Solana was created in 2017, launched in 2020, and has been one of the fastest-growing cryptocurrencies since. Only two years later, Solana is the 9th largest cryptocurrency network in the entire world. Many people have recognized its great potential, and it’s no wonder its value and blockchain developer community continue to grow.
New Jersey is among the states striving to create a legal framework around Solana and other cryptos. Thus, in November 2021, the State Senate introduced Senate Bill 4163 — Virtual Currency and Blockchain Regulation Act — to regulate and create incentives for virtual currency businesses in the state.
This guide will discuss Solana’s ins and outs — from how it works to how you can become a proud owner.
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What Is Solana (SOL)?
Solana is an open-source blockchain project designed to host decentralized and scalable applications (DApps) and marketplaces for nonfungible tokens (NFTs).
Former Qualcomm executive, Anatoly Yakovenko, created this project in 2017. After several testnet phases, the official launch took place in 2020. Today, this project is operated by the Geneva-based Solana Foundation, whose blockchain is developed at the San Francisco-based Solana Labs.
Scalability is Solana’s unique feature. Namely, this project uses a hybrid consensus model combining a proof-of-history (PoH) algorithm with a synchronization engine (a version of proof-of-stake (PoS)). Consequently, Solana can handle many transactions per second without increasing costs.
As scalability is one of the most challenging characteristics of decentralized blockchain protocols, Solana seems like an ideal solution — it is decentralized, secure, scalable, and cost-effective.
How Does Solana Work?
The proof-of-history consensus is the primary component of the Solana project. In fact, Solana is the only cryptocurrency that uses this consensus mechanism.
Yakovenko first presented this concept in a white paper in 2017. He described it as a series of computations that record all events occurring on the network, noting their order and time intervals. This means that each node in the network has an internal clock to verify and timestamp transactions.
The unique design of Solana enables message sequencing between its nodes by using a single leader node. With this method, each transaction’s output becomes the input of another. As a result, Solana’s workload is reduced, its scalability is increased, and its overall usability is improved.
Additionally, Solana performs numerous other complex computations as part of its operation. These algorithms enhance the protocol by adding various functionalities, enabling it to reach consensus and ensuring its security and reliability.
What Is So Unique About Solana?
For Solana, speed is the key to building decentralized apps. Many solutions built on the Solana network run much faster than those built on Ethereum, which currently struggles to support them.
Plus, Solana’s transactions are incomparably faster. In comparison, Ethereum can process about 15 transactions per second, while Solana can process more than 65,000.
Another unique feature of this protocol is the average block time, which ranges from 400 to 800 milliseconds.
With Solana’s perfect scalability, tens of thousands of users can use decentralized apps simultaneously without a hitch.
Ultimately, Solana accomplishes all of that without the use of sharding or third-party technologies. There are only a handful of blockchains that can match these speeds without adding any extra features.
Similarities and Differences Compared to Ethereum
Both the Solana and Ethereum networks have some notable differences and similarities. In addition to supporting decentralized apps, these networks have their own crypto coins.
However, Ethereum has a much slower transaction speed, even though its developers are working to improve it. And Solana’s proof of history consensus mechanism ensures excellent scalability. Contrary to that, proof of work, used by Ethereum and Bitcoin, has demonstrated poor scalability.
On the other hand, Solana and Ethereum can create unlimited tokens. Ethereum has released approximately 120 million coins, while Solana has around 511 million in circulation.
SOL Token Explained
In addition to being a blockchain-based project, Solana also features its own cryptocurrency token, SOL. Since its launch in 2020, it has become one of the top 10 cryptocurrencies worldwide.
The SOL coin functions like any other cryptocurrency, so you can buy, sell, trade, or invest in it. However, the SOL token serves another purpose — it’s a utility token, just like DOT. Aside from staking, you can use it to pay fees for smart contracts and transactions on the network. By staking SOL, you will receive rewards based on your network activity and the opportunity to participate in the future governance decisions of the project.
There are currently over 343 million active SOL coins in circulation, and about 511 million SOL tokens have been created so far. The Solana Foundation and its founders control roughly 60% of this token’s total supply, while the public owns approximately 38%.
In early November 2021, SOL reached its all-time high value of $259.96, while its current value is $33.54 (as of July 2022).
Crypto Laws in New Jersey
Although Solana and other cryptos have no legal status in many US states, New Jersey is on the right track to tick that box. The Garden State has been among the few in the race to write crypto rules and to require people to procure a license to engage in any digital asset business activity.
Earlier this year, Assemblywoman Yvonne Lopez re-introduced the Digital Asset and Blockchain Technology Act, which requires operators and consumers to be licensed by the Department of Banking and Insurance. Those who violate the provisions requiring licensure will be subject to a penalty of $500 per day.
