What Is Solana and Will There Be a SOL ETF?

Spot Ethereum success and SOL's recent performance is fueling optimism about a spot Solana ETF.

The success of the recently launched spot Ethereum ETFs, plus strong performance this week for SOL, the native cryptocurrency of the Solana blockchain, has the cryptocurrency world buzzing about the potential for a Solana spot ETF.

Spot Ether exchange-traded funds have gathered nearly $900 million in assets since their July 23 launch, according to Cointelegraph, a crypto news and price tracker.

The largest bitcoin ETF, the iShares Bitcoin Trust (IBIT), has amassed more than $20 billion in assets since the January launch of the 11 approved funds tracking price of the world's most popular cryptocurrency.

SOL has been volatile in 2024 but jumped 30% Wednesday amid renewed enthusiasm around the cryptocurrency and Solana platform.

Whether or not speculation about a spot Solana ETF becomes reality, the timing is good to learn how the cryptocurrency works and how the blockchain platform is challenging traditional players with its high speed and low transaction costs. 

If you're curious about the world of decentralized finance (DeFi), non-fungible tokens (NFTs), or just want to understand the future of web3, then diving into Solana is a great place to start. 

What Is Solana (SOL)?

Solana is a blockchain platform designed to be fast, scalable, and user-friendly. Here are some key points about Solana: 

• High speed and low fees: Compared to other blockchains like Ethereum, Solana can handle many more transactions per second with significantly lower fees. This makes it attractive for a wider range of applications. 
• Proof-of-history consensus mechanism: Solana uses a unique combination of proof-of-stake (PoS) and proof-of-history (PoH) to achieve its speed and efficiency. PoH helps to verify the order of transactions without requiring as much computational power as traditional PoW methods. 
• Smart contracts: Like Ethereum, Solana allows developers to create decentralized applications (dApps) using smart contracts. This generates a wide range of potential uses for the platform in finance, gaming, and supply chain management, among other industries. 

What Are the Uses of Solana?

Solana's high speed and low transaction fees make it attractive for many different applications. Here are some of the main uses of Solana: 

• Decentralized Finance (DeFi): Solana's fast transactions and low fees make it a suitable platform for building DeFi applications like lending platforms, decentralized exchanges, and asset management tools. 
• Non-Fungible Tokens (NFTs): Solana is a popular choice for creating and trading NFTs due to its ability to handle large volumes of transactions efficiently. This is useful for things like digital art, collectibles and in-game items. 
• Blockchain gaming: The ability to handle fast and cheap transactions makes Solana ideal for developing play-to-earn games and other blockchain-based gaming applications. 
• Supply chain management: Solana's transparency and security can be used to track the movement of goods throughout a supply chain, improving efficiency and reducing fraud. 
• Payments: With faster settlement times and lower fees compared to traditional methods, Solana has the potential to transform online payments. 

Overall, Solana's potential applications extend to any area that can benefit from a secure, fast, and cost-effective blockchain platform. 

Is There a Futures-Based Solana ETF?

A futures-based Solana ETF isn't currently available to trade on any U.S. market, but there are ETF-like products investors can buy, including the Grayscale Solana Trust (GSOL), which is a closed end fund, and VanEck Solana, which is an exchange-traded note (ETN). 

• Closed end funds (CEFs) trade intraday on an exchange like an ETF; however, they can’t create or redeem shares on a daily basis. Instead, CEFs come to market through an IPO with a fixed number of shares. This means CEFs may trade at premiums or discounts to their net asset value (NAV). 
• An exchange-traded note (ETN) is a debt security that tracks an index or asset like a stock, but trades on an exchange and doesn't represent ownership of the underlying asset. Like a bond, an ETN can be bought by an investor and held to maturity, or it may also be sold in the secondary market to another investor for a market price. 

Will the Market Get a spot Solana ETF? 

The recent approval of spot Ethereum ETFs has fueled speculation about a Solana ETF; however, that does not automatically translate into approval of other crypto ETFs.

“It’s unlikely that the approval of ETH will result in a large wave of approvals,” Ophelia Snyder, co-founder and president of 21.co — a sponsor and subadvisor for ARK Invest’s spot ether ETF — told Cointelegraph.

The future of a Solana ETF depends on regulatory decisions and how Solana addresses potential centralization issues. U.S. politics may also weigh into the decision and timeline of the next crypto ETF. 

For example, Bloomberg analyst Eric Balchunas told etf.com that the Ethereum ETF approval was likely fast-tracked by former president and current Republican presidential nominee frontrunner Donald Trump’s statement at a May 8 rally, saying “If you’re pro-crypto, you have to vote for Trump. Balchunas added that “the Dems don’t want to be seen as anti-crypto anymore.”

Spot Ethereum ETFs began trading July 23. Two issuers, VanEck and 21Shares, have filed for a spot Solana ETF with the Securities and Exchange Commission.