TL;DR
SOL is Solana’s native cryptocurrency used to pay transaction fees, stake with validators, participate in DeFi, and govern the network.
Transaction fees: every Solana transaction costs a small amount of SOL. Staking: delegate SOL to validators to earn ~7-8% APY. DeFi: use SOL as collateral for borrowing, provide liquidity in trading pairs, or trade perpetual futures. NFT purchases: SOL is the primary currency for NFT marketplaces. Governance: SOL stakers can participate in Solana governance decisions. It’s the base currency of the entire Solana ecosystem.
SOL has no hard supply cap — new SOL is minted via inflation (staking rewards) at a decreasing rate starting from 8% and declining to 1.5% long-term. Meanwhile, 50% of each transaction’s base fee is burned, creating deflationary pressure. The net inflation rate depends on network activity. Major SOL holders include the Solana Foundation, early investors, and validators. SOL was initially distributed through a seed sale, multiple funding rounds, and Foundation allocations.
SOL is the most liquid asset on Solana and the base trading pair for most tokens. When you buy a memecoin, you’re swapping SOL for it. SOL price movements affect the entire ecosystem: a SOL pump lifts all Solana tokens in USD terms; a SOL dump drags everything down. Many traders denominate their portfolio in SOL rather than USD to measure performance relative to the base asset.