Under this bill, all digital assets will be classified as property, and the banks will be able to provide custodial services for them. Also, the Director of the Division of Taxation would be allowed to accept virtual currencies for State taxes.
Where Can I Buy Solana in New Jersey
With a regulated cryptocurrency market, New Jersey residents can trade cryptocurrencies just as easily as anyone else in the country. They can buy SOL through a reliable cryptocurrency exchange or directly from another owner. Let’s explain both in greater detail.
Centralized Crypto Exchanges
Cryptocurrency exchanges are platforms that allow you to buy, sell, and trade cryptocurrencies and other digital assets. When choosing the right one for you, you must consider several factors. Every exchange uses various security measures and builds its network and user experience differently.
Some of the most popular exchanges offering SOL tokens are Kraken, Coinbase, Gemini, and Binance. New Jersey residents may want to take a look at some of them.
Before users can buy or sell assets on exchange platforms, they must register and verify their accounts. This is a standard KYC procedure. It is also possible to sign up with different exchanges and compare them to find the one that is most suitable for you.
We’ve compiled a list of the top points to consider when choosing a cryptocurrency exchange platform to help you make the right choice.
- Availability in New Jersey — Some exchanges may not be available in New Jersey. Ensure the exchange you chose is available where you live.
- Supported tokens — Before selecting an exchange, ensure that it supports Solana tokens.
- Security and safety — No exchange is entirely safe from malicious activities such as hacking, but some are safer than others. You must ensure your exchange uses up-to-date firewalls and knows how to deal with malware and hackers.
- Fees — The majority of cryptocurrency exchanges charge both payment and trading fees. The latter is determined by the volume of cryptocurrency traded and decreases with increased volume. Naturally, costs vary from one exchange to another.
- Limits — Another vital aspect to check is the maximum number of tokens you can buy or sell within a specific timeframe.
- Method of purchase — Different exchanges accept different payment methods. Most accept deposits via bank transfers, PayPal, credit and debit cards, and cryptocurrencies. You should also check how quickly transactions are completed.
- User interface — The user interface is crucial if you are new to this process. A cluttered interface is the last thing you need.
- Liquidity — A key indicator of liquidity is trading volume. Higher volume levels on a particular exchange will decrease volatility and market manipulation. Transactions take time to complete, so the price of one coin can change between the time a trade is initiated and when it is finished. However, a faster transaction and higher trade volume can eliminate such fluctuations.
- Reputation — Check if the exchange has a good reputation by conducting thorough research, reading other people’s feedback, and seeing if it has experienced any security breaches in the past. By doing so, you’ll know what to expect.
It is also possible to purchase SOL coins directly from a Solana owner. Unfortunately, this can be pretty risky, and scams are common. Nevertheless, if you do decide to participate in an exchange like this, there are a few things to keep in mind.
For instance, ensure you buy SOL coins from a trustworthy person and educate yourself on SOL token value. In addition, it is a good idea to finalize the transaction in a public area.
How to Buy SOL on an Exchange — Step-by-Step Process
Buying and selling SOL tokens through an exchange is pretty straightforward. For those who are interested in opening an account and becoming Solana owners, here is a step-by-step guide:
- Get a Solana wallet: To secure your SOL tokens, you’ll need an SOL wallet. You can find supported wallets on the official website of this token.
- Pick a reliable crypto exchange: You can choose one of the exchanges we discussed earlier or find one that meets your needs. It should cover all of the crucial aspects we’ve already discussed.
- Create an account: Complete the registration process by providing all the required documents, such as a government-issued ID and proof of address.
- Make a deposit: Select the deposit option from the list and enter the desired amount. Also, keep an eye out for conversion and transaction fees.
- Buy Solana: Select the option to buy Solana, then click the Buy button.
- Withdraw SOL tokens from the exchange platform to your wallet: The amount you purchased is now in your account on the exchange platform. To add an extra layer of security, you can withdraw the tokens to your e-wallet. You can also leave them there if you plan to trade them further.
Compared to ETH, Solana offers lower costs and faster transactions. Many different projects run in Solana’s ecosystem, and it is ranked among the top ten cryptos globally. As another perk, Solana users can stake their coins. Nevertheless, it is an investment that comes with high risk. Since all cryptos are highly volatile, this is to be expected.
If you decide to invest in Solana, make sure that the amount you invest is one that you can afford to lose. If you are a crypto beginner, it is best to dig deeper and keep up-to-date on the latest crypto numbers and trends. In addition, seeking advice from a crypto expert is a good idea before investing in Solana or any other crypto.