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Should You (or Anyone) Buy Solana (SOL)?

Crypto Adoption Is Surging Globally -- but Not in the U.S.
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Everyone is talking about Solana after her skyrocketing price tag, but what does she do?

Solana’s price has jumped more than 100% since the beginning of August, making it the 10th largest cryptocurrency by market capitalization. According to data from CoinMarketCap, Solana reached an all-time high of $80.12 on August 18.

So what is Solana, and what does it do?

Solana Basics

  • what’s he doing: Solana is a fast, programmable blockchain that powers many decentralized applications.
  • Management team: Co-founder and CEO Anatoly Yakovenko worked on systems design for semiconductor giant Qualcomm and Dropbox before starting Solana. He was joined by two former colleagues at Qualcomm, Greg Fitzgerald and Stephen Akridge.
  • launch date: Solana launched on Mainnet Beta in March 2020.
  • Market value: Over $21 billion (CoinMarketCap, August 23, 2021).
  • Notable Investors: Supporters include Andreessen Horowitz and Paulichen.
  • Availability: Several major US cryptocurrency exchanges, including Coinbase and Binance.US.

Solana is a programmable blockchain

Solana is one of the fastest crypto-programmable blockchains at the moment. It is also one of several coins that are being seen as possible successors to the Ethereum (ETH) throne.

If you are wondering what a programmable blockchain is, let’s start by looking at the technology behind Bitcoin (BTC) – the non-programmable blockchain. It is a huge, decentralized ledger that cannot be tampered with and records transactions. It enables people to transfer funds without involving a third party such as a bank.

Programmable blockchains exist on another level. They can store small pieces of code called smart contracts. It can be programmed to perform certain actions when contract terms are met. For example, if you rent a car, the dealer may create a smart contract to automatically pay the deposit when the car is returned in good condition. Or it may pay the farmer’s insurance contract in the event of some severe weather conditions.

Ethereum was the first programmable blockchain and attracted a group of developers who used it to build decentralized applications (dApps). But she was a victim of her own success. The network is congested due to traffic congestion. Its fees have also become expensive and have a large carbon footprint. A major upgrade to Eth2 addresses these issues, but it won’t be fully rolled out until at least 2022.

As a result, many new programmable blockchains are vying for a portion of the Ethereum market share. It was designed to be faster, cheaper and more sustainable from the start. And Solana is the fastest of them all.

What is Solana’s speed?

Solana can process 50,000 transactions per second (TPS) or more. In fact, it says that number could rise to as much as 700,000 TPS as the network grows. To put that in context, Ethereum is currently processing 15 to 45 TPS.

Visa says its payments system processes about 24,000 TPS. This is important because if cryptocurrencies are ever going to compete as a form of payment, they should at least be able to match the speed of Visa.

Should you buy?

If you’re buying Solana because you’re hoping for another 100% jump next month, you might want to think again. Solana may be a good long-term option, but it is never a good idea to invest in the hope of making a quick profit. Instead, look at the basics and use them to evaluate how Solana stacks up against other investment opportunities.

It is relatively new, so it is difficult to analyze past performance. But it enjoys strong leadership and has attracted reputable investors. There are already more than 400 projects on the Solana network. Some projects like Serum, Chainlink, USDC (The Circle Stablecoin), and Audius are well known in the crypto world.

Another bonus is that if you plan to buy and hold, you should be able to participate in SOL to earn interest. Staking is essential for network validation and security, and token holders can earn rewards by tying their coins for a specified period of time.

All cryptocurrency investments are risky, so do not invest more than you can afford to lose. There is potential for high rewards but there are also big losses. Many coins can fail completely in the long run.

The big challenge facing Solana’s long-term prospects is adoption. Ethereum can be relatively slow and expensive, but developers are used to using its programming language. The power of Ethereum’s first-mover advantage cannot be understated – from Uber to Kellogg’s Corn Flakes, our daily lives are filled with brands who have benefited from being number one in the market. People are often reluctant to give up on products they are used to, even when something better comes along.

However, if the cryptocurrency industry continues to grow, there is likely to be enough room for Ethereum, Solana, and others. And if there are any hurdles in upgrading Ethereum, Solana might be well positioned to take advantage of them.

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