Solana (SOL): a proof-of-stake network token explained

What Solana is

Solana is a public blockchain that launched in 2020. It was designed to process a large number of transactions quickly and cheaply on a single chain, rather than relying mainly on separate layer 2 networks. SOL is its native token.

Like Ethereum, Solana runs smart contracts, which Solana calls programs. Developers have built exchanges, lending markets, token launches and other DeFi applications on it. The same categories of risk you find on Ethereum apply, even though the technology underneath differs.

Solana has its own token standard, its own wallets and its own address format. An Ethereum address and a Solana address are not interchangeable, and tokens on one do not appear on the other without a bridge.

Because the two networks use different designs, a wallet built for one may not support the other. Some wallets handle both, but they keep separate addresses for each network, and it’s up to you to pick the right one each time you send or receive.

How the network works

• Proof of stake: validators stake SOL and take turns producing blocks. Holders can delegate SOL to a validator to share in rewards.
• Proof of history: a technique Solana uses to order and timestamp transactions, which helps validators agree quickly.
• Fees in SOL: fees are usually small, but users can add priority fees to get transactions processed faster when the network is busy.
• Accounts and rent: Solana stores data in accounts that need a minimum SOL balance to remain open, which is why some actions lock a small amount of SOL.

Staking on Solana works through stake accounts. You choose a validator and delegate to it; the stake takes effect and ends at epoch boundaries, so starting or stopping is not instant. Validators charge a commission on rewards, and a poorly performing validator earns less for its delegators. Read the network’s current documentation for how rewards and any penalties work.

See the full infographic with notes.

How SOL shows up in DeFi

• Gas: every action on Solana costs SOL, so you need a small balance for fees.
• Trading and liquidity: SOL is a common trading pair on Solana’s decentralized exchanges.
• Collateral: SOL can be deposited in lending protocols, which brings liquidation risk if its price falls.
• Liquid staking tokens: some services issue a token that represents staked SOL plus rewards. That token can then be used in DeFi, adding the staking service’s risks.
• Bridged assets: tokens from other chains appear on Solana through bridges, and SOL appears elsewhere the same way.

Key risks

• Smart contract risk: Solana programs can have bugs like any code. See smart contract risk.
• Network risk: if any blockchain slows or stops producing blocks, you can’t move funds until it recovers. Read the network’s own status history.
• Wrong-network sends: sending SOL or Solana tokens to an address on another network can lose them.
• Approvals and signing: malicious transactions can drain a wallet. Read wallet approvals and signing.
• Staking and liquid staking risk: validator performance, service failures and liquid staking tokens trading below their underlying value.
• Price swings: the CSA warns crypto assets can be very volatile and you could lose some or all of your money.

Questions to ask before you use SOL

Speed makes mistakes happen faster too. These questions are worth a pause before each new kind of action.

1. Is the receiving address a Solana address, and is the token I’m sending native to Solana or bridged?
2. Will I have enough SOL left for fees and account minimums after this action?
3. If I’m staking, what is the validator’s commission, how reliable has it been, and how long will deactivating take?
4. If I’m using a liquid staking token, how do I turn it back into SOL, and could it trade at a discount?
5. What exactly am I signing? Many wallets show a preview of what a transaction will do; read it instead of clicking through.

Compare approaches in staking options, and try the self-custody readiness tool if you’re new to holding your own keys.

Canadian notes

CDIC does not cover cryptocurrencies, so SOL is not deposit-insured anywhere.

For tax, selling SOL, swapping it for another token and spending it are dispositions. The CRA says staking rewards received on a centralized platform are generally income when credited. As of 2026-10-30, it has not addressed delegating from your own wallet, liquid staking or using SOL in DeFi. One-half of a capital gain is taxable. Our staking and rewards page covers what is and isn’t settled.

Your checklist

• Keep a small SOL balance for fees and account minimums.
• Check that the receiving address is a Solana address before you send.
• Compare validator commission and reliability before delegating.
• Allow for the wait when deactivating stake.
• Record each reward and disposition with its Canadian-dollar value.

Sources and dates

• Introduction to smart contracts — ethereum.orgreference
  No date shown on page · checked 2026-10-31. What a smart contract is and how it executes.
• Ethereum staking — ethereum.orgreference
  No date shown on page · checked 2026-10-31. Solo, pooled and centralized staking options and their trade-offs.
• Blockchain bridges — ethereum.orgreference
  No date shown on page · checked 2026-10-31. How bridges move assets between networks, and bridge risks.
• Investor tools — crypto assets — Canadian Securities Administratorsreference
  Page date 2025-10-22 · checked 2026-10-30. Crypto assets can be very volatile and risky; you could lose some or all of your funds.
• Director's decision — Newton Crypto Ltd. (example of platform terms) — Ontario Securities Commissionin force
  Page date 2026-03-25 · checked 2026-10-30. Example terms: $30,000 net 12-month limit for most retail clients on non-specified crypto assets; not applied in AB, BC, MB, QC, SK; BTC, ETH, LTC, BCH, SOL listed as specified.
• What's covered — Canada Deposit Insurance Corporationin force
  No date shown on page · checked 2026-10-30. Up to $100,000 per category per member institution; cryptocurrencies, including stablecoins, are not covered.
• Reporting income from crypto-asset transactions — Canada Revenue Agencyin force
  Page date 2025-12-02 · checked 2026-10-30. Business income vs capital gains is case by case; lists business indicators; crypto-to-crypto trades are dispositions; half of a capital gain is taxable.
• Reporting income from crypto-asset mining and staking activities — Canada Revenue Agencyin force
  Page date 2025-11-10 · checked 2026-10-30. Mining is usually a business; staking rewards on a centralized platform are generally income when credited. Silent on self-custody/DeFi staking.
• Prime Minister Carney cancels proposed capital gains tax increase — Prime Minister's Officein force
  Page date 2025-03-21 · checked 2026-10-30. The proposed increase in the capital gains inclusion rate was cancelled; the one-half rate continues.