Solana is a high-performance, layer-1 blockchain designed to process transactions quickly and cheaply, making it a popular base for trading apps, NFTs, payments, and memecoins. Its native token, SOL, is used to pay network fees and to secure the network through staking. Launched in 2020 by a team of former engineers from companies like Qualcomm, Solana stands out for its speed and low costs, though it has also faced criticism over past network outages and its early ties to the collapsed FTX exchange.
Key takeaways
- Solana is a fast, low-cost layer-1 blockchain that competes with Ethereum for decentralized apps.
- It was founded by Anatoly Yakovenko and Raj Gokal and launched its mainnet beta in March 2020.
- Its signature innovation is Proof of History (PoH), a timekeeping method that boosts throughput.
- SOL pays for transaction fees and is staked to help secure the network and earn rewards.
- Solana has suffered several notable network outages and is known for very low fees and high speed.
What is Solana?
Solana is a public, open-source blockchain that lets developers build decentralized applications (dApps) and lets users send value without a bank or middleman. What sets it apart from many earlier blockchains is raw performance: Solana is built to handle a very high number of transactions per second at fractions of a cent in fees. This has made it a home for decentralized exchanges, lending protocols, NFT marketplaces, consumer apps, and a thriving memecoin scene. If you are new to this space, our explainer on what crypto is covers the basics that the rest of this guide builds on.
The network’s native asset is SOL. You need a small amount of SOL to pay fees for any on-chain action, and holders can stake SOL to validators to help secure the network in return for rewards. Solana is frequently compared with Ethereum, and the two represent different philosophies about how to scale a blockchain.
History & origin story
Solana’s story begins with Anatoly Yakovenko, an engineer who previously worked at Qualcomm on wireless and distributed-systems problems. In late 2017 he published a white paper describing Proof of History, an idea for adding a verifiable, cryptographic clock to a blockchain so that nodes could agree on the order and timing of events without constantly talking to each other. Yakovenko teamed up with former Qualcomm colleague Greg Fitzgerald and others, and recruited Raj Gokal as a co-founder to lead product and operations. The company behind the project was originally called Loom, then renamed Solana Labs after a beach town near San Diego where some of the founders had lived.
Through 2018 and 2019 the team built and tested the network and raised funding from venture investors. The mainnet beta launched in March 2020, and the SOL token began trading shortly after. Solana grew quickly during the 2021 bull market, when low fees and fast confirmations attracted developers and traders frustrated by Ethereum’s high gas costs at the time. SOL’s price rose dramatically that year, and the ecosystem expanded into DeFi and a high-profile NFT market.
A defining chapter of Solana’s early history was its close association with Sam Bankman-Fried, FTX, and Alameda Research. Bankman-Fried was a vocal Solana supporter, and FTX and Alameda were significant backers and holders of SOL and Solana-based projects. When FTX collapsed into bankruptcy in November 2022, confidence in anything tied to it fell sharply, and SOL’s price dropped heavily. Many observers expected the association to cripple Solana permanently. Instead, the network’s developer community continued building, and the ecosystem recovered substantially in the following cycle, though the FTX-linked token holdings remained an overhang as they were managed by the bankruptcy estate.
The other recurring theme in Solana’s history is reliability. The network has experienced several notable outages in which block production halted for hours, often triggered by surges in transaction volume or bot activity overwhelming validators. Each incident prompted engineering fixes aimed at making the network more resilient, and Solana’s developers have worked on client diversity and congestion-management improvements to reduce the risk of future stoppages. These outages are a real part of the record and are frequently cited by critics, so any honest profile of Solana has to include them.
How Solana works
Solana is a proof-of-stake (PoS) blockchain, which means validators put up SOL as a stake to earn the right to produce and confirm blocks. What makes Solana distinctive is how it combines PoS with its trademark Proof of History.
Proof of History (PoH)
In most blockchains, nodes spend a lot of effort agreeing on the time and order of transactions. Proof of History sidesteps much of that by creating a continuous, cryptographically verifiable record of the passage of time. Think of it as a built-in clock that everyone can check independently. Because validators already agree on ordering through this clock, they can process transactions in parallel and reach consensus faster, which is a big part of why Solana achieves high throughput.
Parallel processing and low fees
Solana’s runtime is designed to execute many non-conflicting transactions at the same time rather than one after another. Combined with PoH, this lets the network confirm transactions in well under a second and keep fees extremely low, typically a tiny fraction of a cent. The trade-off is that running a full Solana validator demands powerful hardware and high bandwidth, which critics argue can make the network more centralized and more fragile under stress than slower designs. For a side-by-side look at the design choices, see our Ethereum vs Solana comparison.
