Minnesota is similar to other states in the US regarding cryptocurrencies. It has yet to introduce any laws that explicitly address cryptocurrencies. Therefore, you are not required to have a special permit to buy or sell cryptocurrencies in Minnesota, including Solana.
Solana is a crypto with enormous potential. Its low cost and fast transactions, combined with its vast ecosystem for numerous projects, give it a reputation as a cheaper version of Ethereum. This guide will help you understand Solana better and decide if it is a worthwhile investment.
Table of Contents
What Is Solana (SOL)?
Solana is defined as a public, open-source blockchain that is decentralized in nature. Its creator, Anatoly Yakovenko, wanted to design a blockchain that would solve some of the main issues other blockchains have faced — scalability and faster consensus times. He created Solana with his partners Eric Williams, Greg Fitzgerald, and Raj Gokal.
Solana was created in 2017, but it took three years to launch. In the meantime, the team raised more than $20 million in private and public sales. In March 2020, Solana raised $1.76 in a CoinList public token sale. Soon after, this crypto went live on Mainnet Beta.
This relatively new cryptocurrency is seen as a rival to Ethereum. Like ETH, Solana also offers a way to build decentralized applications (DApps). It is estimated that over 400 DApps run on the Solana network.
Since Solana’s ecosystem is massive and constantly growing, it is also home to DeFi projects, various NFT marketplaces, and Web3 apps. In 2021, the number of projects increased from 70 to 5,100.
Solana is also eco-friendly, with a fast and secure protocol. Gas fees are low, and there is no network congestion. Due to all these benefits, Solana has global scaling capabilities.
Solana’s Distinctive Features
Solana is the first web-scale blockchain, thanks to its eight key innovations. All of them work together to create a reliable blockchain network. Let’s take a look under its virtual hood and see what they are:
- Proof-of-history (PoH) — PoH is unique to Solana and is also the backbone of its network. Solana’s consensus mechanism is hybrid because it utilizes both proof-of-stake and proof-of-history. Unlike other blockchains where the biggest problem is determining the order and time of events, Solana relies on PoH to resolve this issue. It does this by providing each validator with its own clock. The validators use a verifiable delay function (VDF) to maintain their clocks, meaning they do not have to wait on others to confirm their transactions. This speeds up the system tremendously. The clock has a digital record of every event, and the exact moment it occurred. It assigns a timestamp to each event (transaction) along with its data structure. Solana’s team boasts that this is the reason why the network can process up to 65,000 TPS.
- Tower BFT — Aside from PoH, Solana utilizes a consensus mechanism called Tower BFT. PoH allows this mechanism to use the synchronized clock to agree on transactions and enables validators to vote on the ledger’s state. Validators can use this mechanism to reference their previous votes instead of rerunning the entire chain of transactions.
- Gulf Stream — Gulf Stream is responsible for mempool, and it is also what enables Solana to reach 65,000 TPS. A mempool, in a way, represents a waiting room where transactions wait before they are picked to go in the next block. This protocol provides a new way for the network to forward transactions to validators before the current block of transactions is approved.
- Sealevel — Unlike some networks that can run one smart contract at a time, Solana employs the Sealevel transaction processing engine, which allows it to run multiple contracts simultaneously without clogging or slowing down the network.
- Pipelining — Solana incorporates a transaction processing system called Pipelining, which assigns small data packets to different hardware components. This system improves block validation times substantially.
- Turbine — Solana uses this protocol to transfer consensus-independent blocks between validators. This protocol breaks important data into small pieces. The streamed block is split into tiny packets containing erasure codes and is then dispersed among many random peers. The streamed block is divided into little packages containing erasure codes and distributed among many randomly selected peers. This way, Solana increases the bandwidth and speed of transactions.
- Cloudbreak — This is the network’s account database that works with the Pipelining and Archivers protocols. It also keeps track of participant balances. Cloudbreak allows the system to read and write data, simultaneously improving previous iterations.
- Archivers — One of the most important factors is the ability to store data on such a high-performance network. Solana solves this issue by delegating data storage from validators to a network of nodes — archivers. Since the network history is fragmented, Archivers store a small portion of it. The network regularly checks if archivers properly store the data they are supposed to archive. On the other hand, they do not take part in consensus meetings.
SOL Token Explained
Solana’s native cryptocurrency is SOL. Unlike BTC, this inflationary crypto has no hard cap on the total number of tokens. Inflation is set at 8%, which will decline by 15% yearly until it reaches 1.5%, the long-term fixed rate.
Although Solana appeared on the market in 2020, it quickly climbed up the crypto ladder and positioned itself among the top ten cryptos. The value of the SOL token at the moment of its launch was $0.50. It reached its all-time high of $258.93 at the end of 2021, making it one of the best-performing cryptocurrencies.
Solana’s current circulating supply (as of June 2022) exceeds 342 million, while its live market cap goes over $11 billion.
Aside from scaling capabilities and being a better blockchain for DApps, the Solana network provides a few other benefits.
