What is it, how does it work and how to invest in Solana (SOL)

Solana is a high-performance blockchain designed to host decentralized applications (dApps) and cryptocurrencies. It is best known for being very fast and low-cost compared to more traditional blockchains like Ethereum.

In 2021, the price of the cryptocurrency grew by almost 2000%. This result has led Solana to be one of the top 5 digital currencies in terms of market capitalization. Analyst estimates for the price of SOL by the end of 2025 range from moderate to very optimistic scenarios, always keeping in mind the volatility that characterizes the sector.

To understand how Solana works and how to invest it is necessary to know its characteristics. Below, what it is and what you need to know about investing in the cryptocurrency.

What is Solana (SOL)

Solana is a public and open source blockchain that supports smart contracts, NFTs and dApps included.

It was created in 2017 by Anatoly Yakovenko, a former software engineer at Dropbox, together with Greg Fitzgerald, Stephen Akridge and Raj Gokal, with the aim of offering a new blockchain that is faster, cheaper and scalable.

It is precisely thanks to these characteristics that Solana has seen a surge in price and has attracted increasing attention from investors, especially in 2021, after its launch in 2020.

Solana has made significant progress since its debut, establishing itself as one of the most innovative and high-performance blockchains in the cryptocurrency landscape.

According to some data elaborations found on the web, by 2025 Solana can count on over 1,300 validators and the processing of more than 408 billion transactions, with a cumulative trading volume close to 1,000 billion dollars.

The success of Solana, which exploded almost immediately after its debut, had several reasons. First of all, with the boom of DeFi and NFT ecosystems, the ETH network was overloaded and became extremely expensive.

The Solana blockchain has therefore proven to be the ideal alternative, offering fast transactions at little or no cost. This is why activity on the Solana blockchain has grown rapidly and exponentially, positioning itself among the 10 most used decentralized finance platforms by total value locked.

In summary, here is the story of Solana from its origins to today. The birth is due to the creation of a very fast blockchain using the concept of Proof of History (PoH), a sort of “cryptographic clock” to order transactions without needing traditional consensus each time.

After the boom of 2021, in the following two years Solana suffers some setbacks. The collapse of FTX (a large investor in Solana) temporarily damages confidence in the project. However, Solana Mobile is born: the Saga Phone project begins.

Between 2023 and 2024, several new developments emerge:

• Firedancer: development of a second independent validation client, much faster and more resilient;
• Solana Pay: peer-to-peer payment solutions without commissions;
• Compressed NFTs: revolution in the management of NFTs at very low cost;
• Hyperdrive Upgrade: innovations that multiply the speed and efficiency of the blockchain

According to analysts, today Solana Pay is growing, with very easy microtransactions; its network is more decentralized and diverse and the technology is among the most advanced in terms of scalability in the crypto world.

How Solana Works

Solana is a blockchain designed to be very fast (very high number of transactions per second), very cheap (very low fees), decentralized (although there are criticisms on this point).

To achieve these characteristics it combines multiple technologies. Here are the main ones.

Proof of History (PoH) - Cryptographic Clock
Solana uses PoH to order transactions in time without having to wait for all nodes to agree.

It’s like having an automatic timestamp: so validators can work faster. The result is the drastic reduction of consensus times.

Tower BFT - Fast Consensus
It is an improved version of Byzantine Fault Tolerance (BFT).
Thanks to PoH, nodes can vote on decisions very quickly, without continuously recalculating.

Turbine – Efficient data transmission
Splits data into small packets and sends them across the network in a manner similar to BitTorrent.

Improves the propagation of information between validators.

Gulf Stream – Forwarding optimization
Sends transactions to the right validator in advance, even before the block is created.

This drastically reduces latency.

Sealevel – Parallel execution
Allows thousands of smart contracts to be executed in parallel, instead of sequentially like on Ethereum.

Maximizes the efficiency of computation on the network.

Pipelining – Concurrent processing
Different stages of the validation process (e.g. receiving, signing, distributing) happen in parallel, like an assembly line.

Archivers - Distributed Archive
Not all validators need to keep the entire history: pieces of historical data are stored in a large distributed network called Archivers.

How ​​a Solana transaction happens
Solana does not work with miners, but with validators, who prove their reliability by blocking tokens that act as collateral (stake) in a wallet.

By validating transactions and adding them to the blockchain, validators receive rewards. To participate in the blockchain, you do not need very powerful hardware and high energy consumption, but a normal computer and availability of cryptocurrency. Furthermore, this mechanism incentivizes users much more to behave correctly, under penalty of removing their stake from the network through the so-called “slashing”.