Tokenomics & supply
SOL is the native token used for paying fees, staking, and participating in network governance discussions. Unlike Bitcoin, Solana does not have a fixed maximum supply. Instead, new SOL is created through staking rewards (inflation), while a portion of every transaction fee is burned (removed from circulation), which partially offsets new issuance.
| Property | Detail |
|---|---|
| Token | SOL |
| Consensus | Proof of Stake + Proof of History |
| Max supply | No fixed cap (inflationary with fee burning) |
| Primary uses | Transaction fees, staking, securing the network |
| Mainnet launch | March 2020 |
Solana’s inflation rate was designed to start higher and decline gradually over time toward a long-term steady rate. Because exact circulating supply and emission figures change continually and a large block of tokens has been tied to the FTX estate, it is best to check a live data source rather than rely on a fixed number. The combination of staking rewards and fee burning means the net change in supply depends on how much the network is being used.
How to buy Solana
SOL is one of the most widely listed cryptocurrencies, so buying it is straightforward. In short: choose a reputable exchange, create and verify an account, deposit funds, and place an order for SOL. From there you can leave it on the exchange (custodial) or withdraw it to a self-custody wallet you control. For a complete walkthrough including exchange selection, fees, and storage, follow our dedicated how to buy Solana guide, and browse our wider coins hub to compare alternatives before you commit.
Staking & earning
Because Solana is proof-of-stake, holders can stake their SOL by delegating it to a validator. You do not give up ownership; you simply lend your stake’s voting weight to a validator that produces blocks, and in return you earn a share of the rewards, paid in SOL. Staking helps secure the network, and rewards are a function of the network’s inflation schedule and the validator’s performance and commission.
Staking is possible directly from many Solana wallets, through exchanges that offer staking services, and via “liquid staking” protocols that give you a tradable token representing your staked SOL so you can use it elsewhere in DeFi. As with any yield, staking carries risks: validators can be penalized for downtime, liquid-staking tokens add smart-contract risk, and rewards are paid in a volatile asset. If you want to understand on-chain yield more broadly, our guide to what DeFi is is a useful companion.
Risks & is Solana a good investment?
Solana has clear strengths: very high speed, very low fees, a large and active developer ecosystem, and a strong consumer-app and DeFi presence. Those qualities are why it remains one of the largest cryptocurrencies by market value. But there are real risks to weigh honestly.
- Reliability history: Solana’s record of network outages is its most cited weakness. Engineering has improved, but the track record is part of the risk profile.
- Centralization concerns: High hardware requirements for validators can concentrate participation, which critics argue weakens censorship resistance.
- Competition: Solana competes with Ethereum and its layer-2 networks, plus other fast layer-1s. There is no guarantee it keeps its lead.
- Token overhang and volatility: Large historical holdings tied to the FTX estate, plus normal crypto volatility, can pressure the price.
Whether SOL is a “good investment” depends entirely on your own risk tolerance, time horizon, and conviction in the bull case (continued ecosystem growth and resilience) versus the bear case (renewed outages, competition, or selling pressure). A common approach is to size any single altcoin position modestly within a diversified plan. To explore scenario-based outlooks rather than promises, read our Solana price prediction, and consider how it fits a broader crypto portfolio strategy.
FAQ
Who created Solana?
Solana was created by Anatoly Yakovenko, a former Qualcomm engineer who proposed the Proof of History concept in a 2017 white paper, alongside co-founder Raj Gokal and other early engineers such as Greg Fitzgerald. The project was built by Solana Labs, and its mainnet beta launched in March 2020. The non-profit Solana Foundation also supports the network’s growth and decentralization.
Why does Solana sometimes go down?
Solana has experienced several outages where block production stalled for hours. These were generally caused by surges in transaction volume or automated bot activity overwhelming validators, rather than a hack. After each incident the developers shipped fixes to improve congestion handling and resilience. Reliability has improved over time, but the outage history remains a genuine consideration when evaluating the network.
What was Solana’s connection to FTX?
Sam Bankman-Fried, founder of the FTX exchange and Alameda Research, was a prominent Solana supporter, and both firms were significant holders and backers of SOL and Solana projects. When FTX collapsed in November 2022, SOL’s price fell sharply. Despite expectations that this would doom Solana, the ecosystem continued building and recovered substantially, though FTX-estate token holdings remained an overhang.
Can you stake SOL to earn rewards?
Yes. Solana is a proof-of-stake network, so you can delegate your SOL to a validator and earn staking rewards paid in SOL without giving up ownership. You can stake directly from many wallets, through exchanges, or via liquid-staking protocols. Rewards depend on network inflation and validator performance, and staking carries risks such as validator penalties and the underlying asset’s volatility.
Crypto is volatile and risky; this is education, not financial advice. Do your own research.
