What Is SOL? Solana's Native Token Explained

SOL is the native token of the Solana blockchain, used to pay transaction fees, staked by validators and delegators to secure the network through proof-of-stake consensus, and used to participate in on-chain governance decisions affecting the protocol. Every transaction on Solana, whether a simple transfer or a complex DeFi interaction, requires a small amount of SOL to cover its network fee, making the token a functional requirement for using the chain at all, not just a speculative asset layered on top of it.

Here's a closer look at each of SOL's core functions.

Paying transaction fees

Every action on Solana, from sending tokens to interacting with a DeFi protocol, requires paying a network fee denominated in SOL. Solana's fees are typically a small fraction of a cent per transaction, notably lower than fee levels seen during congestion on some other major chains, which is part of why the network has attracted use cases involving frequent, small-value transactions. Because fees are paid in SOL specifically, holding at least a small amount is a practical necessity for anyone using the network directly, even if their primary interest is in a different token entirely.

Securing the network through staking

SOL is the asset staked by validators to participate in Solana's proof-of-stake consensus, and by delegators who assign their SOL to a validator of their choice without running infrastructure themselves. Our guide on staking SOL covers the practical mechanics, validator selection, and unstaking timelines in more depth. This staking function ties SOL's value directly to the network's security, more SOL staked by a broad, decentralized set of validators generally means the network is more resistant to attacks requiring control of a large share of total stake.

Governance participation

While Solana's governance processes are less formally on-chain than some other networks' structured voting mechanisms, SOL holders and the broader community influence protocol direction through a combination of informal community discussion and, in various contexts, token-weighted signaling. This is a less codified governance model than networks with structured on-chain voting systems, worth understanding if you're comparing governance rights across different layer 1 blockchains.

Supply and inflation mechanics

SOL's supply increases over time through a network-defined inflation schedule that funds staking rewards, with the specific inflation rate having been designed to decrease gradually over time according to a predetermined schedule. This inflationary issuance is the primary source of staking rewards for validators and delegators, alongside a share of transaction fees, meaning SOL's total supply isn't fixed the way some other major cryptocurrencies are designed to be.

SOL's core functions at a glance

Function	Practical effect
Transaction fees	Required to pay for any action on the network
Staking	Secures the network via proof-of-stake, earns rewards
Governance	Informal community influence over protocol direction
Supply	Inflationary issuance funding staking rewards

SOL as collateral within DeFi

Beyond its base-layer functions, SOL is also widely used as collateral within Solana's DeFi ecosystem, deposited into lending protocols to borrow other assets, or paired in liquidity pools on decentralized exchanges to earn trading fees. This secondary utility, using SOL within applications rather than for the network's core fee and staking functions, is worth distinguishing from SOL's protocol-level roles, since collateral and liquidity-provision use cases carry their own distinct risks (smart contract risk, liquidation risk, and impermanent loss, covered in our impermanent loss explained guide) layered on top of simply holding the token itself.

Liquid staking tokens built on SOL

Because natively staked SOL is illiquid for the duration of the cooldown period, liquid staking protocols have built derivative tokens representing staked SOL positions, letting holders earn staking rewards while retaining a transferable asset usable elsewhere in DeFi. This adds a layer of composability on top of SOL's base staking function, at the cost of additional smart contract and depeg risk beyond native staking alone, a tradeoff covered in more depth in our liquid staking explained guide.

Risks and considerations

Like any native network token, SOL's price is subject to the same market volatility and speculative dynamics as other cryptocurrencies, this article makes no claims or predictions about its future price, only about its functional role within the network. Holding SOL for its utility, paying fees, staking to earn rewards, is a fundamentally different consideration from holding it as a speculative investment, and it's worth separating those two motivations clearly when deciding how much to hold and why.

Check current network activity and staking yields on our chains and yield data pages for up-to-date context on how SOL's utility metrics compare to other major layer 1 tokens.

Bottom line

SOL functions as Solana's fee currency, staking asset, and informal governance-influence token, all three roles tied directly to how the network actually operates day to day rather than being purely symbolic. Its inflationary supply schedule funds staking rewards, making SOL's utility inseparable from the security of the underlying network. As with any token, separate its functional utility from any speculative expectations about its price, the two are independent considerations that deserve independent scrutiny.