verybody’s talking about Solana after its big price jump, but what does it do?
So what is Solana, and what does it do?
Here Are Five Reasons Why Solana Is Skyrocketing, According to Crypto Trader Lark Davis
Crypto trader Lark Davis says five fundamental factors are fueling the meteoric rise of the smart contracts platform Solana (SOL).
In a new video, Davis tells his 427,000 YouTube subscribers that SOL is exploding because developers are actually building on its blockchain.
Builders are actually showing up… You got to have stuff built on your blockchain. Otherwise, you’re a ghost town. Solana is definitely not a ghost town. We have loads of applications built on Solana [that] you can actually go out [and] use right now, today…
For example, you have Port Finance (PORT). That’s one of Aave’s competitors that we’re seeing come up on Solana. We have Mercurial Finance. That’s like Ethereum’s Curve Finance. It’s a stablecoin-swapping protocol. We have Radium (RAY), which is like Uniswap (UNI).”
The rise of non-fungible tokens (NFTs) is also contributing to the growth of Solana, according to Davis.
“NFT has been a massive trend recently. Solana’s got a lot of NFTs, too. That’s been part of what has been driving the demand: to get the main Solana asset, the SOL token, because people want to go and buy NFTs on Solana, which are priced in Solana.”
What it does: Solana is a fast programmable blockchain that runs various decentralized applications.
Management team: Co-founder and CEO Anatoly Yakovenko had worked in designing systems for semiconductor giant Qualcomm and Dropbox before starting Solana.
He was joined by two former Qualcomm colleagues, Greg Fitzgerald and Stephen Akridge.
Date launched: Solana launched on Mainnet Beta in March 2020.
Market cap: Over $21 billion (CoinMarketCap, August 23, 2021).
Notable investors: Backers include Andreessen Horowitz and Polychain.
Availability: Several major U.S. cryptocurrency exchanges, including Coinbase and Binance.US.
Solana is a programmable blockchain
Solana is one of the fastest programmable blockchains in crypto right now.
It’s also one of the many coins viewed as potential successors to the Ethereum (ETH) throne.
If you’re wondering what a programmable blockchain is, let’s start by looking at the technology behind Bitcoin (BTC) — non-programmable blockchain. It’s a huge, tamper-proof, decentralized ledger that records transactions. It enables people to transfer money without involving a third party like a bank.
Programmable blockchains are on another level. They can store tiny pieces of code called smart contracts. These can be programmed to carry out certain actions when the conditions of the contract are fulfilled. For example, if you rented a car, the dealership might set up a smart contract to automatically pay back your deposit when the car was returned in good condition. Or a farmer’s insurance contract might pay out in the event of certain extreme weather conditions.
Ethereum was the first programmable blockchain and attracted a host of developers who used it to build decentralized applications (dApps). But it has been a victim of its own success; the network is congested due to heavy traffic. Its fees have also become expensive and it has a large carbon footprint. A major upgrade to Eth2 is in the works to address these issues, but it won’t be fully rolled out until at least 2022.
As a result, several new programmable blockchains are jostling to take some of Ethereum’s market share. They are designed to be faster, cheaper, and more sustainable from the get go. And Solana is the fastest of them all.
How fast is Solana?
Solana can process 50,000 transactions per second (TPS) or more. In fact, it says that number could increase to as much as 700,000 TPS as the network grows. To put that in context, Ethereum currently processes 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 Visa’s speed.
Should you buy SOL “solana crypto” ?
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 choice, but it’s never a good idea to invest in the hope of making a quick buck. Instead, look at the fundamentals and use them to evaluate how Solana stacks up against other investment opportunities.
It is relatively new, so it’s difficult to analyze past performance. But it does have strong leadership and has attracted reputable investors. And there are already over 400 projects on the Solana network. Some of the 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 stake your SOL to earn interest. Staking is key to the network’s validation and security, and token holders can earn rewards by tying up their coins for a set period of time.
All cryptocurrency investments are risky, so don’t invest more than you can afford to lose. There’s the potential for high rewards but also big losses. Many coins could fail completely in the long run.
The big challenge for Solana’s long-term prospects is adoption. Ethereum may be slow and relatively costly, but developers are used to using its programming language. The power of Ethereum’s first-mover advantage can’t be underestimated — from Uber to Kellogg’s Corn Flakes, our daily lives are full of brands that capitalized on being first to market. People are often reluctant to give up products they’ve become used to, even when something better comes along.
That said, if the cryptocurrency industry continues to grow, there will likely be enough space for Ethereum, Solana, and others. And if there are any hitches with Ethereum’s upgrade, Solana could be well placed to take advantage.
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This may slow down Solana’s journey to $300
Over the past week, Bitcoin and Ethereum’s prices have been rangebound, depicting just about 1% in gain and loss respectively. However, Solana, the new entry in the top ten ranked coins (by market cap), has managed to steal the show yet again, by making another all-time high, at the time of writing.
Solana’s value appreciated by over 30% in the last four days. As the alt traded at $87 at the time of writing, the market deliberated over apt trade entry and exit points, for SOL. But the more important question is, how far would Solana go this time?
What will the be extent of Solana’s price rally?
Solana’s circulating supply witnessed a spike to 291 million since August 25, till date. Interestingly, the supply had seldom breached this level before, and was at an all-time high. Ergo, it can be inferred that more coins are circulating amongst market participants at this stage.
Furthermore, SOL’s Sharpe ratio touched high levels of 10.67, at the time of writing, when the same for Bitcoin noted 5.4. For Ethereum, the value stood at 4.8. This ratio outlines the potential risk-adjusted returns of an asset. The higher the Sharpe ratio, the better the returns fetched. To be more precise, SOL holders, at this stage, are being compensated more than usual, for the risk borne.
High ROIs were an additional incentive for participants to stay back in the market, avoid sell-outs and keep the prices of the alt afloat. In fact, just around ten days back, the Sharpe ratio signified that Ethereum promised better and higher returns than Solana.
However, these numbers flipped, as SOL made its way to a new ATH and ETH went on to consolidate. The strong returns, coupled with high on-balance volumes for SOL, made a pretty decent case for a further rally for the alt.
What Solana needs, to make it above $300
While most of the metrics soared alongside SOL’s price, development activity took a downturn and saw the lowest levels this year. During a rally, development activity often takes a back seat. However, for a rally to sustain, it needs to be backed by strong development activity, which was missing for SOL at the moment.
At press time, after reaching an ATH of $88.86, Solana started consolidating and was down 2% since. This, even though the social sentiment ( both social volumes and social dominance) was high. However, it wasn’t a bad thing altogether, as coins have a tendency to rally when social euphoria subsides.
Nonetheless, with Solana targeting $300, along with high trade volumes and decent social sentiment, the alt is bound to rise in the near future. However, SOL’s price momentum at the moment showed that over lower time frames, the alt could see some consolidation going forward.