What Is Solana? How SOL Works and How SOL/USD Trades
BY Eleni Antoniou
|October 21, 2026What is Solana? According to CME Group, Solana is an open-source, third-generation layer-1 blockchain built for fast transaction settlement and low latency, and SOL is its native cryptocurrency. Drawing on CME Group, US Securities and Exchange Commission (SEC) filings and CNBC, this explainer covers how Solana works, SOL's uses and volatility, and owning SOL versus a SOL/USD CFD.
What Is Solana? A Short Definition
A layer-1 blockchain is an independent base network. According to CoinDesk, Solana and SOL launched on 2020-03-31 under founder Anatoly Yakovenko.
How Solana Works: Proof of Stake and Proof of History
Solana uses delegated proof of stake. A Bitwise SEC filing says that holders who stake (lock up) SOL delegate its weight to validators, which process transactions and propose new blocks.
Proof of history (PoH) acts as a built-in clock. A Morgan Stanley Solana Trust SEC filing says it timestamps every action and links the timestamps, fixing the order of events.
What the SOL Token Is Used For
- Fees: a base fee of 5,000 lamports per signature (1 SOL equals 1,000,000,000 lamports). A Brera SEC filing says 50% of it is burned (permanently removed).
- Staking: delegating SOL to the validators that run the network.
- Governance: taking part in decisions on network changes.
What Drives Solana Price Volatility
Volatility is how much a price moves. CNBC reports that an early-2022 outage took Solana down for over 24 hours, and SOL fell from $141 to a low of just over $94.
According to CME Group, SOL also has no hard supply cap; inflation started at 8% in 2020 and falls 15% a year towards 1.5%. Past performance is not a reliable indicator of future results.
Owning SOL vs Trading a SOL/USD CFD: Differences, Risks and Common Mistakes
- Ownership: holders own tokens they can stake; a CFD (contract for difference) tracks the price without ownership.
- Costs: holders pay network fees; CFD costs include the spread (the buy-sell price gap) and may include swap, an overnight financing charge.
- Leverage and risk: CFDs use leverage, opening a larger position with a smaller deposit. Leverage magnifies losses as well as gains, losses can build quickly, and traders can lose all the money they deposit.
Common mistakes: confusing Solana with SOL, and treating leverage as extra money.
Key Takeaways
Solana is the network and SOL its token. Owning SOL and a SOL/USD CFD differ in ownership, costs and leverage; leveraged crypto CFDs carry a high risk of losing money.
FAQ
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Authors BIO
Eleni is a financial markets enthusiast contributing to content covering forex, indices, commodities, and global market developments. She is passionate about researching market-related topics and helping make financial information more accessible to traders.
