What is Solana and is it a Good Investment

Solana is censorship-resistant, meaning that the network will remain open for applications to run freely and transactions will never be stopped. Solana was founded by Anatoly Yakovenko and officially launched in March 2020. Yakovenko published a whitepaper in 2017 describing the Proof of History model as proof for verifying the order and the passage of time between events, and it is used to encode trustless passage of time into a ledger.

As demand for Ethereum, the most widely used blockchain network has surged this year.

Because of the Bitcoin regulation, other projects have emerged in an attempt to compete. Among them is Solana, a blockchain with a native cryptocurrency called SOL. Solana is a public, decentralized blockchain platform built to enable scalable, user-friendly apps. Its internal cryptocurrency is called SOL. Solana achieves consensus using a proof-of-stake mechanism as well as a “proof-of-history” mechanism, which Solana’s whitepaper claims improves efficiency. Solana is currently the fastest blockchain in the world and the fastest-growing ecosystem in crypto, with over 400 projects spanning DeFi-Decentralised Finance, non-fungible tokens (NFT), and web3. Solana is all about speed, with 400 millisecond block times (the average time it takes to create a block on a blockchain is very fast).

Solana has soared by almost 12,000% so far in 2021 and has a market capitalization of $66 billion. It ranks at number 5 as the 5th largest cryptocurrency by market capitalization. Solana is both a cryptocurrency with the token SOL and a blockchain network like Ethereum, but unlike Ethereum, the secret to Solana’s success has to do with its speed and low transaction fees. Solana’s proof of history model helps speed things up; it marks blocks of data with a timestamp, so they immediately move forward in the validation process. Solana can process as many as 50,000 transactions per second. To put that into perspective, its biggest rival, Ethereum, can only process about 30 transactions per second, and because of this, coupled with the high fees Ethereum charges, developers are moving to Solana to build projects. As of December 2021, Solana had over 5,100 projects hosted on its blockchain, and that’s a massive growth, considering that the blockchain started the year with only about 70 projects. Total transactions rose from 10 billion in January to 45 billion in December. All of this growth is laying the groundwork for future growth this year and beyond because it shows real-world utility and it still has so much room to grow. Solana was the best performing crypto in 2021 and might continue to grow beyond expectations in the future. Solana currently owns the third-largest futures open interest, which is the most relevant metric in derivatives contracts. There has undoubtedly been an incredible amount of activity going on in Solana’s on-chain data and derivatives markets. The network’s total value locked has increased over 15% in the last six months. It seems to be quickly closing the gap between total value locked, active users, and the derivatives market. The market capital is more than double the value of Avalanche and Terra. 2021 presented strong evidence of SOL’s growing investor community, and with growing investor adoption comes enhanced institutional adoption. The overall market has shown support for Solana and it is now the fourth-largest cryptocurrency by market value and currently has a market capitalization of over 74 billion USD.

Is Solana a good investment? Experts argue that when a cryptocurrency appreciates in such a short period of time, it is likely to depreciate just as quickly, but given the fundamentals of Solana, this is unlikely. Taking a look at the reason for its appreciation, there were more developers using its blockchain to create apps, and as long as its promise of fast transactions and faster processing speed is held, the coin will do just fine. The long-term value of Solana will likely be influenced by how many decentralized apps developers bring to its network. Solana seems to have the speed and efficiency to continue being useful in the future and is well on its way to becoming the third-highest cryptocurrency by market capitalization in coming years. However, cryptocurrencies have proven to fluctuate, and any asset that appreciates 12,000% in a single year could easily experience significant volatility. Investors should manage the risk by dollar-cost averaging and by diversifying their portfolios.