Unpacking Solana: A Leading Crypto Platform

In this edition of Crypto for Advisors, Josh Olszewicz from Canary Capital provides an in-depth analysis of Solana, covering its origins and current market trends. Alec Beckman from Psalion also shares insights on Solana's history and key considerations for investors in the Ask an Expert segment. Solana's ascent can be attributed to its resilience in the face of significant challenges. Despite experiencing setbacks such as the FTX collapse and network outages, Solana has demonstrated impressive growth, with its native token, SOL, seeing substantial increases since its lows in late 2022. The platform's appeal stems from its high-speed, low-cost transactions, making it a preferred choice for developers and users alike. However, concerns surrounding centralization persist due to the network's reliance on a limited number of validators and high hardware requirements. Launched in March 2020 by Solana Labs, the Solana blockchain and its native token, SOL, have quickly gained traction. Backed by prominent venture capital firms, including a16z, Jump, Multicoin Capital, and Polychain Labs, as well as the now-defunct Alameda Research, the platform has differentiated itself through its high-speed, low-cost transactions. This has positioned Solana as a compelling alternative to legacy Layer 1 protocols such as Ethereum, Binance Smart Chain, and TRX. Solana operates on a proof-of-stake consensus mechanism, allowing users to secure the network and participate in governance by staking tokens. The network's governance is partially influenced by stake-weighted voting, similar to a representative democracy, where validators with the most staked assets wield the most influence. Initially, Solana's momentum was fueled by endorsements from Sam Bankman-Fried and the now-defunct FTX exchange, which portrayed Solana as a faster and more scalable alternative to Ethereum. However, the collapse of FTX and Alameda Research in late 2022 revealed material centralization risks, raising questions about token distribution and ecosystem resilience. In 2023, Solana faced further scrutiny when the SEC identified SOL as a potential unregistered security in lawsuits against Binance and Coinbase. This led to Robinhood delisting SOL, causing the asset to plummet. Nonetheless, SOL has appreciated nearly 700% between October 2023 and March 2024, reflecting robust retail demand and increasing developer activity despite regulatory ambiguity. The regulatory landscape began to shift in late 2024, with Robinhood relisting SOL and the SEC dismissing its case against Coinbase. While Solana's classification remains unresolved, the industry anticipates a revised framework that could allow blockchain projects to be deemed 'sufficiently decentralized,' thereby sidestepping securities law constraints. Solana has emerged as a leading platform for retail activity, particularly in the fast-growing sectors of meme coins and NFTs. Phantom, a self-custody wallet built for Solana, reported 10 million monthly active users in 2024, with over 850 million transactions and 24 million mobile app downloads. The launch of the TRUMP coin in January 2025 coincided with SOL reaching an all-time high of nearly $300. Although network reliability concerns persist, with seven temporary blockchain outages since 2020, Solana consistently ranks among the top blockchains in terms of daily active users, transaction volume, decentralized exchange activity, and fee generation. However, in decentralized finance and real-world asset applications, Ethereum remains dominant, with Solana still trailing in key metrics, including total value locked and circulating stablecoins. From an investment perspective, SOL has historically traded as a high-beta asset relative to bitcoin, resembling the behavior of equities. Since late 2024, some firms have begun replicating the Strategy playbook, raising capital to acquire SOL for their balance sheets. While this may increase short-term demand, long-term efficacy will depend on sustained network adoption, regulatory clarity, and institutional trust. -Josh Olszewicz, portfolio manager, Canary Capital Ask an Expert Q. What drives investor interest in Solana? Solana's high speed, low fees, and growing ecosystem make it an attractive option: With a loyal community and strong momentum, Solana has emerged as a high-beta play on blockchain usability and scalability. Q. What should investors focus on when evaluating Solana? Investors should monitor both technical and ecosystem fundamentals: Tracking development activity, usage, and upgrades is key to understanding Solana's staying power. Q. What are the biggest risks associated with investing in Solana? Solana carries high upside potential, but also significant risks: For all its innovation, SOL has risks driven by both fundamentals and narrative momentum. -Alec Beckman, vice president of Growth, Psalion