The crypto market is growing rapidly. There are over 19,000 cryptocurrencies and dozens of blockchain platforms currently available. It is estimated that 34 million US adults own at least one cryptocurrency, a number that is expected to grow by a double-digit percentage by 2023. It is no surprise that Kentuckians embrace Solana and other cryptos since they own 18.7% of the entire amount.
In his piece, we’ll discuss Solana and its distinctive features. We’ll also touch upon whether this new crypto is a good investment and where you can obtain it legally in Kentucky. Buckle up!
Table of Contents
What Is Solana (SOL)?
A former Qualcomm and Dropbox employee, Anatoly Yakovenko, wanted to create a decentralized network of nodes that would be on par with the performance of a single node. Thus, he designed Solana in 2017. However, the public, open-source blockchain network did not go live until 2020. Two years after its launch, it has surpassed some of the largest cryptos and is currently ranked among the top ten cryptocurrencies.
How Does Solana Work?
Solana utilizes smart contracts, which means developers can use its network to create applications and solutions with their own tokens. Therefore, Solana’s robust protocol offers a decentralized platform for DApps and NFT marketplaces with global scaling capabilities. Currently, more than 400 DApp projects run on its network. Unlike the Ethereum network, there is no network congestion and high gas fees. Furthermore, Solana’s protocol is fast, secure, and censorship-resistant.
However, what attracts investors the most is decentralized finance (DeFi). Solana’s ecosystem and transaction speed benefit DeFi, which uses decentralized applications for financial transactions.
On top of all of this, Solana is eco-friendly. Unlike other cryptos, it doesn’t involve intensive mining. The Solana team has designed a bridge that allows transferring assets from Ethereum to Solana for an even more eco-friendly environment.
Solana’s Distinctive Features
Solana has brought to the table eight key technologies to create a decentralized network that would match the performance of a single node. They are:
- Proof-of-history (PoH) — Solana’s consensus mechanism is a hybrid since it comprises a proof-of-stake and proof-of-history. This improves network scalability and throughput, supporting around 65,000 transactions per second. Proof-of-history is an innovation introduced by Solana which brings a solution to the clock problem. Unlike other blockchains where each validator has to communicate with another to decide whether time has passed, with Solala, this is not the case. Here, every validator has its own clock mechanism that records the passage of time using a verifiable delay function (VDF), making the system even faster. PoH verifies the chronological order of transactions and the time interval between them. All validators utilize VDFs to help them maintain their clocks. Furthermore, the Solana network can rotate validators without any of them communicating with one another. It can also rotate leaders asynchronously, which means that the network never stops working regardless of its conditions. Aside from having a built-in clock for timestamping, PoH also provides Solana with ledger storage, optimized block time (800ms), and throughput (50,000–65,000 transactions per second). This is revolutionary since no other blockchain has a mechanism like this.
- Tower BFT — Solana also runs a tower consensus that uses the synchronized clock. With this consensus, nodes tremendously increase their timeouts to reach an agreement. In addition, a trustless ledger also allows nodes to observe and examine the timeouts of all validators in the network.
- Turbine — This is Solana’s block propagation technique that breaks data into small increments along with erasure codes, which facilitates their transfer through the nodes. Using this protocol, Solana addresses bandwidth-related issues and increases the speed of network transactions.
- Gulf Stream — This mempool-less transaction forwarding protocol enables Solana to reach 65,000 TPS. Gulf Stream works by pushing transactions catching and forwarding them to the edge of the network. Since validators know the order of upcoming leaders, they can forward transactions to them ahead of time. As a result, confirmation time and memory requirements on validators from unconfirmed transaction pools are drastically reduced.
- Sealevel — This transaction processing engine allows Solana to run multiple contracts concurrently. As a result, contracts can be processed more quickly, and the blockchain network costs are lower.
- Pipelining — Most tasks in the Solana ecosystem are divided into smaller ones to ensure transaction processing. Data is assigned to various hardware components as they are input to the ecosystem. Different hardware can simultaneously validate information blocks through a technique known as pipelining. DeFi projects typically use pipelining to optimize transaction validation.
- Cloudbreak — Cloudbreak is a horizontally-scaled accounts database that keeps track of participant balances. This structure is essential for the network’s scalability and throughput. In addition, it bridges the gap between hardware and software.
- Archivers — The data storage of Solana data is delegated from validators to a network of nodes known as Archivers. They do not participate in the consensus. An archiver can be a lightweight node, such as a PC or a laptop, used for data storage by the network.
SOL Token Explained
Solana has a native token — SOL. Its owners can use it for staking or paying different smart contracts and other transaction fees. By staking the tokens, users safeguard the networks and also earn rewards. The more they stake, the more they are rewarded.
SOL owners do this by pledging their tokens to validators in charge of handling transactions and operating the network. As you delegate more coins to a validator, they will generate more new transactions. With each transaction they write, they share more benefits with a delegator.
The great thing about this relatively new crypto is that there is no cap on its supply. Its current circulating supply exceeds 339 million, with a market cap of over $14 billion.
