Solana 101: A Beginner’s Guide
November 14, 2025
Read Time 6 MIN
Please note that VanEck may have a position(s) in the digital asset(s) described below.
Key Takeaways:
- Speed and usability: Solana handles thousands of transactions per second for less than a cent, making it practical for payments, trading, and apps.
- How it stays efficient and secure: A built-in Proof of History clock keeps the network coordinated, while staking helps protect it and reward participants.
- Opportunities and risks: Solana continues to expand its reach, but it still faces volatility, technical issues, and shifting regulations.
Solana is one of the fastest-growing blockchains in the world. It is built to make sending money, trading assets, and building apps online fast, affordable, and open to everyone. If you have heard about Solana’s “speed” or “low fees” and wondered what that really means, this guide explains the basics without the jargon.
What is Solana?
Solana is a public blockchain, a shared digital record maintained by thousands of computers around the world. Anyone can use it to send money, trade digital assets, or build apps. Every transaction is recorded on a transparent ledger that anyone can verify.
What makes Solana stand out is its speed and low cost. A typical transaction costs less than one cent and settles in under a second.
How is Solana different from Bitcoin and Ethereum?
| Feature | Bitcoin | Ethereum | Solana |
| Main purpose | Potential digital store of value | Platform for decentralized apps | High-speed apps and payments |
| Speed | Minutes | Seconds to minutes | Under a second |
| Typical fee | High | Variable | Often < $0.01 |
| Consensus system | Proof of Work | Proof of Stake | Proof of History + Proof of Stake |
- Bitcoin was created to serve as a decentralized digital currency and a potential store of value. It is designed to be simple, transparent, and highly secure, but it processes transactions slowly and has higher fees.
- Ethereum expanded on that idea by allowing developers to create decentralized applications and smart contracts, introducing more flexibility but also higher costs when the network is busy.
- Solana builds on both by combining speed, scalability, and low fees. It can handle thousands of transactions per second and is designed for apps that need quick and inexpensive interactions, such as payments, trading, and gaming.
In short, Bitcoin focuses on reliability, Ethereum focuses on flexibility, and Solana focuses on speed and affordability.
How does Solana work in plain English?
Every blockchain needs a way for all the computers in the network to agree on the order of transactions. Most blockchains slow down because those computers have to keep checking with each other before recording what happened.
Solana’s founder, Anatoly Yakovenko, saw that the real problem was time. Without a shared clock, computers waste energy figuring out when each transaction took place. His solution was something called Proof of History1,2.
Proof of History works like a built-in clock that keeps every computer on the same schedule. Each tick of this clock creates a record that proves when something happened and what came before it. Because everyone is already in sync, Solana can confirm transactions almost instantly and keep fees very low.
How does Solana stay secure?
Solana uses something called Proof of Stake to protect the network. People who own Solana’s token, called SOL, can “stake” it by locking up some of their tokens to help verify transactions3. In return, they can earn additional SOL as rewards.
When you stake, your tokens remain in your control but are temporarily assigned to a validator who helps process transactions and keep the network safe.
Slashing, which means losing part of your stake if a validator acts maliciously, is rare on Solana and not automatic.
What is SOL and how is it used?
SOL is the token that powers everything on Solana. It is used to:
- Pay for transactions
- Earn staking rewards
- Take part in decisions about the network’s future
Each transaction includes a small base fee and, sometimes, an extra priority fee to move faster during busy times. The base fee is 5,000 lamports (0.000005 SOL)4. Half of it is burned, which means permanently removed from supply, and the other half goes to the validator who processes the transaction. Even when demand is high, the total cost per transaction usually stays under one cent5.
Why do investors pay attention to Solana?
Many investors see Solana as part of the next generation of blockchain technology that could support real-world uses like payments, trading, and gaming6.
Reasons investors follow Solana
- Performance: One of the fastest and most efficient networks
- Low fees: Costs stay very low even when demand is high
- Staking rewards: Holders can earn SOL for helping secure the network
- Developer growth: Thousands of projects and apps are already building on Solana
As with all digital assets, SOL is highly volatile and may not be appropriate for all investors. You can lose your entire principal investment. Always consider your risk tolerance, time horizon, and whether the asset fits your broader allocation.
