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Update Nov. 14, 2022: Solana's price has tumbled in recent days, following a report by CoinDesk that the balance sheet of Alameda Research — a crypto trading firm — showed that it was heavily invested in SOL. Alameda was founded by Sam Bankman-Fried, who also founded the major exchange FTX and its U.S. branch FTX.US. All three companies filed for Chapter 11 bankruptcy on Nov. 11, 2022.
Solana is a cryptocurrency project used to build decentralized blockchain applications such as financial products, games and NFTs. For years it was one of the most highly valued crypto assets by market capitalization, but in 2022, became one of the most volatile. By Nov. 10, SOL's price had fallen more than 90% from its 1-year high.
Before you buy Solana, it’s a good idea to learn how it works, what gives it value, and some of its pros and cons.
If you decide to invest in Solana, there are several options. You can:
Use certain decentralized exchanges, or DEXes, to trade another cryptocurrency for Solana.
Receive Solana as a direct payment from someone else.
Get Solana as a reward for staking, which is a process through which users can help authenticate transactions on Solana’s network. This approach requires you to have some Solana before you start.
Here are the four steps to buying Solana.
1. Decide where to buy Solana
Solana is still one of the most widely circulated cryptocurrencies, so you should have no trouble finding an exchange that offers it. Many centralized exchanges reviewed by NerdWallet carry Solana, and centralized exchanges are a common way for beginners to get involved with a cryptocurrency.
A centralized exchange is a platform operated by a company that creates a market for cryptocurrency and charges fees on transactions. Some traditional brokerage businesses operate crypto platforms, while some exchanges operate solely in the crypto world.
Due to their centralized nature, these mainstream platforms provide some advantages in the form of simplicity. You can purchase cryptocurrencies with cash, for instance, which is helpful if you don’t own any crypto yet. And though crypto is not regulated in the same way as stock, crypto exchanges may offer some customer protections that are not available elsewhere in the crypto space.
» Ready to buy? Here are our picks for best Bitcoin and cryptocurrency exchanges
Other options for buying Solana will involve greater expertise.
A decentralized exchange, or DEX, automatically finds matches between people who want to trade one cryptocurrency for another. Costs can be lower with decentralized exchanges, which generally only require a network fee to carry out a transaction. While network fees can be costly on some platforms, Solana is one of the cheaper options among major cryptocurrencies.
It’s important to note, though, that decentralized exchanges don’t take cash. You’ll have to own some cryptocurrency to use one. To make matters more complicated, DEXes that sell Solana may not accept the cryptocurrency you own.
If you’re using a DEX to buy Solana, it’s important to remember that transactions (even ones that are mistakes) may be irreversible. Do research to make sure you’re using a reputable exchange. Solana’s website has a tool with which you can research DEXes and other projects that operate using its technology.
Payments: It’s possible that you could find someone to send you Solana as payment for a good or service, but that could be difficult if you’re not already familiar with cryptocurrency.
Staking: You can use your Solana to earn more Solana using staking, through which you can participate in the process of securing transactions on the network. Staking can be a technical process, but many exchanges or crypto storage options will do it for you in exchange for a cut of the proceeds.
Staking, however, is probably not the easiest move for a beginner because you must own some Solana before you can participate.
One important note about Solana is it does not support mining, the energy-intensive process that runs Bitcoin and other major cryptos. Staking stands in for this process.
2. Fund your account
If you’re using a centralized exchange, you’ll be able to create an account relatively quickly, but you may have to provide some information such as a picture of your ID. While this might seem invasive at first, it’s normal on centralized exchanges. These companies have to comply with anti-money laundering and “know your customer” rules.
Exchanges have a variety of programs for moving money into your account. Some encourage bank transfers, debit payments or credit cards. Depending on whether the exchange has worked with your bank before, this could be relatively easy, and could include filling out paperwork or even calling your bank to initiate a transfer.
Make sure you check the fees before you decide which exchange to use. Moving money can be costly with some providers.
If you don’t want to use cash, you can trade another cryptocurrency for Solana. Moving a cryptocurrency onto a platform can be a convenient way to pay for Solana, though not all cryptos can be directly exchanged for one another, and the choices vary by exchange.
One question to ask when deciding whether to buy with cash or crypto is whether you’re trying to increase your overall holdings in crypto or whether you just want to add Solana to the investment mix in your existing crypto portfolio.
If you’re using a decentralized exchange, you won’t have to make an account. Usually, all you need is a crypto wallet that holds some cryptocurrency that can be exchanged for Solana.
Again, if you don’t already have a wallet, or don’t understand how to carry out transactions on your own, you might want to take a look at centralized crypto exchanges.
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3. Make your trade
Whether you’re using a centralized or decentralized service, the trading process is pretty simple.
You’ll decide how much Solana you want to buy. The service will show you the conversion rate for whatever asset you’re using to pay. If it looks acceptable to you, you’ll confirm the transaction and Solana will be sent to your wallet or your exchange account. Where the crypto you bought winds up depends on how you’ve decided to store it.
4. Store your Solana safely
Storing Solana involves many of the same considerations that come up anytime you buy cryptocurrency.
You have two major options when storing your cryptocurrency.
On the exchange: You can leave your cryptocurrency on the exchange where you bought it. This can be convenient, and it can minimize the chances of losing your crypto because of a mistake. Some exchanges also offer staking rewards akin to interest for people who store crypto on their sites. The tradeoff here is that because online crypto platforms hold a large amount of cryptocurrency, they can be a target for hackers. Here are NerdWallet's best crypto exchanges for storage.
In your own wallet: You can also hold Solana and other cryptocurrencies in your own wallet. It’s pretty easy to send crypto from most exchanges into a personal wallet (though some providers charge fees for this). Then, you have control over the private information you can use to establish your ownership of your crypto. Wallets have risks, too, though. If you make a mistake or lose your login credentials, your crypto may be gone forever. Before committing to a wallet, you should make sure you’re using one that’s compatible with Solana.
» Getting started? Here’s how to pick a wallet
The author owned Solana at the time of publication.
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