However, it is worth mentioning that Solana is highly volatile, just like other cryptocurrencies. There is no way to predict its future direction due to its constant price fluctuations. You should acquaint yourself with the way Solana works and then decide whether you should invest or not.
Crypto Laws in Kentucky
The Bluegrass State has always stayed on top of the latest crypto and blockchain industry trends. During 2019 and 2020, Kentucky did a lot to promote blockchain technology and startup businesses across the state.
In 2021, Governor Andy Beshear signed Senate Bill 255, offering tax exemptions to miners who invested at least $1 million in equipment. With this new law, the state aimed at attracting more miners and related companies into its jurisdiction. This could be Kentucky’s competitive advantage since the state has access to cheap power, and this industry is known for consuming substantial amounts of energy.
Where Can I Buy Solana in Kentucky
Kentucky residents can buy Solana through a central crypto exchange or directly from another holder. Since the latter method is less safe, we will examine the former in more detail.
Centralized Crypto Exchanges
The most secure way to purchase Solana is via a centralized cryptocurrency exchange. These platforms allow you to buy, sell, and trade cryptocurrency and digital assets. You can buy SOL tokens at Kraken, Gemini, Binance, Coinbase, and eToro, to name a few.
Each centralized crypto exchange will require you to submit personal documents and verify your identity before you can access their tools. Companies and organizations that own these exchanges operate within the country and abide by its laws and regulations. These companies act as the middlemen, securing and monitoring transactions.
Kentucky residents also have access to decentralized crypto exchanges. The difference is that there is no registration required for their services, and users do not need to provide any personal information. In addition to using a blockchain for storing funds, these exchanges also support peer-to-peer trading. However, decentralized sites can be difficult to find.
Therefore, we’ll help you understand what factors to consider when selecting a centralized platform. Below is a list of all the things to keep in mind:
- Availability in Kentucky — The majority of exchanges in the US are available nationwide. Nonetheless, there are always some differences between states, which might mean an exchange you like is not available in Kentucky.
- Crypto selection — In addition to SOL, you’ll likely want to buy or sell other cryptocurrencies, so check the exchange’s crypto offerings. This indicates that the exchange has more liquidity and is more popular.
- Security — While most exchanges with licenses adhere to high security standards, breaches still happen. Because of this, you need to find out how they handle security issues and what insurance they provide.
- Privacy — Almost all exchanges ask for your sensitive and payment information when you register. Ensure that they keep that information private and don’t make it available to numerous third parties.
- Reputation — Online reputation plays a vital role in today’s world, and crypto exchanges are no exception. Members’ reviews and feedback can help you determine whether the exchange that you are considering is a good fit.
- Fees — Each exchange charges different fees, particularly for trading and withdrawing assets. Check that these fees are reasonable and in line with those in other businesses.
- Limits — Crypto exchanges earn money through fees, but each platform has a different pricing scheme. Find out what those fees are and how high they are.
- Liquidity — The exchange should have a high trading volume of Solana, which indicates that there are enough tokens in circulation. In this case, you won’t have to wait too long before you can complete a trade, and the prices will be reasonable.
- Payment methods — There are various payment methods available on cryptocurrency exchanges, but you’ll have to make sure the one you use is on the list.
- Ease of use — Beginners will find any exchange more usable if it has an intuitive user interface and a good user experience.
Alternatively, if you prefer to avoid the interference of a third party or wish to sidestep the exchange’s verification process, you can purchase Solana directly from a fellow SOL holder. However, this comes with a risk.
To begin with, you must find a trustworthy person to perform the trade, which can be challenging. You should also remember that crypto transactions are irreversible, so you may be scammed. Therefore, buying SOL tokens from a random individual is risky. Avoid getting scammed by performing all the security checks and finalizing the trade in a public space.
How to Buy SOL on an Exchange — Step-by-Step Guide
It is relatively easy to purchase SOL coins through a centralized crypto exchange. We have put together a step-by-step guide to help you become an SOL owner in no time:
- Get a wallet — Make sure the crypto wallet accepts Solana and is highly trusted and safe. If you wish to keep your assets secure and available whenever you need them, you will need one.
- Pick an exchange — You can either use one we recommend or look for a reputable exchange online. Just make sure it covers all the aspects we have discussed previously.
- Register an account — Go to the exchange’s official website and complete the registration process. Provide all the information and documentation required to set up your account as quickly as possible.
- Deposit fiat funds — Select a payment method and follow the instructions to deposit the funds needed to purchase SOL.
- Purchase SOL — Decide how much SOL you wish to purchase and complete your transaction. The new tokens will appear in your account when the Solana network confirms the transaction.
- Withdraw SOL to your wallet — If you do not intend to keep trading SOL, it is better to store them in your wallet for an extra layer of security.
Solana has experienced steady improvements in all areas. Its developers intend to take the ecosystem to the next level by expanding it further. Therefore, experts consider it one of the most well-crafted and promising cryptocurrency projects.
We hope this guide helped you understand Solana’s functionality. However, you should still conduct your own research before making final decisions. You should also seek advice from an expert and keep abreast of the latest market trends. Remember to invest a reasonable amount and never put your faith in past performance to predict the future.