Arizona is called the Silicon Valley of the Southwest, thanks to its booming tech industry and tech-friendly legislature. Thus, it is no surprise that the state passed a few laws that allowed blockchain companies to continue operating. Furthermore, Arizona State University has become a hub for blockchain innovations.
It is not hard to conclude that Solana and other cryptos are more than welcome in the Grand Canyon State. Its residents can buy, sell, and trade this virtual currency without obtaining a money transmitter license.
This article will cover everything from Solana’s history and distinctive features to its potential as an investment. Read on.
What Is Solana (SOL)?
Solana is not just a cryptocurrency with a token but also an open-source platform. It is an ecosystem for developing decentralized apps (dApps). The history of Solana can be traced back to 2017, although it came into the spotlight in 2021.
It was created by Anatoly Yakovenko, a former Qualcomm and Dropbox employee. He joined forces with Greg Fitzgerald, and they made one of Ethereum’s biggest challengers in the platform category. The name Solana comes from the Solana Beach in San Diego, which is the place where Yakovenko used to go surfing.
Test networks used for Solana’s development reached hundreds of thousands of transactions per second by the end of 2018. This helped Solana raise money from investors. It managed to raise over $25 million through various private and public sales. This also drew the attention of major companies like Multicoin Capital, Serum, and many others. Furthermore, Serum is one of the most successful projects built on the Solana blockchain.
The team behind Solana organized its first ICO in 2020, where Solana earned $1.76 million. It was launched the same year by the non-profit Solana Foundation based in Geneva.
How Does Solana Work
It all started with Ykovenko’s vision to synchronize time in a decentralized network. This is what he called proof-of-history (PoH). PoH is the heart of Solana. This unique technology enables up to 65,000 transactions per second on a blockchain. And it only gets better. This is achieved without sharding solutions and with almost zero cost (the price per transaction is $0.01)
Each transaction in Solana has a built-in timestamp. This way, network nodes can instantly organize transactions without waiting for confirmation from other validators. PoH can verify the order of blockchain transactions and the passage of time between them. Plus, nodes that confirm transactions don’t have to communicate with each other, which makes this system so fast.
Moreover, Solana also has node clusters — a set of validators maintaining a single application. With this feature, transaction processing is even faster.
Aside from using PoH, Solana also uses a proof-of-stake consensus algorithm. This symbiosis makes Solana a hybrid model.
SOL Token Explained
Solana has a native token, SOL, which can be used for staking and transaction fees. Those who stake SOL tokens can become network validators. Although there is no minimum limit of staked tokens, the more you stake, the higher the chances of becoming a slot leader or creating blocks.
It is important to note that Solana’s coin has the highest staking rate compared to all other platforms. Thus, those who stake SOL can reap around 6% interest. Solana is an inflationary cryptocurrency with annual inflation of 8%. In the long-term, this number will decrease until it reaches 1.5%.
However, staking is a long-term process, and you should not expect overnight success. Plus, you need to take into consideration SOL’s volatile nature.
Solana in Numbers
When the SOL token was launched in May 2020, its price was $0.78. The rest of the year was quiet, and Solana wasn’t even among the top 100.
However, the tables turned at the beginning of 2021 when the SOL price skyrocketed. In May 2021, the SOL token’s value was around $50, which means it increased 30x in just four or five months. Solana is highly volatile like all cryptos, so its price went up and down, reaching an all-time high of $258.93 in November 2021.
The SOL token has been among the top 10 cryptos for quite some time, with a market cap of over $15 billion. Its current circulating supply exceeds 336 million, while the maximum supply is unlimited.
Investing in Solana
As one of the year’s hottest projects, Solana saw a growth of over 10,000% in its SOL token value in 2021. In addition to gaining more mainstream attention, Solana is attracting institutional investors due to its established ecosystem, developer adoption, and expanding offerings (such as NFTs).
Despite these things, Solana still has room to grow and expand further. From the standpoint of market capitalization, Solana is one-tenth the size of its main competitor, Ethereum. It is expected that Solana will grow more in the future, thanks to over 1,000 new projects and the high transaction speeds it provides.
Those interested in investing in Solana or other cryptocurrencies should be aware of potential risks. The entire crypto market is naturally more volatile than most investments, which means Solana may show massive growth or a massive downward swing. Investing in Solana involves risk, so be sure you understand the risks and talk to an investment professional if needed.
Crypto Laws in Arizona
Arizona is one of those states with a positive stance toward cryptocurrencies and wants to incorporate blockchain technology in legal commerce. Therefore, The Arizona legislature enacted HB 2417 to boost blockchain development. The bill states that smart contracts and electronic signatures are valid under Arizona law.
