The top cryptocurrencies by market capitalization keep changing over time as the industry matures. Solana (SOL) has seen its value skyrocket so far
The top cryptocurrencies by market capitalization keep changing over time as the industry matures. Solana (SOL) has seen its value skyrocket so far this year and has been consistently processing over 2,500 transactions per second.
The cryptocurrency’s price, according to TradingView data, is up nearly 13,000% year-to-date as the year started with SOL trading slightly below $2. Solana is now changing hands-on exchanges for around $240.
Solana is a blockchain platform that aims to achieve high transaction speeds at a low cost without sacrificing decentralization. To do so, it relies on a number of unique features, including a “proof-of-history” mechanism. This allows Solana to process an estimated 50,000 transactions per second, compared to Bitcoin’s seven and Ethereum’s 15.
As the Solana network supports smart contracts, decentralized finance (DeFi) applications have found a home on it. Its ecosystem now has nearly $15 billion worth of crypto assets locked on it, according to DeFiLlama data.
Speaking to Cointelegraph, Kraken Intelligence manager Pete Humiston noted that almost all crypto assets have benefitted from a year-long bull run, although Solana has seen “particularly strong price appreciation due to its Web 3.0 experience.”
Humiston added that transactions on Solana are “instant, cost a fraction of a penny and the ecosystem is easy to navigate thanks to user-friendly wallets and applications” contributing to its adoption.
Solana’s adoption may be the result of retail investor demand that was priced out of Ethereum, according to Mindaugas Butkus, chief technology officer of Solana-based decentralized exchange Solanax. He told Cointelegraph:
“Growing demand for DeFi applications and NFTs on Ethereum led to exploding gas fees, which made it expensive to use ETH. Transacting on Solana is inexpensive and transactions are processed in no time, making it an attractive alternative for retail investors.”
Butkus added that Solana’s base-level protocols attracted users for the same reason Ethereum’s DeFi space initially did: flourishing innovation leading to a booming ecosystem with a good user experience.
Is Solana a threat to Ethereum?
As the price of Solana surged, many speculators suggested that SOL will one day overtake Ether (ETH) to become the second-largest cryptocurrency by market capitalization. Solana’s focus on maintaining its decentralization while offering near-instant transactions at a low cost has been a way to attract users, but there’s more to Ethereum than gas fees.
Speaking to Cointelegraph, Adrian Kolody, founder of Domination Finance — a non-custodial exchange focusing on dominance pairs — said he believes there are “too many users vested in Ethereum” for it to be surpassed by Solana.
To Kolody, Ethereum is “a truly decentralized network whereas Solana falls more into the SpeedFi category.” To him, there are idealists that refuse to interact with any ecosystem that isn’t that of Ethereum:
“Ethereum would have to totally bottle their promises for Ethereum 2.0 over the coming years for Solana to overtake it, and even if that happens, it is still very unlikely.”
To Kraken Intelligence’s Humiston, it’s in the “realms of possibility that Solana could trade inline with Ethereum this cycle if it maintains momentum and grows its developer and user community.”
Humiston added that Ethereum has a “number of tailwinds of its own” that could justify its price moving up further this cycle. To the analyst, this potential price appreciation is “why diversification among the largest smart contract platforms” is worth considering at this point.
Markus Bopp, chief technology officer of no-code nonfungible token (NFT) platform Unifty, told Cointelegraph that he believes Solana has “great potential technically,” and as it matures and developers organically jump onto its network it “could be a good #3.”
Bopp added that “this will take years moving forward,” and right now it’s “a lot easier as a developer to jump on EVMs due to much lower barriers to entry,” concluding:
“Having said that, Ethereum just can’t compete with the speed of transactions on Solana which developers may increasingly look at.”
Jack McDonald, CEO of digital asset custodian Standard Custody & Trust Company, told Cointelegraph that Ethereum will “always have a prominent place in terms of market cap” thanks to its first-mover advantage and “significant network effects.”
McDonald, whose company brought Solana staking to institutions earlier this month, added that Ethereum needs to get its transition to a proof-of-stake consensus mechanism right and “do it smoothly and in a timely manner, as that will fix their gas fee issue.”
Solana’s 17-hour outage
On Sept. 14, the Solana network went offline for roughly 17 hours after enduring a denial-of-service disruption. At the time, Twitter account Solana Status explained a large increase in transaction load to 400,000…
cointelegraph.com