Solana, a blockchain network that launched not long ago, in 2020, is being seen by many as a competitor to Ethereum. One of the leading so-called Ethereum Killer networks. Its native cryptocurrency has grown about 12,000% percent since its launch. Currently Solana’s market cap is around $31 billion. It entered the top 10 cryptos by market capitalization last year after a very strong rally and has been firmly positioned there ever since. This means people have invested heavily in the relatively new cryptocurrency that has become the sixth biggest by market capitalisation – or 5th if we don’t count the stablecoin Tether.
This is why today’s post is dedicated to Solana (SOL) – let’s dive into the specifics of this project and how it became such a hot token.
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. One of its main strengths is speed of transactions and low cost – the two main problems that Ethereum faces today and the reason why many projects, like Binance Smart Chain, Cardano, Polkadot and Solana are so successful – they all tackle the challenges that are making Ethereum too slow and expensive to use. Solana prides itself as a blockchain that can handle up to 65,000 TPS (transactions per second) and at the cost of less than a penny each. In comparison, Ethereum can process up to 45 TPS and Cardano 250 TPS, so as you see there’s a huge jump from these to Solana and that’s not all.
Other advances that Solana offers are:
Improved mining mechanism – while Ethereum is still working on its transitioning to Proof of Stake protocol, Solana is using a novel approach – a combination of Proof of Stake and Proof of History – designed to keep time between computers on a decentralized network without all the computers having to communicate about it and come to an agreement. I won’t go into all the details on how this works, but to keep it short, it creates a historical record that proves that an event has occurred at a specific moment in time and thus it allow for blocks to be created much faster, independently of each other and successfully verifiable to keep the right sequencing, so there can’t be any duplicates. As a proof of stake network, it also offers staking rewards and governance rights to block validators. Being a governance token, means that token holders are able to vote on future upgrades and governance proposals that are submitted by the Solana community. This is essential to its decentralized nature and it’s a common practice these days as It keeps the community actively involved in the growth and development of the network.
Like Ethereum, Solana is a computing platform that can interact with smart contracts. Smart contracts power a wide range of applications, from NFT markets and DeFi to games and decentralized lotteries… Fungible tokens on Solana are similar to the popular “ERC-20” token standard on Ethereum, which allows users to create tokens for a wide array of uses such as stablecoins, wrapped tokens, and governance tokens. There’s a lot that Solana offers to developers.
Just recently Solana Labs announced the launch of Solana Pay in partnership with industry giants like Circle, Checkout.com, Phantom and FTX among others. The app will allow users to send stablecoins such as USDC from their crypto wallets directly into a merchant’s account, where they are settled almost instantly with very low transaction fees. merchants should also benefit from the advantages of decentralized crypto payments such as “network cost savings, DeFi yield generation, zero fraud liability, and instant settlement. There are also a few DEXes built on Solana – like Serum and Orca and last year there was a lot of buzz surrounding the newly launched NFT marketplace and blockchain-based games, there’s quite a lot already built on Solana – and in quite a short space of time – this is why we saw such an accelerated growth throughout 2021. In fact, By December 2021, Solana had processed over 40 billion transactions at an average cost of $0.00025 per transaction.
Last year we saw a boom in the DeFi and NFT sectors and Solana supports building applications for both, so it’s no surprise that it’s such a popular network but that doesn’t come without its challenges. as Bloomberg reported, the protocol suffered its sixth serious outage of more than eight hours recently, which a notice on its website attributed to excessive duplicate transactions causing a high level of network congestion. During these periods of network instability, crypto traders are often left unable to sell off their positions as transactions fail to complete on Solana’s network, yet another sign that there’s still a lot of hurdles to be resolved in this emerging technology. Also, despite a capacity to handle 65 000 TPS, it appears that on average the network process up to 3000 TPS and recently it recorded an average of 500 TPS – far from its full capacity, but even at this, it is light years faster than Ethereum’s 15 to 45 TPS, so critics have little to hang on when trying to attack Solana.
The goal of Solana’s architecture is to demonstrate that you can use a set of software algorithms that can be combined to enble transaction throughput to scale proportionally with network bandwidth. Solana’s architecture satisfies all three desirable attributes for a blockchain: scalable, secure, and decentralized. It has a theoretical upper limit of 710,000 transactions per second on a standard Gigabit network and 28.4 million tps on a 40-Gigabit network. These parameters can be reached one day, but for the time being it is too early to consider such a large-scale performance.
Solana’s status as a top crypto network also came under scrutiny when it suffered a network outage for more than 17 hours on Sept. 17, 2021, after a surge in transaction volume—which peaked at 400,000 transactions per second—and spam-bot activity led to excessive memory consumption. While its Sol token initially plunged on the news, it recovered soon after, reaching a record price of over $250 in November 2021. We’ve seen the market go through a major correction since then and currently Solana’s market price is around 60% below its ATH but this is due to the overall drop in crypto and is only relevant to present time – if you’re watching this video in a few months from now, it will be a very different picture.
Token Metrics, the service I use for analytics on all major cryptocurrencies, is giving it a very high technology score – 91% – one of the highest I’ve seen – they analyse loads of metrics to achieve that score. It also has a 63% fundamental grade based on having a great team that is well funded and experienced in the industry. The token distribution score of Solana is 40%. This means 60% of tokens will be reserved for future development while 40% can be traded freely in exchanges post-ICO. The tokenomics score of Solana is 100% so all in all, really strong rating.
Token Metrics is a paid service but it’s well-worth it as they provide valuable insight for every investor or trader and regular emails with deep analysis of new up and coming projects, ICOs and pre-sale tokens that can be very beneficial and bring you loads of profit if you follow their recommendations, so go check it out, my invite link is in the description too and you can give it a test run before you commit to a monthly or yearly subscription – there’s also a discount you get if you use my link, so I’d recommend it.
In terms of getting your hands on some of these Solana tokens, the cryptocurrency is so popular that you will find it on all good exchanges – Binance, Coinbase Pro, Bitpanda, Kraken, Kucoin, Bitfinex, Bityard, Crypto.com… many more. You can also store it safely in hardware wallets such as Ledger Nano S and Nano X – I use both and I’ve done step by step tutorials on how to use these, so if you’re following me for some time, you might have seen these, if not, you can search on my channel for Ledger nano and they’ll pop up. Holding coins on an exchange for long periods is not safe, so make sure you get yourself a hardware wallet for the long run.