How Do Solana Become the Top-Performing Cryptocurrency of 2021?

Solana (SOL)

There are a number of new crypto projects coming out every day, but what is Solana (SOL)? It’s an infrastructure project that aims to be the go-to for blockchain services. The company behind it has big plans and hopes they can change how people do business in this digital age by making sure all transactions will eventually happen on their platform as well.

SOL, the cryptocurrency linked to the Solana network, has jumped into the world’s top 10 largest cryptocurrencies amid optimism that its blockchain infrastructure could be a long-term competitor to Ethereum. Solana’s token has tripled in just a few weeks and now has more than $35-billion market value. Optimism has grown thanks to Solana’s faster transaction speeds and lower transaction costs when dealing in the world of decentralised finance (DeFi) and digital collectables — areas where Ethereum dominates.

What is Solana (SOL)?

Solana is a blockchain network that seeks to develop an ecosystem of cryptocurrency-powered products and services. Solana is different to Bitcoin but offers similar features to Ethereum. It differentiates itself from Ethereum’s network by providing faster transaction times, lower fees and a programming capability that focuses on flexibility.

Solana can currently handle over 50 000 transactions per second, more than Ethereum and Bitcoin combined, and at a fraction of the cost. Developers can also write and launch customisable applications in multiple programming languages on the Solana blockchain. Solana’s native cryptocurrency, SOL, is used to pay for executing programmes and sending transactions.

What Makes Solana Unique?

1. Ecosystem Growth

Solana’s blockchain ecosystem has grown rapidly and is seeing strong adoption. In fact, Solana has seen a 130% growth in its projects over the last few months (up to 181 projects at the time of writing). Solana’s total value locked in smart contracts is now north of $3.5-billion, growing 200% in August.

2. Built to Scale

Solana is built for speed and can currently execute over 50 000 transactions per second. Bitcoin and Ethereum, on the other hand, process five and 15 transactions per second, respectively. For reference, Visa’s payment’s network is said to process over 1 700 per second on average. Faster transaction processing speeds are necessary for projects rebuilding the financial system as we know it through decentralised blockchain-based applications.

3. Ultra-Low Fees

Solana offers far lower fees when compared to what many other similar blockchain networks are charging today. For reference, Ethereum transaction fees are >200x more expensive when compared to the same transaction on the Solana network.

Solana is not for payments?

No, just like stocks in the technology sector operate differently from those in the oil and gas sector, you get cryptocurrencies that do different things.  The term cryptocurrency is confusing since there’s a preconceived notion of what a currency is and what it can and cannot do. The truth is that many cryptocurrencies aim to achieve very different objectives, and only a small number of them are attempting to become “digital cash”, replacing the ZAR and USD we have today.

Is Solana Still a Good Choice of Investment?

You may see this as a generational buying moment in an emerging asset class or one speculative bubble. Either way, diversification is always the smart thing to do when it comes to investing. Without giving investment advice, do some research on smart contracts and Solana, and form your own view on what the future holds. If you see a big future for smart contracts and blockchain technology, then it would be worthwhile including some Solana in your crypto portfolio.

Solana’s Performance

Solana has been amassing remarkable gains over the past few months. This was partly due to a renewed NFT hype, with many NFTs now being built on the Solana network. NFT stands for Non-Fungible Token. To understand what they are, you need to understand what “fungibility” means.

Fungibility is a simple concept that basically refers to items that are replaceable for the exact same item. Therefore, Non-fungible (the opposite of fungible) means that it’s unique and can’t be replaced with something else, like a one-of-a-kind trading card or the Mona Lisa painting. If you traded either the card or the painting, you’d receive something completely different in return.

Thus, NFTs are “one-of-a-kind” assets in the digital world that can be bought and sold like any other piece of property. The digital tokens can be thought of as certificates of ownership for virtual assets (such as in-app items and digital art) or physical assets (such as real-life paintings and even houses).

With the NFT market hitting new highs in 2021, with more than 30x the sales of 2020, you can understand why the blockchain networks facilitating these transactions have received increased attention.

Bottom line

Assuming the industry continues to grow, Solana (SOL), which is available from most top cryptocurrency exchanges, looks well positioned to emerge as one of the top smart contracts cryptos. However, it’s also worth noting that blockchain technology and cryptocurrencies are different things. Companies may find ways to benefit from blockchain technology without using crypto- especially if increased regulation stifles crypto’s growth.

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