Solana (SOL): What It Is, What It’s Worth and Should You Be Investing?

NicoElNino / Getty Images/iStockphoto

Solana is a cryptocurrency that runs on decentralized blockchain technology. Solana has been a hot topic among investors following a big jump in share price that garnered a lot of attention in August. The jump in value was particularly impressive because other cryptocurrencies experienced losses around the same time.

What Is Solana?

Solana founder Anatoly Yakovenco saw a need for better cryptocurrency technology. He published a whitepaper in 2018 that proposed a way to overcome the challenges of processing thousands of transactions without delays.

At the time, Bitcoin and Ethereum processed around 15 transactions per second – slightly less than 1.3 million transactions in a day. This may sound like a lot, but Visa was processing 65,000 transactions per second for the potential to process more than 5.6 billion transactions per day.

How could cryptocurrency compete with traditional money if it couldn’t scale transactions? By June 2018, Solana leaders found a way to process 250,000 transactions per second, making it the fastest cryptocurrency on the market.

Solana Competitors

There are thousands of cryptocurrencies available to investors. Solana’s main competitors are Bitcoin and Ethereum, which are the two largest cryptocurrencies on the market. Some experts compare Solana to Cardano, with these two cryptocurrencies posing the biggest threat to Ethereum.

What Is the Difference Between Solana and Cardano?

Cardano is currently the fourth-largest cryptocurrency on the market behind Bitcoin, Ethereum and Tether. Cardano was one of the first cryptocurrencies to utilize proof-of-stake validation for transactions. This speeds up transaction times while simultaneously decreasing energy use. The way Cardano processes transactions is better for the environment than many of its competitors.

Solana is currently the seventh-largest cryptocurrency by market cap. What makes Solana such a contender compared to these cryptocurrency giants?

Solana is the company behind blockchain technology. While its value trails almost $25 billion behind Cardano, Solana also has the fastest transaction technology through its decentralized network. Here’s how Solana and Cardano stack up as of Nov. 2, 2021:

Summary Solana Cardano
Market Cap $65.4 billion $65.3 billion
Market Rank #5 #6
USD Value $218.66 $1.97
24-hour Trading Volume $3.07 billion $2.45 billion

Pros of Investing in Solana

Here are some of the pros of investing in Solana.

Growth

Solana has shown impressive growth in a short period of time. When it first launched in March 2020, Solana’s starting price was $0.77. It gained significantly by September 2021, when each coin’s value was $140.

Stability

All cryptocurrencies gain and lose value over time. The COVID-19 pandemic led to market volatility, during which many cryptocurrencies lost value. In fact, Solana most recently continued growing while the larger market in the crypto world had been losing some value.

Unique Technology

It also boasts a unique blockchain technology that is a hybrid combination of proof-of-stake and proof-of-history that backs each transaction. It can process transactions even faster than Ethereum, the second largest cryptocurrency.

Scalability

Solana’s growth and technology pair together well, offering the potential for the cryptocurrency to grow quickly and efficiently. A big part of Solana’s scalability is the ease of use and lower fees for the end user.

Cons of Investing in Solana

Take a look at some of the downsides as well.

Testing Phases

Solana has big plans for the future, but many of those plans are still in beta testing. Until plans are put into action by the company, there’s no way to tell how successful it will be.

Setup Fees

While user transaction fees are low, setting up Solana hardware is more expensive than other cryptocurrencies. Investors may weigh the pros and cons of the difference in fees to invest in another cryptocurrency that has a lower setup fee.

Decentralization

The way Solana handles transactions makes them much faster to process, but it also takes away from decentralization. For investors seeking a highly decentralized cryptocurrency, Solana may not be the first choice.

Good To Know

A lack of decentralization is a con for many investors, but others appreciate it. More stability means that Solana isn’t as volatile in the ups and downs of the cryptocurrency market.

Final Take

Solana is an impressive cryptocurrency. With thousands of cryptocurrencies on the market, it stands apart by showing growth consistency and potential. But will it live up to that potential? Only time will tell.

Investors interested in diversifying their cryptocurrency portfolio should take a serious look at Solana. As the creator of blockchain technology, it has deep roots in the industry. This indicates that it isn’t going anywhere anytime soon.

Still, investors need to weigh the pros and cons of Solana as they consider their cryptocurrency portfolio as a whole. Investors should treat Solana as a long-term investment instead of a get rich quick scheme.

Solana (SOL) FAQ

Here are the answers to some of the most frequently asked questions about Solana.

  • Is Solana the fastest cryptocurrency?
    • Yes. Even though it comes in behind six other cryptocurrencies as far as value, it is still faster. It boasts 50,000 transactions per second compared to 15,000 to 45,000 transactions for Ethereum.
  • Is the Solana network stable?
    • Yes. Solana recently announced a partnership with Tether’s stablecoin. Stablecoins are like a hybrid cryptocurrency that is less decentralized than other cryptocurrencies. While this can be a negative for some investors, it’s a positive for others. Stablecoins hold their value well, in comparison to other cryptocurrencies.
  • Why is Solana growing so fast?
    • Solana has lower fees, making it cheap for investors to build on. Its blockchain technology is also second-to-none, making it enticing to investors. When people look at decentralized financing, these two factors play an important role, driving more investors to Solana. As users add more projects to the platform, demand increases. This cycle continues to drive Solana’s value up.

Data is accurate as of Nov. 2, 2021, and subject to change.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Katy Hebebrand is a freelance writer with eight years of experience in the financial industry. She earned her BA from the University of West Florida and her MA from Full Sail University. Since beginning to work full-time as a freelance writer three years ago, she has written on topics spanning many fields, including home building, families and parenting, legal and professional/corporate communications.


Be the first to comment

Leave a Reply

Your email address will not be published.


*