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Why Is Solana Increasing in Popularity and Price?

The Solana blockchain network hosts the SOL crypto token in the same manner that the Ethereum blockchain links to the ether token. Recently, SOL gained a massive boost with a market capitalization of over $48 billion.

The SOL cryptocurrency has increased so much that it surpassed Dogecoin, formerly the most famous "Joke" cryptocurrency. It has become the seventh most significant cryptocurrency by market capitalization. How has Solana managed to break these standing records?

Solana Has a Promising “Decentralized Finance” Future

One of the critical factors driving Solana's increased price and popularity is its promising future in the realm of decentralized finance (DeFi). Solana has prioritized smart contracts, just like Ethereum did. Smart contracts run on the blockchain when certain conditions come to fulfillment without the assistance of any financial third parties or intermediaries.

Solana outperforms its close competitor, the ether, in terms of price and speed. While Ethereum has a speed of fewer than 10000 TPS, Solana boasts 50,000 TPS and does so with incredibly cheap transaction fees.

Solana Has a Huge Contribution to NFT

Another reason for SOL’s meteoric rise is its entry into non-fungible tokens (NFTs). In addition, last month saw the launch of the "Degenerate Ape Academy," which is an NFT on Solana's network.

NFTs have become so successful that they sold about 10,000 cartoon monkey images in the first ten minutes of its debut. SOL’s prices skyrocketed because customers required SOL tokens to purchase the cartoon pictures.

NFTs allows artists and content creators to make money from their arts. Artists can now sell their crafts directly to their customers instead of depending on auction houses and galleries. NFTs also allow artists to program royalties into them to receive a percentage for every time the owner sells the art.

The NFT market gained notoriety when Beeple sold his digital art at a Christie’s auction for $69.3 million. Advocates of NFTs certainly highlight SOL's success as a significant incentive to invest. Solana has a massively evolving ecosystem, supporting several projects that have reaped the benefits of the NFT craze.

Solana Has Successfully Started a Wormhole Project

When most people hear about wormholes, their minds may wander to sci-fi movies. However, for the Solana ecosystem, wormholes provide a convenient avenue to connect to other networks. At the moment, blockchains aren't particularly adept at collaborating with one another, which has been a stumbling block in their development.

You can picture this as having two wireless network devices that are unable to interact with each other. Experts believe several projects can now use the wormhole to transfer assets between Solana and Ethereum cheaply and swiftly. Subsequently, Solana aims at linking Terra (LUNA) with the Binance smart chain.

Investors Want Alternatives to Ethereum

Being the first programmable blockchain, Ethereum could host other cryptocurrencies and apps. Currently, several other cryptocurrencies have followed its footsteps. Although Ethereum continues to be helpful in most applications, the network is experiencing high fees partly due to congestion. Consequently, both investors and developers are on the lookout for new opportunities.

Since Solana is also a programmable blockchain with the potential to support even more applications, it is presently competing with Ethereum for first place.

Many experts and investors still refer to Solana as an Ethereum killer, but it is unlikely that Ethereum will lose its credibility in the next few years. If Solana keeps doing well, there’s an excellent chance that it’ll earn its place among the top guns.

Solana is Fast

With the capability to handle at least 50,000 TPS under $0.01 per transaction, Solana is now one of the fastest cryptos on the market. Solana is among the few cryptos that have a comparably low price with Visa’s payment method. The platform claims that it can process payments faster as technology advances, perhaps reaching 700,000 TPS.

In contrast, Ethereum now handles 15 to 45 TPS, but this will increase when developers complete the upgrade to Eth2.

While speed isn't everything, it has proven to be a roadblock for many developing cryptocurrencies. It's only a matter of time before we can tell if Solana is correct in claiming that it achieved its speed without compromising security or other factors. If this is the case, Solana may be capable of maintaining its place in the top ten cryptos for some time.

What Can We Expect From Solana in the Future?

Although Solana is a relatively newer blockchain than other popular ones like Ethereum, its native currency, SOL, has already risen to the top ten cryptocurrencies in terms of market capitalization. The Mainnet is still in the beta stage, indicating that the developers are actively striving to improve the network's reliability and features.

The network aims to solve some of the industry's most urgent problems, mainly speed, and scalability for global adoption. It aims to do this without compromising any of the intrinsic features of a solid layer-1 protocol.

The network seeks to address the scalability problem by implementing a more efficient consensus model, transaction processing mechanism, and revolutionary temporal architectures.

Over 250 projects are currently running on the Solana ecosystem, prompting more developers to choose to build on it. The blockchain offers two of the essential factors for decentralized apps – low gas costs and latency. Presently, the network hosts several excellent projects, partnering with Exodus, Chainlink, Serum, BSN, USDC, and Kin.

Ultimately, Solana aims to solve the blockchain trilemma, which holds that a decentralized system can only fulfill two of three fundamental properties: scalability, security, and decentralization. Solana says that its eight key innovations have addressed this trilemma.

According to Solana’s co-founder, Yakovenko, the next phase in the Solana project is onboarding a billion users. He noted that they built Solana from the ground up to allow this scale. Also, with the funding that Solana has received, Solana Labs can now invite more partners and generate more capital to build products and tools that'll enable them to achieve their goal.

Is SOL a Good Investment?

Solana has surpassed Ethereum in terms of transaction volume, a significant accomplishment for such a new cryptocurrency. Its enormous unrivaled transaction speed and bandwidth make it ideal for various applications, including creating exchanges and platforms.

Since Solana can boldly compete with Ethereum, it’s worth considering as a solid investment in 2021. According to market analysts, Solana's rise may continue due to its impending token burning. This action, similar to Ethereum's token burning, has the potential to drive SOL values further higher.

Presently, Ethereum has more blockchain infrastructure, including non-fungible tokens (NFTs), decentralized exchanges, and automated lending protocols. Therefore, it is unlikely that Solana can completely overtake Ethereum if the latter migrates to proof-of-stake before Solana builds out its infrastructure.

On the brighter side, Solana is planning to launch its smart contract shortly, putting it in direct rivalry with ADA in terms of usefulness.

Another reason why Solana is currently enjoying a significant rise is because investors exhibit "FOMO" or Fear of Missing Out. Investors who didn't buy Ethereum before its price went up are betting that Solana will do the same and jump on the bandwagon. Another reason to purchase or invest in Solana is the enthusiasm around NFTs and DeFi.

Kevin O'Leary, a Shark Tank investor, said DeFi applications would inevitably overtake financial intermediaries in the coming years. If his prediction is accurate, this may further boost all coins trading in the base currency, including SOL.

Conclusion

While Solana is still relatively new, it has delivered on its promises of speed and scalability. Its token (SOL) price has also fared well, attracting investors’ attention. Nonetheless, the network’s acceptance and use are still in their early stages.

We won't know if Solana's speed significantly impacts the crypto industry until we witness high traffic and additional use cases. A fast network is beneficial, but the advantages will only accrue when more people utilize it, and new use cases emerge.

It would be exciting if Solana were simply a modular app-building tool; it would also be impressive even if it were merely a scalable and efficient blockchain. However, if it merges these elements, it may create its in-house app-based economy. This creation will generate even more excitement.

We may have to observe the Solana network for a few years to see if it can keep up with the performance, but it sure has a promising future.