Co-founded by software developer Anatoly Yakovenko, Solana launched in March 2020. With its cutting-edge technology, lightning-fast speeds, and ultra-low network fees, Solana is a strong contender to more established blockchains like Ethereum. It’s especially suited for high-volume, fast-moving decentralised apps (DApps) and token launches. While it may not yet have the same legacy as Bitcoin or Ethereum, Solana’s speed and cost-efficiency give it a competitive edge in many areas.

The technology behind Solana

Solana’s technology underpins its speed, security, and scalability. Key components include:

    • SOL, Solana’s native cryptocurrency, which fuels the entire Solana network, powering transactions, applications, and staking for security,
    • Proof of History (PoH), working like a built-in clock to reduce delays and streamline validation compared to older blockchains like Bitcoin and Ethereum,
    • Turbine technology, unique to Solana, breaks data into smaller packets for faster and more reliable processing, and
    • The Sealevel engine, which allows Solana to process many transactions at the same time, unlike older blockchains that handle them one by one.

Key features: Why Solana stands out

Transaction speed

Solana’s high transaction speed makes it ideal for applications requiring quick and seamless execution, such as those utilised by smart contracts and decentralised apps. For comparison, while Solana regularly processes around 3,000 to 4,000 transactions per second (TPS), far outpacing Ethereum (around 15-30 TPS) and Bitcoin (around 7 TPS). Even this incredible speed is only about 1.6% of Solana’s current theoretical maximum throughput of 65,000 TPS.

Low fees

Solana has some of the lowest network fees on the market, typically around just a fraction of a cent (A$0.00038 per transaction at the time of writing). This makes it particularly appealing for high-volume applications, including non-fungible tokens (NFTs), decentralised finance (DeFi), and gaming.

Expanding ecosystem

One key measure of ecosystem growth is total locked value (TLV), which reflects the total assets held within a blockchain’s applications (most relevant for DeFi). A higher TLV means more assets are being used in Solana’s applications, indicating greater trust from users and developers.

Recent data shows Solana’s TLV is sitting at around US$9.10b as of December 2024, driven in part by the election of President Trump, as well as growing projects such as Jupiter, Raydium and Sanctum. However, it’s important to note that looking solely at deposit figures can be misleading, as many DApps, NFTs and gaming platforms do not require large deposit bases.

Community and developer support

Building on Solana includes enterprise-grade security with audits and the flexibility to code in popular languages, including C, C++, and Rust. This active community contributes to continuous growth and innovation, with a steady flow of new projects and initiatives. As of July 2024, 2,856 developers were working on the Solana ecosystem (a 14% increase from the previous year, but less than its two-year high).

Security

Solana regularly undergoes third-party security audits, reinforcing institutional confidence in the network’s robustness. High-security standards further support Solana’s suitability for many applications.

Proof of Stake (POS)

Proof of Stake is Solana’s consensus mechanism. It governs how decisions are made within the blockchain and how new SOL is added, making it integral to the network’s operation. Validators are chosen to propose and validate blocks based on their SOL stake, helping to ensure the network remains secure and efficient.

This contrasts with the Proof of Work consensus mechanism, used by blockchains such as Bitcoin, which requires considerable energy and computing power to crack cryptographic puzzles.

Risks and potential shortcomings

While Solana’s innovative technology drives its rapid growth, it’s important to consider potential risks.

Security and new technology risks

As a newer blockchain, Solana’s long-term security and resilience have yet to be proven to the same degree as those of more established networks like Bitcoin or Ethereum. While its innovative technologies are promising, they also bring potential security risks as it scales.

Solana has experienced network outages in the past, raising concerns about the network’s stability and reliability for high-stakes applications. This included a 5-hour outage in February this year, temporarily impacting prices. Maintaining consistent uptime will be critical for Solana as it aims to support a growing number of applications and users.

Regulatory scrutiny

Growing institutional interest could bring increased regulatory attention, potentially affecting Solana’s operations or the adoption of SOL in certain markets.