What are Solana’s investment risks?
- Market risk and volatility: SOL’s price can move sharply and unpredictably.
- Technology and security risk: Software bugs, validator outages, or network incidents could impair functionality or confidence in Solana contributing to SOL weakness.
- Fee‑market dynamics: During peak demand, users may pay optional priority fees for inclusion. Design changes to fees or execution may alter user economics over time. There is also the risk that private actors may figure out ways to avoid priority fees and thus decrease the network’s revenues.
- Staking risks: Validator misconfiguration, downtime, commissions, or changes to the staking program can impact rewards; operational and custody risks also apply. (Protocol‑level slashing is not currently enabled, but future changes are possible.)
- Regulatory risk: Rules and guidance for digital assets continue to evolve, potentially impacting access, market structure, and taxation.
- Inflation Risk: Solana’s network is run by validators who earn rewards in the form of inflation. Many rely upon these subsidies to operate, and any reduction in inflationary rewards may cause the network to become uneconomical for validators.
This list isn’t exhaustive. Do your own research and consult a financial professional before investing.
How can I get exposure to Solana?
- Direct ownership of SOL
Purchase SOL through a crypto exchange or wallet and optionally stake it for rewards.This approach gives you full control but requires understanding custody and security. - Regulated products (e.g., ETFs/ETPs where available)
Exchange-traded products or funds can provide exposure to SOL within a traditional brokerage account. These products handle custody and operations for you, but fees and structures vary. Always review the prospectus and disclosures before investing.
How does Solana fit into the idea of Internet Capital Markets?
In traditional finance, most transactions pass through intermediaries such as banks, brokers, and payment processors. These institutions help move money and keep records, but also add fees, delays, and limits on who can participate.
Internet Capital Markets aim to change that by running on open networks instead of private systems. Here, assets such as stocks, art, or real estate can move online as easily as messages. Transactions settle instantly, and anyone with a phone and a wallet can take part.7.
Solana’s speed and low costs make this possible. It helps build markets that are always open, transparent, and accessible to more people around the world.
What is the bottom line on Solana?
Solana combines speed, low cost, and open access to make blockchain technology practical for everyday use. For investors, it is an example of how digital networks could reshape finance, though it still carries the risks and uncertainty of any new technology.
As with any investment, research carefully, diversify, and understand your risk before getting started.
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IMPORTANT DISCLOSURES
Sources
1 Solana Documentation – Proof of History; Solana Whitepaper – Anatoly Yakovenko, 2017
2 Solana Documentation – Staking Overview
3 Documentation – Transaction Fees; Solana Developer Docs – Priority Fees
4 Solana.com – Learn: What is Solana
5 Solana Docs – Cluster Overview (Validators and Network)
6 Solana.com – Ecosystem and Performance Data
7 Helius Blog – Internet Capital Markets
Definitions
Solana (SOL): A high-throughput Layer-1 blockchain; SOL is used for fees and staking to secure the network.
Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries.
Ethereum (ETH) is a decentralized, open–source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization.
Risk Considerations
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Staking Risks
Staking digital assets involves several risks. Staked assets are often locked during activation and withdrawal periods, limiting liquidity and potentially delaying access to funds—especially in volatile markets. Validators or node operators may act improperly or suffer technical failures, leading to performance issues or “slashing” penalties that can reduce or eliminate staked assets.
Use of third-party staking providers and custodians introduces counterparty, operational, and cybersecurity risks, including potential failures in security, compliance, or business continuity. Staking rewards, if received, are subject to fees, possible withholding obligations, and uncertainty regarding timing, amount, and tax treatment.
In addition, changes in law or regulation—such as those affecting securities, commodities, or taxation—could alter the legality, treatment, or viability of staking activities and impose unexpected costs or compliance burdens.
