in a self-custody Solana wallet. With self-custody, you control the wallet and are responsible for protecting your recovery phrase. SOL holders can also delegate their tokens to a validator for staking.

Solana price

SOL’s price and market cap are volatile and respond to market conditions, network reliability, and ecosystem activity. Check a trusted, real-time source before trading and consider fees and spreads.