Competition from other blockchains

Ethereum remains its closest competitor and is significantly more established than the younger Solana ecosystem, and will continue to improve its transaction costs and TPS. Additionally, while Solana has seen strong growth in this market cycle, several competitors are emerging, including Sui (May 2023) and Aptos (October, 2022). Although Solana’s DeFi ecosystem is larger than that of Sui and Aptos, these competitors bring their own innovations and could impact Solana’s market position.

Centralisation

Critics have raised concerns about Solana’s centralisation, primarily due to its early token distribution favouring private investors and the Solana Foundation’s significant control over validator nodes. However, centralisation involves multiple factors beyond validator distribution.

Factors like node client diversity, hosting distribution, and geographic spread further influence decentralisation, showing room for improvement across all blockchains.

Factors influencing SOL price

Politics and regulations

With the reelection of pro-crypto President Trump on November 8, 2024, the crypto industry experienced a surge across many cryptocurrencies. His administration is broadly seen to back a supportive regulatory environment for the crypto industry, increasing optimism and adoption of many cryptocurrencies, including SOL.

Altseason

“A rising tide lifts all boats.” After major cryptos like Bitcoin surged, investors historically explored altcoins like Solana, a period many have come to term “altseason.” For example, after the May 2020 Bitcoin halving, the altcoin market saw incredible growth, with SOL’s price rising significantly. This trend mirrors a similar altcoin surge following the 2016 Bitcoin halving (though Solana did not exist at that time). However, past performance does not guarantee future performance, and investing in crypto carries significant risk, as with many investments.

New projects and coins

New token launches are driving network activity, with Solana emerging as a leader. In late September alone, 96,101 of the 110,180 new tokens were launched on Solana. This trend has continued through much of 2024, with Solana hosting over 80% of new token launches between April to November 2024.

 

Source: The Block

Solana isn’t just about memecoins. The network is becoming a hub for Decentralised Infrastructure (DePIN) protocols like Helium, Render, IoNET, and Grass, focusing on real-world applications beyond just finance.

Institutional adoption and partnerships as market drivers

Institutional interest brings credibility and substantial capital to the market, often boosting demand and stability for assets like SOL. In Q3 2024, institutional investments in Solana-based applications surged to $173 million across 29 projects, according to a Messari report.

More recently, PayPal’s stablecoin, PYUSD, surpassed a $1 billion market cap, driven by its expansion to the Solana blockchain and incentives from decentralised finance (DeFi) protocols. Initially launched on Ethereum, PYUSD faced slow growth but gained momentum after integrating with Solana in May 2024. Within three months, PYUSD’s supply on Solana grew to $650 million, surpassing its supply on Ethereum. This surge highlights growing institutional interest in leveraging Solana’s infrastructure for stablecoin deployment.

While Solana-focused exchange-traded funds (ETFs) were previously rejected under outgoing SEC Chair Gary Gensler, the potential for future approval under new SEC leadership may further influence institutional adoption and thereby SOL prices.

Average daily fee payers, Q3. Source: Messari

Recent developments and roadmap

At the recent Solana Breakpoint conference in Singapore, two major upgrades were announced:

Key takeaways

Transaction speed and cost efficiency: Solana’s ability to process thousands of transactions per second at minimal cost makes it ideal for high-demand applications like NFTs, DeFi, and gaming.

Ecosystem growth: The platform’s speed and affordability have attracted a diverse range of dApps, driving the steady expansion of the Solana ecosystem.

Community and developer support: Enterprise-grade security and coding flexibility draw a wide community of developers, driving ongoing innovation and growth.

Technological edge: Solana’s unique Proof of History (PoH) and Proof of Stake (PoS) mechanisms ensure efficient, scalable operations that support its expanding ecosystem.

Market dynamics: Factors including institutional investment, environmental impact, altseason trends, and the influx of new projects can influence SOL prices.

Getting started with Solana

Ready to start buying SOL?

1. Buying Solana: You can buy SOL on Independent Reserve using an SMSF, trust, company, personal or institutional account with a range of easy deposit methods.

For larger transactions ($50,000+), our over-the-counter (OTC) desk offers tailored support to fill orders that might be too price-disruptive on open markets at exchanges.

2. Storing SOL: When you purchase SOL on Independent Reserve, your funds are stored securely within our platform. For long-term storage or additional control, you can also transfer your SOL to a hardware wallet.

 

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