General Digital Asset Risks
Investments in digital assets and Web3 companies are highly speculative and involve a high degree of risk. These risks include, but are not limited to: the technology is new and many of its uses may be untested; intense competition; slow adoption rates and the potential for product obsolescence; volatility and limited liquidity, including but not limited to, inability to liquidate a position; loss or destruction of key(s) to access accounts or the blockchain; reliance on digital wallets; reliance on unregulated markets and exchanges; reliance on the internet; cybersecurity risks; and the lack of regulation and the potential for new laws and regulation that may be difficult to predict. Moreover, the extent to which Web3 companies or digital assets utilize blockchain technology may vary, and it is possible that even widespread adoption of blockchain technology may not result in a material increase in the value of such companies or digital assets.
Digital asset prices are highly volatile, and the value of digital assets, and Web3 companies, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
Digital assets are not generally backed or supported by any government or central bank and are not covered by FDIC or SIPC insurance. Accounts at digital asset custodians and exchanges are not protected by SPIC and are not FDIC insured. Furthermore, markets and exchanges for digital assets are not regulated with the same controls or customer protections available in traditional equity, option, futures, or foreign exchange investing.
Digital assets include, but are not limited to, cryptocurrencies, tokens, NFTs, assets stored or created using blockchain technology, and other Web3 products.
Web3 companies include but are not limited to, companies that involve the development, innovation, and/or utilization of blockchain, digital assets, or crypto technologies.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Associates Corporation.
IMPORTANT DISCLOSURES
Sources
1 Solana Documentation – Proof of History; Solana Whitepaper – Anatoly Yakovenko, 2017
2 Solana Documentation – Staking Overview
3 Documentation – Transaction Fees; Solana Developer Docs – Priority Fees
4 Solana.com – Learn: What is Solana
5 Solana Docs – Cluster Overview (Validators and Network)
6 Solana.com – Ecosystem and Performance Data
7 Helius Blog – Internet Capital Markets
Definitions
Solana (SOL): A high-throughput Layer-1 blockchain; SOL is used for fees and staking to secure the network.
Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries.
Ethereum (ETH) is a decentralized, open–source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization.
Risk Considerations
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Staking Risks
Staking digital assets involves several risks. Staked assets are often locked during activation and withdrawal periods, limiting liquidity and potentially delaying access to funds—especially in volatile markets. Validators or node operators may act improperly or suffer technical failures, leading to performance issues or “slashing” penalties that can reduce or eliminate staked assets.
Use of third-party staking providers and custodians introduces counterparty, operational, and cybersecurity risks, including potential failures in security, compliance, or business continuity. Staking rewards, if received, are subject to fees, possible withholding obligations, and uncertainty regarding timing, amount, and tax treatment.
In addition, changes in law or regulation—such as those affecting securities, commodities, or taxation—could alter the legality, treatment, or viability of staking activities and impose unexpected costs or compliance burdens.
General Digital Asset Risks
Investments in digital assets and Web3 companies are highly speculative and involve a high degree of risk. These risks include, but are not limited to: the technology is new and many of its uses may be untested; intense competition; slow adoption rates and the potential for product obsolescence; volatility and limited liquidity, including but not limited to, inability to liquidate a position; loss or destruction of key(s) to access accounts or the blockchain; reliance on digital wallets; reliance on unregulated markets and exchanges; reliance on the internet; cybersecurity risks; and the lack of regulation and the potential for new laws and regulation that may be difficult to predict. Moreover, the extent to which Web3 companies or digital assets utilize blockchain technology may vary, and it is possible that even widespread adoption of blockchain technology may not result in a material increase in the value of such companies or digital assets.
Digital asset prices are highly volatile, and the value of digital assets, and Web3 companies, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
Digital assets are not generally backed or supported by any government or central bank and are not covered by FDIC or SIPC insurance. Accounts at digital asset custodians and exchanges are not protected by SPIC and are not FDIC insured. Furthermore, markets and exchanges for digital assets are not regulated with the same controls or customer protections available in traditional equity, option, futures, or foreign exchange investing.
Digital assets include, but are not limited to, cryptocurrencies, tokens, NFTs, assets stored or created using blockchain technology, and other Web3 products.
Web3 companies include but are not limited to, companies that involve the development, innovation, and/or utilization of blockchain, digital assets, or crypto technologies.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Associates Corporation.