Decentralized finance (DeFi) is a hot topic in the cryptocurrency industry. Most DeFi infrastructure is built on Ethereum, the largest and most robust blockchain network that supports smart contracts. Smart contracts are the code that powers DeFi, allowing for exchanges, financial derivatives and even insurance to be processed directly on Ethereum’s blockchain.
With an influx of demand for Ethereum’s network, transaction costs have skyrocketed. This makes it hard for retail investors to use DeFi on Ethereum, as transactions on Ethereum can cost over $50.
Like Ethereum, Solana uses smart contracts to host decentralized applications (dApps). However, Solana’s unique parameters allow for significantly cheaper transaction costs while simultaneously increasing the speed of the network. Find out how to buy Solana in 3 easy steps.
What is Solana?
Solana is a smart contract enabled cryptocurrency that uses a proof-of-stake and proof-of-history consensus to secure its blockchain. Ethereum is currently proof-of-work, which is a big contributor to the high gas costs on its network. To understand the differences between Ethereum and Solana, you should become familiar with these different consensus models.
Proof-of-work uses computational power to secure blockchain transactions. Bitcoin uses proof-of-work, and Ethereum is currently in the process of upgrading its blockchain from proof-of-work to proof-of-stake.
Proof-of-stake uses validators with a financial stake in the cryptocurrency to verify blockchain transactions. In many cases, anyone can become a validator so long as they have enough cryptocurrency to stake on the blockchain. This staked crypto is used to keep validators in check. If they try to enter fraudulent transactions, their staked crypto assets will be seized as punishment.
Proof-of-history works by adding what is essentially a time record on the blockchain. This way, transactions can be verifiable based on when they’re sent using a verifiable delay function. Unlike proof-of-work and proof-of-stake, there is a clear sequence of transactions based on the time the transaction is sent.
Brief History of Solana
While the cryptocurrency token Solana (SOL) just launched last year, the Solana Foundation has been busy at work since 2017. Anatoly Yakovenko and Greg Fitzgerald left Qualcomm in 2017 to start the Solana Foundation.
The token began trading in April 2020 for about $0.75. Throughout the year, Solana roughly doubled in price. It wasn’t until 2021 when Solana gained mainstream attention, quickly rising to the 14th largest cryptocurrency by market capitalization. Today Solana is currently trading hands at about $45 per coin, and it has a market cap of over $12 billion.
How to Buy Solana
- Open an online account.
Unfortunately, most popular crypto trading platforms have yet to add support for Solana. With such a promising project, it’s not unlikely that Solana will be added to more crypto exchanges in the near future. Right now, your best option is to use Crypto.com to invest in Solana.
To open an account with Crypto.com, you’ll need to enter an email address and create a password. More likely than not, you’ll also need to provide personal identification information to the website for tax purposes. Once your identity has been verified, you’re ready to begin investing.
- Buy a wallet (optional).
Before you invest in any cryptocurrency, you should consider where you’ll store your assets. It’s not recommended for you to store your crypto on an exchange, as exchanges are large targets for cryptocurrency hackers. Many exchanges have been hacked in the past, so the only reason you should keep your crypto on an exchange is if you’re trading in the short term.
Instead, you should store your cryptocurrency in a hardware or software crypto wallet. Software wallets are free to use applications that allow you to securely store your crypto on a PC or mobile device. Hardware wallets are the most secure way to store cryptocurrency, as they store your assets offline on a physical device.
- Make your purchase.
You can buy Solana on Binance using USDT or Bitcoin. Tether (USDT) is a stablecoin pegged to $1, so it simulates investing with fiat currency. Some cryptocurrency investors like to trade against Bitcoin, as this provides a metric for how well an investment does in terms of Bitcoin.
You can place your buy order as a market order or a limit order. Market orders will fill your transaction instantly at market price, whereas limit orders are filled if the cryptocurrency reaches a specific price that you specify. If the crypto never falls to that price, however, your order won’t be filled.
Best Crypto Exchange for Solana
Solana is available to U.S customers on Crypto.com.
Best Crypto Wallets for Solana
Best Hardware Wallet: Ledger Nano S
Ledger has been selling cryptocurrency hardware wallets since 2014, and it’s the most popular brand in the business. The Ledger Nano S is a multicurrency wallet and supports a variety of different cryptocurrencies.
You can purchase the Nano S on Amazon for $51. With over 1,000 supported cryptocurrencies, it’ll be the only hardware wallet you’ll ever need.
Best Software Wallet: Trust Wallet
Trust Wallet is a free-to-use mobile wallet that supports a variety of cryptocurrencies. If you ever plan on investing in tokens that use Binance Smart Chain, then you’ll need a software wallet like Trust Wallet to interact with Binance’s decentralized ecosystem.
Remember to store your seed phrase somewhere safe, as you’ll need it to recover your funds if you lose access to your account.
Trade, Sell or Convert your Solana
If you plan on actively trading Solana, you’ll need to leave your funds on Binance to do so. If you’re buying Solana to hold, then you’ll need to transfer your tokens to and from your crypto wallet when you want to make transactions.
It’s a good idea to average your buy-in price as well as your sell price. Since crypto investments are so volatile, averaging your buy-in helps reduce some of the risk associated with volatility.
Current Crypto Prices
The cryptocurrency market has skyrocketed this year, after big institutions like Tesla and Paypal have voiced their support for blockchain technology and Bitcoin. While Bitcoin’s annual returns have been impressive, cryptocurrencies like Ethereum and Solana have done much better in terms of percent gains.
To get an idea of how prices are moving, it’s a good idea to keep an eye on the crypto markets.
Is Solana a Good Investment?
If Solana can truly compete with Ethereum, then it may be a solid investment for 2021. Ethereum still has the most infrastructure on its blockchain, including decentralized exchanges (DEXes), nonfungible tokens (NFTs) and automated lending protocols. If Solana isn’t able to build out its infrastructure before Ethereum migrates to proof-of-stake, then it’s not likely that Solana will be able to compete with Ethereum’s network, given the extent that network effects have in the crypto industry.
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