Solana explained: how it works, its outage record and how SOL CFDs work

Solana is a public proof-of-stake blockchain designed to process large numbers of transactions quickly and cheaply on a single chain. Its native coin, SOL, pays transaction fees and is staked by validators to secure the network. To get that speed, Solana asks more of the computers that run it, and it has had several well-documented outages in which the whole network stopped producing blocks until validators coordinated a restart.

This guide explains how Solana's design differs from Bitcoin and Ethereum, what happened during its main outages, how SOL's supply works, and how SOL CFDs are margined and sized. If blockchains and consensus are new to you, start with what is cryptocurrency.

Risk first. SOL is a highly volatile crypto-asset and has lost most of its value in past downturns. You can lose all of the money you put in. Leveraged products such as CFDs magnify losses, and most retail CFD accounts lose money.

A short background

Solana was proposed by Anatoly Yakovenko, who published a draft paper in late 2017 describing a timekeeping method for blockchains he called proof of history. Solana Labs was set up to build it, and the network's mainnet beta went live on 16 March 2020. The "beta" label stayed on the main network for years, a reflection of how much of the software was still being changed.

The project's pitch was simple: rather than moving activity to second layers, as Ethereum does with rollups and other layer 2 networks, make the base layer fast enough for most uses, including trading, payments and games.

How Solana's design works

Proof of stake

Like Ethereum since 2022, Solana uses proof of stake. Validators lock up SOL, and the amount staked (their own plus SOL delegated to them by holders) determines how often they are chosen to produce blocks and how much weight their votes carry. Holders who do not run a validator can delegate their SOL to one and receive a share of rewards. Our guide to proof of work vs proof of stake compares the two security models.

Proof of history

In most blockchains, nodes spend time agreeing on the order in which things happened. Solana's proof of history is a cryptographic clock: a sequence of hashes, each depending on the one before, that proves a certain amount of time has passed between events. Transactions are stamped into that sequence, so validators can agree on ordering with less back-and-forth communication. Proof of history is not a consensus mechanism on its own; it works alongside proof of stake.

A known schedule of block producers

Solana publishes a schedule in advance of which validator will lead block production for each short slot. Transactions can be forwarded straight to the upcoming leaders rather than waiting in a shared public pool. This helps speed but has made the network sensitive to floods of traffic aimed at the current leader, a factor in some of its outages.

Parallel execution

Solana transactions declare in advance which accounts they will read and write. That lets the network run non-overlapping transactions at the same time on different processor cores, rather than one after another. Programs (Solana's term for smart contracts) are commonly written in Rust.

The trade-off: hardware and decentralisation

Running a Solana validator requires powerful servers and fast network connections, considerably more than a Bitcoin node or an Ethereum validator. Supporters argue that hardware gets cheaper over time and that performance is what users want. Critics argue that higher costs mean fewer, more professional operators, often concentrated in a small number of data centres and hosting providers, which weakens resilience and censorship resistance. Both points are worth holding at once: the design choices that make Solana cheap to use are the same ones that make it harder to run.

Fees on Solana

Solana transaction fees have typically been a small fraction of a cent. Each transaction pays a base fee per signature, and users can add an optional priority fee to get ahead in busy periods. Part of the fee is burned and part goes to the validator.

Low fees have encouraged very high activity, including large volumes of automated trading and memecoin launches. That has an obvious downside: when sending a transaction costs almost nothing, spam is cheap too. During bursts of demand, users have seen high rates of failed transactions even when fees stayed low, and priority fees have risen.

Solana and Ethereum compared

The two networks are often set against each other, so a plain comparison helps:

• Scaling approach. Ethereum keeps its base layer conservative and moves most everyday activity to layer 2 networks. Solana tries to handle it all on one chain.
• Fees. Both have variable fees, but Solana's base layer fees have typically been far lower than Ethereum's base layer; Ethereum's layer 2s narrowed that gap after March 2024.
• Validator requirements. Ethereum has aimed to let individuals validate on modest hardware; Solana validators need data-centre-class machines.
• Track record. Ethereum's base layer has not had a full network halt of the kind Solana has experienced, though it has had other incidents, and its layer 2s have had their own outages.
• Programming. Ethereum contracts are mostly written in Solidity; Solana programs mostly in Rust. Applications and tokens on one network do not run natively on the other.

