What is Solana?
Solana, a blockchain with a native cryptocurrency called SOL, is potentially an Ethereum killer. One year ago its price was $1.66, today in the Bitcoin 2nd bull market, it’s price is $187. What is that? That’s a 12,000% increase.
Solana is widely regarded as the leading Ethereum competitor. In June, 2021 Solana Labs, a developer of decentralized finance projects, raised $314.2 million from investors, including venture capital firm Andreessen Horowitz.
Solana is a Layer 1 blockchain protocol. It bills itself as the fastest growing decentralized blockchain. This year, SOL is up nearly 12,000%, according to CoinGecko. Now the fourth-largest cryptocurrency by market value, SOL hit an all-time high of nearly $259.96 recently.
Other investors including Polychain Capital, Alameda Research and CoinShares participated in the fundraising, which was carried out via a sale of Solana coins. Crypto is a speculative bubble inside an inflated market pumped with liquidity by overly dovish Fed QE. Despite recent sell-offs, Bitcoin’s, Ethereum’s, and Solana’s tokens have posted stellar gains in 2021. Gains for Solana’s SOL token across the stretch are particularly eye-catching and have been driven by surging adoption for its blockchain network, but investors should keep in mind that the overall cryptocurrency market remains highly volatile and prone to cyclical pricing trends.
Solana is a blockchain platform designed to host decentralized, scalable applications. Founded in 2017, Solana is an open-source project currently run by Solana Foundation based in Geneva, while the blockchain was built by San Francisco-based Solana Labs.
There are a few reasons why Ethereum and Solana are often compared. For one, both have smart contract capabilities. Smart contracts, or collections of code that carry out a set of instructions on the blockchain, are crucial in running decentralized finance, or DeFi, applications and nonfungible tokens, or NFTs. As you know, DeFi and NFTs are like FOMO hype-words in 2021.
Pumped by Billionaires and famous people like Elon Musk and Jack Dorsey, crypto investing has also become more common with Coinbase, Block’s Cash App, and Robinhood. Still 12,000% is a lot for a digital asset to rise in such a short period.
Still, Solana is much faster in terms of the number of transactions it can process and has significantly lower transaction fees compared to rival blockchains like Ethereum. Will younger platforms in the end disrupt older ones in crypto? Can anyone really challenge Bitcoin or Ethereum? These are questions not for the crypto pundits who are biased but for history to decide.
Everyone likes to gamble in a bubble market that Bitcoin enthusiasts enjoy since it has gone more mainstream. If you’re investing in Solana, you’re betting that its technical sophistication will help it leapfrog Ethereum, as unlikely as that appears to be. In many ways, Solana is similar to Ethereum. Solana is a smart-contract platform that allows developers to build decentralized applications (dApps) on the blockchain. It currently hosts over 400 projects, with many others in the pipeline.
The reality is hype in crypto platforms come and go. Some of the biggest ICOs didn’t materialize much in scalability. Solana officially launched in March 2020. Its founder, Anatoly Yakovenko, designed Solana to support smart contracts and the creation of decentralized applications, or dapps. You can see which crypto platforms are trending on lists like coinmarketcap.com.
Experts say that it has several advantages over competitors, and it could continue its growth streak. It also recently surpassed Cardano to become the fifth-most popular cryptocurrency, with a market cap of roughly $73 billion. Solana is much faster than Ethereum, however, which gives it an advantage over its larger competitor. Solana is capable of processing more than 50,000 transactions per second, while Ethereum can only handle around 15 to 45 transactions per second.
It really does seem to be a bottleneck for the future of Ethereum. Solana can support tens of thousands of transactions per second, while Ethereum can support roughly 13 transactions per second. Supporters of Ethereum say the blockchain will become more scalable, secure and sustainable after its Eth2 upgrade, slated for 2022, during which the network will shift to a PoS model as well.
At the end of November, 2021, Crypto asset management firm Grayscale has launched a Solana trust product for accredited investors via private placement.
Yakovenko’s previous work experience was in the field of distributed systems design with leading technology companies such as Qualcomm Incorporated. This experience had made him aware that a reliable clock simplifies network synchronization, and when that occurs, the resulting network would be exponentially faster, with the only constraint being its bandwidth.
Yakovenko surmised that using Proof of History would speed up the blockchain tremendously compared with blockchain systems without clocks like Bitcoin and Ethereum that were struggling to scale beyond 15 transactions per second (tps) worldwide, a fraction of the throughput handled by centralized payment systems such as Visa Inc. that required peaks of 65,000 tps.
While Solana does have plenty of strengths, one of its biggest weaknesses is that it simply doesn’t have the same track record or name recognition as its competitors. It remains to be seen if its gigantic price increase in 2021 was just a fad or that it will emerge as a real competitor to Ethereum, like so many other crypto ecosystems competing for attention, developers, projects and wallets.
