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 Binance estimates). Solana is also a low 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 £29 at the time of writing, a decrease of 85% from 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 you are still looking to buy Solana, having been made aware of the risks, here’s how to do it.
Remember, trading in cryptocurrency is speculative and you may lose some or all of your money. Cryptocurrency trading is not regulated in the UK and you would have no recourse to compensation if something were to go wrong.
Choose an exchange
You 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’s worth bearing in mind the following factors when deciding which exchange to choose:
- Payment methods: check whether your exchange will accept your preferred payment method, together with the fees charged. By way of example, 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 use a credit card, or any other credit facility, to buy cryptocurrency.
- Wallets: check whether you are able to use an integrated wallet to store your SOL. If you decide to store your Solana in a third-party wallet or an offline storage device, you should check whether the exchange will allow transfers out, and what fees are charged (if applicable).
- Available currencies: make sure that the exchange trades in SOL.
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 you 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 you to buy crypto on your debit card, be careful of any transaction fees incurred.
The following table shows the fees charged by other providers:
In the UK, PayPal isn’t widely accepted as a method of payment by cryptocurrency exchanges. However, eToro will permit PayPal deposits but charges a $5 fee on withdrawals to a PayPal account.
Place your order of Solana
Having selected an exchange and payment method, navigate to the Solana page on your exchange’s website or app and input the amount you want to invest.
Choose your storage method
You have the option of keeping Solana in your exchange’s integrated wallet, although you are able to hold it elsewhere provided your exchange permits transfers out.
You are able to store your 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, aren’t automatically connected to the internet. You will have to pay to use a third party hot wallet.
If you lose your login details for a hot wallet, your exchange or wallet provider may be able to help you recover them to reclaim access to your cryptocurrency. If you lose your access codes for a cold wallet, or misplace the drive itself, you have no recourse to recover it.
