Click here to get this post in PDF
If you are looking to buy Solana (SOL), simply buying is easy, but it is important to consider several factors before you do, as many exchanges are based on where to buy Solana (SOL).
- Solana is a high-speed blockchain platform that can process up to 65,000 transactions per second and is also the native token of Solana.
- Each has its advantages and disadvantages when buying SOL, but it is possible to buy SOL via centralized or decentralized exchange transactions.
- Since the Solana ecosystem’s meme coins have become popular, Network activity has skyrocketed. However, investing in any of these comes with risks and should be balanced before purchase.
It’s no secret that cryptocurrency exchanges spend millions on marketing to convince potential customers that they will be buying Solana (SOL) and any other cryptocurrency fast and easy.
The truth, however, while buying cryptocurrency is indeed simple, is that current and prospective investors must be saturated with information about Solana (SOL) and know how the Solana blockchain works, as well as the most suitable mode of buying in your geographic range to write an appropriate investment plan.
Understanding Solana and SOL
While specifically limited to the programming of smart contracts, Solana is especially unique as a blockchain platform using a hybrid consensus form: proof-of-history and proof-of-stake.
This unique consensus mechanism allows the independent node (a device validating and storing transaction information with the blockchain) to process transactions without constantly communicating with other nodes. For this reason, the transaction processing times are significantly reduced.
According to the Blockchain Council, Solana is one of the fastest and most efficient blockchains, capable of handling up to 65,000 transactions per second. It increases the efficiency of the network fees.
In Solana’s ecosystem, a network fee is the amount someone pays to ensure compensation to node operators for processing and validating transactions. Due to Solana’s efficiency, it’s becoming the coin of choice for meme coins and NFT transactions.
Inside the Solana ecosystem, SOL has two fundamental functions. First, it is, in fact, payment to node operators that process transactions. Second, staking is the way to secure the Solana network.
Investors may also use SOL to purchase the asset, hoping its value will increase against fiat currencies. You can buy SOL in several ways. Crypto exchanges make it look like an easy process, truth be told.
Still, there’s usually a better process for purchasing the token, and it all depends on just how much the investor knows or wants to learn about cryptocurrencies in general and smart investments made through cryptocurrencies.
Choosing the Right Platform to Buy SOL
CoinMarketCap records more than 200 different centralized cryptocurrency exchanges currently in existence. Putting all these options at the disposal of potential SOL investors, they should choose the exchange that fits them based on their location, investment strategies, and proficiency in administering their digital assets.
Not every country has every cryptocurrency exchange because, for regulation, some exchanges must remain where they are due to the type of services they are offering. Before buying SOL, it is smart to check that the crypto exchange you want to use for buying SOL has authorization to operate in your country and is legal. A crypto exchange that is aware of your location’s tax and legal issues also provides additional benefits.
For instance, exchanges based in the United States may already be familiar with IRS reporting requirements and can provide you with the necessary information and documentation for tax reporting purposes.
Buying SOL could include using a decentralized crypto exchange. Peer-to-peer exchanges involve no central authority, and people trade directly between user wallets and liquidity pools. Based on smart contracts, order matching and settlement are automatized.
In comparison, a centralized crypto exchange is operated by a company that acts as a middleman between buyers and sellers. These exchanges manage the order book and process buy and sell orders to provide trading.
The benefits and disadvantages of each type of platform are outlined below.
Purchasing SOL on a Centralized Exchange
Benefits
- Liquidity: Centralized exchanges generally have higher liquidity, which means the market has a high availability of liquid assets. It is also easy to buy or sell SOL quickly.
- Ease-of-use: Centralized exchanges are easier to use because they’re more approachable, with a user interface and customer support that are more welcoming to users.
- Regulation: Some users prefer centralized exchanges because they can offer potential regulatory oversight and protective measures that established cryptocurrency companies implement.
Drawbacks
- Custodial Risk: It is known to be related to buying SOL on a centralized exchange, as the exchange (on the buyer’s behalf) serves as the custodian for the tokens. The exchange has to trust users to manage their assets, which are vulnerable to mismanagement and hacking.
- Centralized Control: They are so large and vital to the cryptocurrency that they are categorized as centralized Control. The Centralized crypto exchange manages many funds and trading activities in the cryptocurrency financial system. Trading downtime or market manipulation are some problems that can stem from them.
- Privacy concerns: Centralized exchanges can demand a large amount of personal information (which is required for, amongst other things, Know Your Customer (KYC) verification), which raises privacy concerns.
Purchasing SOL on a Decentralized Exchange
Benefits
- Security: Due to DeFi, they reduces the Risk of being hacked or stolen as the users will retain their private keys and funds.
