As cryptocurrencies gain wider acceptance, many investors are looking beyond bitcoin and ether to diversify their holdings. While those two coins still dominate the roughly $2.36-trillion global crypto market (figures in U.S. dollars), they have at times moved closely with stock markets. That correlation has encouraged some investors to explore altcoins like SOL as potential complements to a broader portfolio.
SOL is the native token of the Solana blockchain and, as of Sept. 24, 2024, ranked among the top cryptocurrencies by market capitalization. According to CoinGecko, SOL had a market cap of about $69 billion, a trading price of $148.93 and nearly 469 million tokens in circulation on that date. For investors seeking exposure to alternatives that emphasize speed and low fees, Solana is worth examining.
What is Solana?
Solana was co-founded by Anatoly Yakovenko, Greg Fitzgerald and Stephen Akridge — all former Qualcomm employees — and is supported by Solana Labs. Launched in March 2020, Solana is an open-source, high-performance blockchain built to host smart contracts and decentralized applications (dApps). Its combination of features makes it one of the most notable challengers to Ethereum, which offers similar programmability but has a different trade-off between throughput and decentralization.
Technically, Solana uses a hybrid model that pairs proof-of-stake (PoS) with proof-of-history (PoH), a mechanism that helps establish the order and passage of time between events. This architecture is intended to boost throughput and reduce transaction latency, enabling the network to process a large number of transactions at very low cost. Those attributes make Solana attractive for decentralized finance (DeFi) projects, NFT marketplaces and blockchain-based gaming, where quick, inexpensive transactions improve user experience.
Solana’s on-chain ecosystem includes a growing array of dApps, DeFi protocols, NFT marketplaces and lending platforms. As adoption of these applications grows, demand for SOL — which is used to pay transaction fees and secure the network — can increase. As Michael Zagari, an investment advisor with Mandeville Private Client and Zagari+Simpson, notes, “When it comes to gaming, finance and NFTs, having transactions processed quickly, at low fees, and an easy-to-use platform to build on top of make for a better user experience and help scale decentralized applications.”
Developers and users are key to Solana’s network effects: more compelling applications attract more users, which in turn can raise demand for SOL and reinforce the ecosystem’s value. That dynamic is one reason some investors view SOL as more than just a speculative token.
Staking SOL
One practical way investors can participate in the Solana network is by staking SOL. Staking involves locking up tokens to help secure the blockchain in exchange for rewards, similar to earning interest. Different services and platforms offer staking options, each with varying fees, lock-up periods and reward structures, so investors should review terms carefully before committing funds. For newcomers, reputable exchanges and non-custodial wallets often provide straightforward staking interfaces and educational resources about risks and expected returns.
Beyond staking, SOL is used for everyday transaction fees and to purchase digital items within some decentralized applications. For example, in blockchain-based gaming and virtual worlds, SOL can be used to buy in-game assets, cosmetic items for avatars and other digital goods. The coin’s utility across DeFi, NFTs and gaming supports its practical value within the Solana ecosystem.
Buying SOL with Canadian dollars
Canadians interested in acquiring SOL can do so through cryptocurrency trading platforms. When choosing a platform, look for providers that are registered or approved to operate in Canada by provincial securities regulators and that follow recognized security practices. MoneySense’s rankings and reviews of crypto platforms can be a helpful starting point for comparing fees, supported coins, custody options and regulatory status.
Before buying SOL, consider practical matters such as custody (where you will store your tokens), fees for trading and withdrawals, and whether you prefer the convenience of a custodial exchange or the control of a personal wallet. Proper security hygiene — including enabling two-factor authentication and understanding private key management — is essential when handling crypto assets.
Bottom line
Solana offers a compelling combination of speed, low transaction costs and a growing developer ecosystem, which makes it attractive for applications spanning NFTs, DeFi and blockchain gaming. That said, SOL and other cryptocurrencies remain volatile and carry risks, including technical challenges, regulatory uncertainty and market swings. Investors should weigh their financial goals and risk tolerance carefully, diversify appropriately, and avoid allocating more than they can afford to lose.
Read more about crypto:
- Mission digital: How Coinbase is reshaping Canada’s crypto landscape
- 10 common crypto scams and how to avoid them
- What is DeFi? And how can Canadians invest in it?
- What affects the price of bitcoin?
- “Which cryptocurrency should I invest in?”