The Grand Canyon State strives to make cryptocurrencies mainstream. Thus, in January 2022, Senator Wendy Rogers sought to amend the current bill by introducing SB 1341, which would make Bitcoin legal currency and allow you to pay debt, taxes, and charges in cryptocurrencies. However, since the Constitution prohibits individual states from establishing legal tender, this law is unlikely to take effect.
Where Can I Buy Solana in Arizona?
The safest way to obtain SOL tokens is through a centralized crypto exchange. Another alternative is to find another SOL owner and purchase from them directly. Let’s discuss both options in greater detail.
Centralized Crypto Exchanges
Crypto exchanges allow users to trade, buy, and sell Solana and other cryptos. Such exchanges come in two forms — centralized and decentralized.
Centralized crypto exchanges need to hold a license to operate. They are owned by companies and impose their rules and fees. They also require all their users to go through a KYC process and submit the necessary documents to verify their accounts. Since they manage all the work for you, they act as middlemen. Some popular CEXs are Gemini, Coinbase, Kraken, and Binance.
On the other hand, decentralized crypto exchanges don’t require you to go through the verification process and allow you to perform trades anonymously. This may be bad news for minor cryptos, as you won’t be able to find them on some DEXs.
It is best to stick to CEXs as they provide a higher level of security. Here is what you need to consider before choosing one:
- Availability in Arizona — Even though most crypto exchanges in the US are regulated nationally, they must hold an Arizona license.
- Solana support — Despite being a major cryptocurrency, Solana may not be available everywhere. Thus, you need to be aware of what assets each exchange offers.
- Security and privacy — The most critical aspect of the exchange should be its security. Make sure the site you choose uses cutting-edge encryption and firewalls to protect your financial data and personal information.
- Overall reputation — See if the platform has any security flaws. Check reviews and feedback from other users to see if they recommend it.
- Fees — Each exchange charges different fees. While some charge a flat fee, others charge a percentage of your trade. Additionally, they differ based on whether you’re a buyer or a seller. Most exchanges also charge conversion and transaction fees.
- Limits — Each centralized exchange charges fees for trading, transferring, and withdrawing money. You want to choose exchanges that charge low trading fees to avoid losing money.
- Liquidity — Just because SOL tokens are listed on an exchange doesn’t mean that there are enough of them. You will not be able to execute any trade without enough trading volume.
- User interface — Both desktop and mobile users should enjoy an intuitive and straightforward user interface. Using the website will be easier for beginners if it has easy navigation and a good user experience.
- Payment methods — Payment methods vary from one exchange to another. Some accept bank transfers, PayPal, and debit/credit cards, while others only accept cryptocurrencies. Study the various options these platforms offer and decide on the most appropriate payment method for you.
Using a crypto exchange to purchase SOL tokens may sound too complicated for some people. However, there is another alternative. You can find another SOL holder and ask them to directly sell you the SOL coins. This way, you don’t have to go through the verification process and reveal your identity.
But you have to be aware that this method carries a risk, as there is no chance for you to know if the other person’s intentions are genuine or not. If you still decide to go this way, try to get to know the person you are buying from and perform the trade in a public place as a safety precaution.
How to Buy SOL on an Exchange — Step-by-Step Guide
This short step-by-step guide will help Arizona residents purchase SOL tokens over a centralized crypto exchange. The good news is that this process is almost the same across all exchanges:
- Set up a wallet — Find a wallet that supports Solana, as this is where you’ll store your tokens. The easiest way is to visit Solana’s official website and see the list of supported wallets.
- Choose an exchange — You can choose one of the exchanges we recommended or find another that suits you better. Either way, remember to consider all the factors we discussed earlier.
- Register an account — This is a standard KYC procedure you’ll come across on any CEX. You’ll be required to provide all the necessary documents and verify your account.
- Make a deposit — Using one of the available methods, determine how much money to deposit by comparing fees and exchange rates.
- Buy SOL — As soon as you fund your account, you’ll be able to buy the desired number of SOL coins.
- Transfer SOL to your wallet — This step is not mandatory. However, it is safer to keep SOL tokens in your wallet than on an exchange.
In summary, Solana is a popular crypto that offers super-fast transactions at a low cost. With the list of applications constantly growing in its ecosystem, this platform is on par with competitors such as ETH or Cardano.
Despite all the improvements and problems it solves, Solana is still a new ecosystem continuing to grow and improve daily. Aside from many projects running on its platform, Solana has an NFT marketplace and hundreds of dApps in development. Overall, Solana is among the most promising projects in the cryptocurrency space, but only time will tell if it continues to grow rapidly in the future.