- Anonymity: Users trade through various decentralized exchanges without needing KYC or user screening.
- Fees: The payment to the node operators is referred to as a network fee and is charged when buying SOL on a decentralized exchange. That being said, using a centralized exchange does not incur any other charge.
Drawbacks
- Liquidity: Decentralized exchanges tend to have lower liquidity (about inflated, misinformation-filled numbers on centralized exchanges), which can be problematic when completing high-volume trades.
- User experience: Some decentralized exchanges may have a steeper learning curve and be less intuitive than a centralized exchange. Users should also create and secure their private keys.
- Smart contract risks: Some problems can lead to financial loss.
The Purchasing Process for Buying SOL
How to Buy SOL on a Centralized Exchange
To buy SOL on a centralized exchange, pick a centralized exchange that supports it, like Binance, Coinbase, or Kraken, and start buying them. You must create an account and provide an email and a strong password.
Identity verification is completed for security purposes and usually involves submitting a photo ID. Once your account is verified, you can further enhance its security with two-factor authentication like Google Authenticator. Then, you can deposit funds through a bank transfer, credit, or debit card (just about any method accepting is possible through the exchange).
Remember that the procedures for raising funds may differ, and therefore, they can have other associated fees.
Go to the exchange’s SOL trading section when your account is funded. In your case, you select SOL/USD and buy. Previous inputs always review the transaction details and finalize only the transaction.
How to Buy SOL on a Decentralized Exchange
If you want to purchase SOL on a DEX like Jupiter or Raydium, you’d first need a wallet compatible with the Solana network. Check that your purse has a sufficient amount of crypto to buy and the necessary fee for the transaction. To use the DEX website, connect your wallet, often to the DEX website, by scanning a QR code or choosing a wallet connection from a dialog.
Once connected, trade the pair that closely fits your funding source (e.g., SOL/USDC). If you’d like to buy, check the liquidity and slippage, and you will receive a fair exchange rate set. After verifying the transaction, and once the transaction is processed, the bought SOL will appear in your wallet.
Remember that the intermediary is taken out when you trade on a DEX. However, you must be very careful about securing your premises keys and wallet.
Buying Solana Meme Coins
In mid-March 2024, Solana blockchain’s daily active users recorded a record high, as the price of SOL is on a strong upward trend. This information is based on Hello Moon data. Why was there increased activity?
In an interview with Solana co-founder Anatoly Yakovenko, Sam Kessler also highlighted meme coin transactions as the main reason behind the growth in activity. As they are named, these memetic coins are based on a blockchain and are often based on animals, jokes, and other internet topics. Other cryptocurrencies tend to face more volatile prices.
Similar to SOL, buying meme coins on Solana includes certain considerations. The meme coin market has a lot of scams, yet some investors are blinded to the risks by the possibility of getting paid quickly.
Those interested in investing in the Meme coin market should look at the risks of their investment plans and strategize their investments. Always invest no more than you can afford to lose. CoinDesk’s guide to meme coins offers safe purchasing.
Securing Purchased SOL
Once you have bought SOL, you should take some steps to protect your investment. Using SOL on a centralized crypto exchange means users don’t have to worry about keeping their private keys; hence, the exchange becomes the cryptocurrency custodian. Nevertheless, you have to protect your account.
Strong alphanumeric passwords, as well as 2FA, are turned on to secure the account. SMS was also deemed advisable to avoid SMS-based 2FA because SMS does not provide end-to-end encryption. Also, you should regularly update your passwords.
Should SOL be purchased via a Decentralized Exchange, the buyer is required to secure their private keys. You can store these keys in your cold wallet (without an Internet connection) or your hot wallet (with an Internet connection).
Finally, since SOL is future securities, investors who intend to keep the cryptocurrency for a while are advised to save it in a cold wallet. It makes it less vulnerable to theft if they never used it to sign transactions online. Do not share your private keys with anyone.
This article is not a call for investment, invitation, or inducement to invest in Solana (SOL) or any other cryptocurrency; it is just the facts of the situation. It is meant for educational and factual use when answering questions about SOL and its blockchain. Cryptocurrencies are risky investments; you cannot expect protection if something goes wrong.
Also read:
Blockchain in iGaming: Accelerating Payouts and Ensuring Fair Play
Image source: elements.envato.com
Disclaimer
The information contained above is provided for information purposes only. The contents of this article are not intended to amount to advice and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the contents of this article. Sandra Hinshelwood disclaims all liability and responsibility arising from any reliance placed on any of the contents of this article.
