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Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
Solana is a public, open-source blockchain that supports smart contracts, including non-fungible tokens (NFTs) and a range of decentralised applications (dApps). Solana’s native currency is called the SOL token.
When Solana was founded in 2017, Anatoly Yakovenko and Raj Gokal wanted to create a blockchain that could meet global demand with blockchain speeds limited to 15 transactions per second (TPS) at that time.
One of Solana’s differentiating factors is its high transaction processing speed, with a theoretical throughput of 65,000 TPS, compared to 5 and 10 TPS for Bitcoin and Ethereum respectively (based on industry estimates). Solana is also a lower fee option in comparison to other cryptocurrencies such as Ethereum.
Solana’s investors include prominent venture capital firms specialising in cryptocurrency, such as CoinShares, Coinfund, Alameda Research and Parafi Capital.
According to cryptocurrency research provider Messari, almost 50% of Solana’s initial token allocation went to ‘insiders’ such as employees and investors which has raised question marks over Solana as a genuine decentralised cryptocurrency system.
SOL was priced at around £32 at the time of writing, well below its November 2021 peak of around £192.
The volatility of price movements has prompted UK regulators to warn investors about the risks of cryptocurrency trading. The Financial Conduct Authority commented that investing in crypto-assets “generally involves taking very high risks” and that investors “should be prepared to lose all their money”.
If an investor is still looking to buy Solana, having been made aware of the volatile risks, here’s how to do it.
How to buy Solana (SOL) in 4 steps
1. Choose an exchange
Investors will have to sign up with an exchange such as Coinbase or eToro in order to buy cryptocurrencies. There are many exchanges to choose from, each with its own benefits and disadvantages.
It might be worth bearing in mind the following factors when deciding which exchange to choose:
- Payment methods: check whether the exchange will accept your preferred payment method, together with the fees charged. Not all exchanges will accept PayPal as a form of payment, while a 3.99% fee is typically charged for debit or credit card payments. It is generally considered unwise to rely on a credit facility to buy cryptocurrency
- Wallets: check if it’s possible to use an integrated wallet to store your SOL. If an investor decides to store Solana in a third-party wallet or an offline storage device, it’s important to understand whether the exchange will allow transfers out, and what fees are charged (if applicable)
- Available currencies: make sure that the exchange trades in SOL.
2. Choose a payment method
Paying by direct bank transfer is typically the most cost-effective way to buy cryptocurrencies as fees do not tend to be charged for this.
While investors may be able to pay by debit card, fees may be charged and not all card providers allow the purchase of crypto. For example, Virgin Money, TSB and Tesco Bank will block transactions with cryptocurrency exchanges. Although some providers may allow the purchase of crypto currency with a debit or credit card, be careful of any transaction fees incurred.
The following table shows the fees charged by other providers:
3. Place an order of Solana
Having selected an exchange and payment method, navigate to the Solana page on the exchange’s website or app and input the investment amount.
4. Choose a storage method
Investors have the option of keeping Solana in the exchange’s integrated wallet, although they are able to hold it elsewhere provided the exchange permits transfers out.
Investors are able to store Solana online in a ‘hot’ wallet or offline in a ‘cold’ wallet. Hot wallets are more susceptible to hacking as cold wallets, such as hard drives and flash drives, as they aren’t automatically connected to the internet. A third party hot wallet will have to be paid for.
If login details for a hot wallet become lost, the exchange or wallet provider may be able to recover them so access to cryptocurrency can be reclaimed. If access codes for a cold wallet, or the drive itself, is misplaced, then there is no recourse to recover it.
Is Solana a safe investment?
No cryptocurrency, including Solana, can be considered a safe investment.
The fact that SOL’s value is down over 80% since its November 2021 peak, but up by around a third since the start of the year, speaks volumes about the volatility of this and other cryptocurrencies.
It is not possible to predict with any degree of certainty what will happen in crypto markets.
SOL is only as secure as an investors choice of crypto wallet. Find more information on the various types of crypto wallet, including their advantages and shortcomings.
Selling Solana
To sell Solana, investors will need to go to the crypto exchange’s sell page and choose what they want in return for it, whether that’s a different crypto asset or fiat currency.
Once the amount an investor wants to sell has been added, they will be shown a preview of the trade that will tell them how much they’ll get in return once any transaction fees have been deducted. If this looks satisfactory, the investor can then confirm the trade.
The investor will be sent a confirmation email and should see their account balance updated to show less SOL and more of what it was traded for.
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
Frequently Asked Questions (FAQs)
What could be some of the cheapest ways to buy Solana?
Using a crypto exchange rather than a broker and paying via direct bank transfer is usually the cheapest way to buy Solana because it tends to avoid fees.
Brokers may charge their own fees and payment via debit or credit card typically comes with a 3% fee.
In the case of the latter, card issuers also treat crypto transactions as cash advances, rather than standard purchases.
This means investors will pay a higher rate of interest from the moment they execute the trade until the balance is cleared.
Is it possible to buy Solana with another cryptocurrency?
Yes, investors don’t have to use fiat currencies to buy cryptocurrencies. They could trade Bitcoin, Ethereum, Cardano or many other crypto tokens in exchange for Solana.
The amount they’ll get in return depends on the value of the asset, relative to Solana’s value.
Can investors buy Solana with a debit or credit card?
Yes, most exchanges accept this payment method but it is not advised. Both card types usually attract a fee equivalent to 3% of the trade’s value.
Credit card issuers class crypto transactions as cash advances too, which means they charge a higher rate of interest than they would on a normal purchase.
Interest is charged from the point the trade is executed until you clear the balance.
Regardless of any fees, it’s crucial that investors do not go into debt to pay for an asset which may very well end up worth less than the amount borrowed to pay for it.
What is Solana’s max supply?
Solana, unlike Bitcoin, doesn’t have an upper limit on the number of tokens that will ever be minted.
Instead, the inflation rate of Solana is fixed.
The initial inflation rate of 8% falls 15% each year until it reaches 1.5%.
There’s currently around 400 million Solana in circulation and it’s predicted that total SOL supply could hit 700 million by 2030.
How can investors stake Solana?
Staking involves investors pledging an amount of Solana, effectively locking it up, for the chance to earn more SOL as a result of helping to validate a block of transactions and adding it to the Solana blockchain.
Most crypto exchanges have staking facilities where investors can delegate however many tokens they want to a validator of your choosing.
Depending on the validator’s success, investors then earn a share of the rewards for successfully validating a block of transactions.
