Someone in the 100 Days of Solana community asked a question last week that needs to be addressed: "What gives SOL its value?"
You have been using SOL in every challenge. You airdropped it, checked your balance, and you are about to start sending it in Arc 3. But where does the value actually come from? Is it just numbers on a screen?
I understand why people think that. Let’s break it down.
Liquidity: Where price comes from
The first thing to understand is that for a token to have purchasing power, there needs to be liquidity. This means there are people or pools willing to trade real assets, such as fiat or stablecoins, for that token. That liquidity is what allows a market price to exist.
Think of it like converting currencies at an airport. You hand over dollars, and you get euros. The value isn't created in that moment; it is a transfer of value from one form to another. In Web3, liquidity is the bridge that connects digital assets to the broader economy.
Different tokens, different sources of value
Not all tokens work the same way. Understanding the types helps you see where the value sits.
- Native Tokens: SOL is required to pay transaction fees, stake with validators, and interact with applications. As usage of the network grows, the demand for these specific functions can increase the demand for SOL.
- Stablecoins: These are often pegged to a currency like the US dollar. They maintain this peg through reserves and market mechanics. Issuers like Circle hold cash and bonds so you can redeem USDC for dollars.
- Utility Tokens: These provide access to specific services, such as in-game items or decentralized file hosting. The token has value because the service it unlocks is useful to someone.
- Governance Tokens: These provide voting power. Holding governance tokens for a protocol allows participation in decisions about fees, features, or treasury management.
- Meme Tokens: These often derive value from community and attention. While they may begin as jokes, they can build large social networks.
The Solana-Specific Engine
Beyond general categories, Solana has unique technical mechanics that influence its economy:
The Cost of State (Rent) On Solana, storage is not free. Every time you create an account or deploy a program, you must deposit a minimum amount of SOL to make that account Rent Exempt. This SOL is held in the account to keep it active. While it isn't permanently removed, it is temporarily locked, which can reduce circulating liquidity as the ecosystem grows.
The Burn Mechanism Solana has a built-in "fee burn" where 50% of every base transaction fee is permanently destroyed. However, Solana also has inflation (new SOL issued to validators to secure the network). The net effect on supply depends on how much network activity (burn) occurs versus the rate of new issuance.
Efficiency via Proof of History (PoH) Solana’s design enables fast, low-cost transactions (settling in roughly 400ms). This can make certain applications, like high frequency DeFi or real time payments, more efficient. This efficiency increases the usefulness of the network, which in turn supports the value of its native token.
Liquidity pools: How tokens stay tradeable
In Web3, we often use liquidity pools instead of traditional order books. A liquidity pool is a smart contract holding two tokens, such as SOL and USDC. Prices are set automatically using mathematical formulas rather than matching individual buyers and sellers like a traditional exchange.
People who deposit tokens into these pools are called liquidity providers. They put in a balanced value of both tokens and earn a portion of the trading fees. This is how decentralized exchanges like Raydium or Orca function. When more people buy SOL from the pool, it becomes scarcer in that pool, and the price rises automatically.
Is it real?
Value in Web3 comes from the same place all value comes from: utility and demand.
SOL is useful because the network processes thousands of transactions per second for very low costs. USDC is useful because it allows for digital dollar movement globally. DeFi protocols are useful because they provide financial tools without traditional intermediaries.
The infrastructure is different from traditional finance, but the principles are the same. Value frequently follows utility.
What this means for you
You have been working with DevNet SOL, which has no monetary value. However, the mechanics are identical to Mainnet. The RPC calls, the wallet interactions, and the transaction flows are all the same.
In Arc 3, you start sending transactions and moving "simulated value." Understanding how that value flows, even on a test network, makes you a better builder. You are practicing the exact same movements you will eventually perform on Mainnet. Whether you end up creating a payment system, a DeFi protocol, or something entirely new, this technical foundation is where it starts.
Keep building. See you on Discord.
100 Days of Solana is a free daily coding challenge. If you have not joined yet, start here: https://mlh.link/solana-100