An example of a transaction:

• A user sends a transaction;
• It is stamped thanks to the Proof of History;
• Validators perform consensus using Tower BFT;
• Transactions are executed in parallel with others via Sealevel;
• Data is propagated quickly via Turbine;
• Historical information is compressed and stored

What makes Solana unique? Differences with other cryptocurrencies

Solana’s features make it unique and, therefore, not comparable to other cryptocurrencies.

Specifically, Proof of History (PoH) was invented by Solana: no other major blockchain uses it.

It is a cryptographic clock that orders events in time without the need for validators to continuously talk to each other. This makes everything faster than other systems such as Proof of Work (Bitcoin) or even Proof of Stake (Ethereum 2.0).

Furthermore, Solana can handle over 50,000 transactions per second (TPS), theoretically even more. For comparison: Bitcoin runs 7 TPS and Ethereum 15-30 TPS.

Plus, Solana runs multiple smart contracts at once instead of one at a time. Developers can create decentralized apps that are much more complex, faster, and scalable than Ethereum.

In short, Solana wants to be the blockchain for mass Web3: as fast as a social network, as cheap as text messaging, as scalable as the Internet, but decentralized.

To be clear: what can you do on Solana that would be impossible or very expensive on Ethereum or Bitcoin? For example: you want to create 1 million NFT tickets (one for each spectator) for a big event?

• With Solana: thanks to NFT Compression (compressed NFTs), you create millions of NFTs for very little money (a few dozen dollars in total). The transactions to distribute these NFTs cost fractions of a cent each. The time to complete everything is a matter of minutes, not hours. Users receive tickets directly in their crypto wallets or mobile apps (e.g. Phantom Wallet, Solana Mobile).
• With Ethereum: Each minted NFT costs tens of dollars in gas fees (depending on traffic). For 1 million NFTs, the cost could be millions of dollars in gas fees alone. Additionally, the Ethereum network does not natively support NFT compression. Transactions would be very slow (congestion slowdowns).
• With Bitcoin: It does not natively support complex smart contracts or standard NFTs like on Ethereum/Solana. Even with the recently introduced Ordinals (NFTs on Bitcoin), creating 1 million subscriptions would be:
• slow (requires many blocks), very expensive (fees for each transaction) and impractical.

To summarize, here are the main features and differences between Solana and other cryptocurrencies:

• Bitcoin: has maximum security, is considered digital gold;
• Ethereum: it is considered the gold standard for DeFi and NFTs;
• Cardano: it has more of an academic approach, slow development;
• Solana: it is ultra-fast, with a focus on Web3

Solana excels for:

• very high speed (TPS among the highest);
• negligible costs even for massive transactions (e.g. compressed NFTs);
• unique technological innovations such as Proof of History;
• mobile opening (Solana Pay, Saga Phone);
• rapid maturation after the difficulties of 2021-2022

Solana’s limits, according to experts’ assessments, include: a relative centralization, with expensive hardware required for validators, therefore less democratic; a network with various historical crashes, even if now very reduced, the young ecosystem: it has fewer years of development than Ethereum or Bitcoin.

How to buy and invest in Solana

To buy and invest in Solana you need to follow several steps:

1. register on an exchange platform that supports Solana by creating an account;
2. load euros, dollars or other currencies via: Bank transfer, Credit/debit card, PayPal (on some exchanges);
3. search for SOL on the platform;
4. enter the amount to buy (e.g. €100 of SOL) with instant purchase (faster, but slightly more expensive) or limit order (you set the price at which to buy).

At this point, to make an investment, you can put Solana on a secure wallet (such as Phantom); stake the SOL to get rewards; keep or use the SOL for NFT/DeFi on Solana.

Solana Future Scenarios: Price and Outlook

​Solana (SOL) price predictions vary widely among analysts, reflecting the uncertainty and volatility that are typical in the cryptocurrency market.

Some experts see significant upside potential, while others predict possible downside. Factors such as institutional adoption, technological innovation, and macroeconomic conditions will significantly impact the price action.

For example, InvestingHaven predicts an average price of $515 per SOL in 2025, with a potential upside of $1,000, especially if a Solana ETF is approved.​

According to The Currency Analytics, SOL can reach $400 in 2025 and as high as $1,351 by 2030.

CryptoPredictions.com predicts an average price of $118.57 per SOL in 2025, with a possible low of $101.23, indicating a potential downside from current levels.

Finbold is bearish signals, with fears that the price of SOL could drop to $100, due to a cooling of market sentiment and a decline in investor confidence.

Original article published on Money.it Italy. Original title: Cos’è, come funziona e come investire in Solana (SOL)