Is Solana a Good Investment?

By Duncan Ferris

Share:

Solana's SOL coin is rapidly generating excitement for crypto traders due to its skyrocketing price, its speedy transactions and its ambitious platform.

Solana has exploded onto the cryptocurrency scene

Solana has risen remarkably to become one of the biggest players in the cryptocurrency arena. The SOL coin currency’s valuation recently overtook established big dog Cardano, coming in at around $72bn. This makes Solana the fourth largest cryptocurrency in terms of value.

But what makes this coin special and is it a good investment?

What is Solana?

Solana was launched in Spring of 2020 by Anatoly Yakovenko, who started his career with companies such as Qualcomm (NASDAQ: QCOM) and Dropbox. Yakovenko devised the Solana platform, which was inspired by his work in communications, to support smart contracts and decentralized finance applications. There will be more on this later. 

Solana’s rise has been monumental. The cryptocurrency’s price has increased by around 13,830% in the year to date, according to data from TradingView. At the time of writing, the coin is worth $211.75.

Rising popularity of decentralised finance indicates that the coin could be set to rise further, with some suggesting that SOL may even be able to topple Ethereum.

What makes Solana special?

So, lets examine some of the things which make Solana different. First up, there is the fact that, unlike Bitcoin, which operates on a ‘proof of work’ basis, Solana requires proof of stake and proof of history.

This latter idea is fairly unique to Solana. In practice, it means that the blockchain can use a synchronized clock to stop miners and bots from ordering the record of transactions in the blockchain.

Another of the key reasons for Solana’s popularity is its speed.

Though it is similar to Ethereum, Solana can outmatch its competitor when it comes to transactions per second. While Ethereum can handle somewhere around 13 per second and Bitcoin can handle seven or so, Solana says it can churn through an almighty 710,000 on a standard gigabit network. As such, Solana claims it is the fastest blockchain in the world.

This makes transactions through the blockchain incredibly cheap compared to the cost of using a competitor like Ethereum. With increasing demand for decentralized finance applications, Solana’s transaction processing capabilities will be able to handle the strain of the related influx of transactions better than its competitors.

The platform's willingness to embrace progress with open arms is attracting high profile attention. For example, earlier this month at Solana's conference in Lisbon, Reddit founder Alexis Ohanian announced a joint $100m initiative with Solana Ventures to promote Web 3.0 on the platform.

It stands to reason that the heightened popularity of the platform, is likely to drive even more investors to SOL.

What are Solana’s applications?

It is worth noting that Solana is actually the name of a public blockchain platform. This platform houses an internal cryptocurrency under the same name, Solana or SOL.

As well as the cryptocurrency, this platform contains a number of applications.

These include applications like Metaplex. This is a platform designed for artists to create their own NFT storefronts and interact directly with consumers. The recent popularity of NFT’s will have added to investors’ curiosity about the platform and the SOL coin itself.

Some of the applications are: 

  • Audius – A music streaming platform with five million users which aims to promote and monetize the work of artists who might not have yet signed record deals.

  • SolDate – Which boasts that it is the world’s first decentralized and community-owned data platform.

  • Dassi Finance – A decentralized peer-to-peer banking provider.

In total, Solana’s platform hosts over 350 projects, including apps, stablecoins and games.

What are the issues with Solana?

The going has not always been rosy with Solana. The blockchain was actually knocked offline in September when transaction volume exceeded even Solana’s capabilities.

After several hours of the outage, which took place just a week after the coin’s price increased to record levels, the Solana Status Twitter account advised that the rise in transaction volume to 400,000 per second had caused the network to start forking. This essentially means the blockchain network split into two divergent pathways.

The incident saw Solana’s price falling by around 15% in just 12 hours, with investors clearly spooked by the outage.

This seems to indicate that there are still kinks in the process and problems that can occur. However, let’s not pretend that this isn’t an issue faced by investors in other cryptocurrencies.

For example, cryptocurrencies like Bitcoin and Ethereum plunged in May after a number of exchanges went down. This resulted in some traders seeking to commence legal action against exchanges after incurring huge losses. It’s unfortunate, but outages like this seem to be part of the risk traders have to consider before committing to crypto.

Should I invest in Solana?

The first thing to say here is the standard cryptocurrency disclaimer. Cryptocurrencies are exciting, but they can be volatile so maybe it’s best not to sink essential savings like your retirement fund or your kids’ college tuition into crypto.

Now that we’ve got that out of the way, let’s get down to brass tacks. SOL’s growth this calendar year has been pretty astounding, especially in a world where there are already major crypto players.

This has not been one constant rise, as sell-offs have taken place periodically throughout the year, perhaps most notably in September and November.

These ignore the potential of SOL and the Solana platform. The breathless transaction speeds and friendliness to decentralized finance applications make Solana an enticing prospect. Its embracing of new ideas and new tech make Solana stand out from the crowd. The risks are there, but Solana looks like a very exciting prospect for the discerning investor.

Share:

In this article:

Topics:
Cryptocurrency
Blockchain
Industries:
Information Technology

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.