Neither design is free of trade-offs, and both continue to change through upgrades. For trading purposes, the more relevant fact is that SOL has historically been more volatile than ether, and both have been more volatile than bitcoin.

The outage record

Solana's most cited weakness is a series of full network halts, in which the chain stopped confirming transactions until validators agreed on a restart. Only the well-documented major incidents are listed here.

September 2021: about 17 hours

In mid-September 2021 a token sale on a Solana exchange drew a flood of automated transactions. Validators ran short of memory, the network lost the ability to reach consensus, and it stayed down for about 17 hours before validators coordinated a restart.

2022: repeated disruptions

Through 2022 the network suffered several further halts and periods of severe degradation, several linked to bot activity around popular token releases, as well as bugs in validator software. Engineers responded with changes to how transactions are forwarded and prioritised, including fee markets for congested accounts.

February 2023: most of a day

In late February 2023 a validator broadcast an abnormally large block that overwhelmed part of the network's block propagation system. Block production degraded and the network was restarted, with reported downtime of roughly 19 to 20 hours.

February 2024: about five hours

On 6 February 2024 block production stopped for nearly five hours because of a bug in validator software, and validators upgraded and restarted the network. After that incident the network went more than a year without another consensus failure of that kind.

What an outage means for users and traders

When Solana halts, nobody can move SOL or tokens on the chain. Exchanges usually suspend deposits and withdrawals on the network, though SOL itself keeps trading on centralised exchanges, where prices can move sharply on the news. Decentralised applications freeze, so on-chain positions cannot be adjusted.

If you trade a SOL CFD, the broker's price is derived from exchange prices, which may keep moving while the chain is down. Spreads can widen sharply. Some brokers may restrict trading in the instrument. A stop-loss is not protection against a fast move: it becomes a market order when triggered and can be filled well beyond its level. See slippage explained for how that works.

SOL supply in brief

SOL has no fixed maximum supply. New SOL is issued as staking rewards, with an annual inflation rate that started higher and is scheduled to decline each year towards a long-term floor, and part of transaction fees is burned. Holders who stake receive new SOL; holders who do not stake see their share of the total supply diluted.

A large share of SOL was allocated in early funding rounds and to the team and foundation, with tokens released on schedules. The specifics have changed through governance and are best checked in current official documentation. Our guide to tokenomics and token supply shows how to read issuance, unlocks and burns for any token.

SOL and the FTX collapse

When the FTX exchange collapsed in November 2022, SOL fell sharply. FTX and its sister trading firm Alameda Research had been prominent backers of the Solana ecosystem, held large amounts of SOL and promoted projects built on it. The market priced in the risk that the bankruptcy estate would eventually sell those holdings and that projects funded by FTX would struggle. It is a clear example of how a coin's price can be hit by the failure of a company that has nothing to do with the protocol's code. Our guide to crypto exchange collapses covers FTX in more detail.

How SOL CFDs work

A SOL CFD is a contract with a broker that pays the difference between the opening and closing price of SOL, multiplied by the size of your position. You do not own any SOL, cannot stake it and cannot send it anywhere. Our comparison of crypto CFDs vs buying crypto covers ownership, custody and costs in detail.

For retail clients of EU-regulated brokers, ESMA rules cap leverage on all crypto CFDs at 2:1, so the margin is at least 50% of the position's value. In the UK, the FCA does not allow crypto derivatives to be sold to retail clients.

Contract specifications vary by broker. Some quote one CFD unit as one SOL; others use a different contract size. Check the specification before trading, because the same number of "lots" can mean very different exposure. Our guide to reading CFD contract specifications walks through each field.