- Solana is censorship resistant — Solana’s distributed nature makes it an excellent platform for everyday commerce. It allows users to conduct global transactions with low fees. Moreover, since there is no central control over the network, no one can block, confiscate, or stop transactions, as can happen with fiat currencies.
- Solana can be used for paying smart contracts and transaction fees — Compared to other cryptos, Solana charges very low fees to run smart contracts (programs that eliminate third parties from digital transactions) or send transactions.
- Solana allows delegated staking — As a delegated staking blockchain, it provides its users with a lot more advantages than the competition. For instance, Solana users can secure a passive income by pledging their SOL tokens to active validators over a specific period. Stakeholders are awarded inflation incentives in return.
Where Can I Buy Solana in Minnesota
Minnesota residents have two alternatives when buying SOL coins — via a centralized crypto exchange or from another SOL holder directly. We’ll discuss both, but we’ll focus more on the former as it is a much safer option.
Centralized Crypto Exchanges
Centralized crypto exchanges are marketplaces for trading cryptos and other digital assets. They are also the safest and most popular option for buying Solana and other cryptos. The most notable ones, like Binance, eToro, Kraken, and Coinbase, offer this token.
They are licensed and run by specific organizations. Since each transaction is closely monitored and secured, these exchanges provide the much-needed security layer. They also require each client to verify their identity.
Decentralized crypto exchanges also exist. They don’t require you to register and provide sensitive data, making them an excellent option for those who don’t wish to reveal their identity. However, they are fewer in number and popularity, and it is often difficult to find those that work in Minnesota and offer Solana.
For this reason, we advise you to stick to centralized exchanges. This is what you need to know before you commit:
- Availability in Minnesota — When looking for a centralized exchange, the most important thing to consider is its availability and functionality in Minnesota.
- Crypto selection — Your chosen exchange must support Solana and other cryptos to demonstrate that the platform is widely used and offers a wide range of trading pairs. This allows you to diversify your crypto portfolio if you decide to trade SOL for other cryptos in the future.
- Security — Keeping your crypto assets safe is crucial, so you must check the exchange’s security protocols. You should also see how it handles breaches, how it has dealt with them previously, and the type of insurance coverage it provides.
- Privacy — Maintaining your privacy in the crypto world is vital, so ensure the exchange handles your data properly and doesn’t share it with any third parties.
- Reputation — Since your money will be in the exchange’s hands, a good reputation is a prerequisite for you to start using a trading platform.
- Fees — Exchanges vary in charges and commissions, although some charge higher rates than others. Ensure you are acquainted with the trading, depositing, and withdrawing fees.
- Limits — Most exchanges limit the amount you can trade, deposit, and withdraw, so checking these numbers is essential.
- Liquidity — Having SOL tokens available on an exchange isn’t always enough. The platform needs to have enough tokens for people to trade in sufficient quantities, and the trades can take place without delay.
- Payment methods — To purchase SOL tokens, you need a way to deposit the money you wish to use. For this reason, the exchange needs to support multiple payment methods.
- Ease of use — Some exchanges have great user interfaces, but some are pretty difficult to use, particularly if you’re new to cryptocurrency. Make sure to find one that is user- and beginner-friendly.
It is simpler to purchase SOL tokens from a third party than from an exchange if you want total freedom. However, you still need to find an SOL owner willing to negotiate and make a deal from which both parties can benefit. That’s why this process is riskier.
Ideally, you should do it with someone you know and trust, and if that is not possible, make a safe trade so that you don’t get scammed. It is advisable to complete the transaction in person in a public area. To ensure you get the assets you’re buying, you should consider bringing in a mediator to ensure you get the tokens you’re purchasing.
How to Buy SOL on an Exchange — Step-by-Step Guide
Because buying through an exchange is the safest way, we wanted to assist you by explaining the process. It’s pretty simple since most exchanges provide similar instructions, so you can easily follow these steps:
- Pick a crypto wallet — The crypto wallet you choose should accept Solana and be highly reputable and secure. Having one will ensure that your assets are safe and accessible when you need them.
- Choose an exchange — You can choose from the many businesses we recommend or find one on your own based on the factors in the previous section.
- Register an account — Visit the exchange’s official website to set up your account. Follow the site’s instructions to complete the verification process so you can start trading right away.
- Deposit fiat funds — Calculate how much money you’ll need to purchase SOL coins, and don’t forget to account for exchange fees and margins. Select a deposit option that suits you and complete the process.
- Buy SOL — Choose SOL on the website and purchase the desired amount. The money should reach you relatively quickly if the exchange’s trading volume is high.
- Transfer SOL to your wallet — Once you have your tokens, you should transfer them to your wallet for security reasons.
Solana represents a strong competitor to BTC and ETH. It solves many issues other blockchains face, utilizes a more efficient consensus mechanism, and provides a new structure for verifying transactions. Due to the multiple innovations that this crypto brings to the table, more investors and crypto enthusiasts will invest in it.
We hope this article helps you get acquainted with Solana, its key technologies, and what to do before investing in it. Do your homework and invest wisely. Good luck!