What Is Solana and Will There Be a SOL ETF?

What Is Solana and Will There Be a SOL ETF?

Spot Ethereum ETF approval has fueled speculation about a Solana ETF.

kent
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Research Lead
Reviewed by: etf.com Staff
,
Edited by: James Rubin

Now that a spot Ethereum exchange-traded fund is likely, the cryptocurrency world is beginning to buzz about the potential for a Solana spot ETF. 

Whether or not speculation about an SOL ETF becomes reality, the timing is good to learn how Solana 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. 

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 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, a crypto news and price tracker. 

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.”

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.