Worked example: margin and a 15% move

Illustrative numbers only. SOL is quoted at 150 dollars and you buy a CFD on 20 SOL.

• Exposure: 20 × 150 = 3,000 dollars.
• Margin at 2:1: 3,000 ÷ 2 = 1,500 dollars.
• A 15% fall to 127.50 dollars costs 20 × 22.50 = 450 dollars, which is 30% of the margin, before spread and financing.

SOL has at times moved 15% in a day. The crypto margin calculator and profit and loss calculator do these sums for any size.

Worked example: sizing from the stop

Illustrative numbers only. Your account holds 10,000 dollars and you decide to risk no more than 1% (100 dollars) on a SOL trade. You enter at 150 dollars with a stop at 138 dollars, 12 dollars away.

• Position size: 100 ÷ 12 = 8.33 SOL, rounded down to 8 SOL.
• Exposure: 8 × 150 = 1,200 dollars. Margin at 2:1: 600 dollars.
• Loss if the stop fills exactly: 8 × 12 = 96 dollars.

If the price gaps through the stop, for example during an outage or over a weekend, the fill could be worse. Some traders size smaller still for coins with an outage history. The crypto position size calculator works this out from your account size, risk and stop.

Overnight financing

Holding a SOL CFD overnight incurs a financing charge, and on many platforms both long and short positions pay. Crypto CFDs are often charged every night including weekends. Over weeks, financing can be a large part of the total cost; see crypto CFD overnight fees.

Weekend and liquidity considerations

Solana's coin trades around the clock on crypto exchanges, but liquidity and attention vary through the day and are often thinner at weekends. Broker CFD hours vary: some offer crypto CFDs seven days a week, others pause or price only during set hours, in which case positions can open on Monday at a very different price from Friday's close. Our guide to bitcoin trading hours and weekends explains how CFD hours and exchange hours differ.

Common mistakes

• Assuming speed means reliability. Solana has been fast when running and has also stopped entirely several times.
• Treating SOL like bitcoin with lower fees. It has a different supply model, different holders and has been considerably more volatile.
• Sizing a CFD from the margin available. At 2:1 you can open exposure of twice your free margin, but a normal SOL move can wipe out a large slice of it. Size from the stop.
• Ignoring financing on long holds. Daily charges add up, including at weekends on many platforms.
• Expecting a stop to fill exactly. In a gap or fast market it fills at the next available price.
• Confusing an exchange listing or CFD offering with endorsement. Being available to trade says nothing about a coin's quality.

Frequently asked questions

What is Solana used for?

Solana runs smart contracts, which Solana calls programs, for trading, lending, payments, games and token launches. Its low fees and high throughput have made it popular for frequent small transactions and for memecoin activity, which has both driven usage and contributed to congestion.

How many times has Solana gone down?

Solana has had several full halts and many periods of degraded performance. The major documented halts include about 17 hours in September 2021, several in 2022, a long outage in late February 2023 and about five hours on 6 February 2024. Each required validators to coordinate a restart.

What is proof of history?

It is a cryptographic clock: a continuous chain of hashes that proves time has passed between events. Solana uses it to order transactions efficiently, alongside proof of stake, which decides who produces blocks and secures the network.

Does SOL have a maximum supply?

No. New SOL is issued as staking rewards on a declining inflation schedule, and part of each transaction fee is burned. Whether total supply grows faster or slower depends on both.

What leverage is allowed on SOL CFDs?

For retail clients of EU-regulated brokers, ESMA caps leverage on all crypto CFDs at 2:1, meaning at least 50% margin. Retail clients in the UK cannot be sold crypto derivatives. Professional clients may be offered more leverage but lose some protections.

Why did SOL fall so much in November 2022?

The collapse of the FTX exchange hit SOL hard because FTX and Alameda Research were major backers and holders, and the market feared their holdings would be sold and that projects they funded would fail.