Is Solana (SOL) Too Cheap To Ignore?

Last Updated April 16th 2022

5 Min Read

Go On And Find Out More About Solana, One Of The Hottest Crypto Platforms In The Market.

Back in 2009, when Bitcoin was created in response to the economic calamities inflicted by the financial crisis, the world had access to a novel asset class, not just a new digital currency. A little over a decade later, there are thousands of cryptocurrencies with varying specialties and differing degrees of utility, adoption, and promise.

While institutional interest in assets like Bitcoin and Ether surged, several other altcoins have performed notably well. Solana (SOL) is one such coin. The coin has appreciated more than 15,000% on a year-to-date basis. SOL is currently trading at an affordable price of $101, begging the question: is Solana (SOL) too cheap to ignore?

Solana: A Crypto Project On The Rise

Solana is a fourth-generation blockchain and cryptocurrency that leverages an open infrastructure to provide greater scalability. In addition, the network introduces various new and unique technologies to provide users with unmatched transaction speeds and enterprise-level security. Consequently, the network has seen considerable growth since its introduction in 2017.

There are multiple pain points in the market that Solana attempts to rectify. First, the network’s architecture was structured to be expandable and resilient to censorship. This trustless and distributed blockchain tackles concerns of transaction settlement speed and bandwidth via this design.

The crypto market faces various scalability issues, and early blockchains' reliance on the Proof-of-Work consensus mechanism has led to congestion issues. Top coins such as Bitcoin and Ethereum increase transaction fees as the congestion rise.

Solana avoids these issues by introducing systems that allow the network’s transaction throughput to scale proportionally to its bandwidth. For example, Bitcoin can handle seven transactions per second (TPS), and Ethereum can process around twelve. According to developers, Solana is capable of 50,000 TPS. In this way, Solana improves upon many drawbacks of early blockchain networks.

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Investing In Solana: Pros

Solana is a Delegated-Proof-of-Stake (DPoS) network. Both DPoS and PoS mechanisms utilize Validators to process transactions. Validators are chosen based on their overall holdings in the network. Therefore, the more SOL you hold, the higher the chances of you getting selected as a validator. This strategy ensures that only those vested in the network gain this position.

There are currently over 400 projects built on the Solana network, including various decentralized finance applications. Notably, FTX and Alameda Research developed their decentralized cryptocurrency exchange called Serum on Solana. The platform hosts the popular USDC stablecoin. Additionally, Audius (AUDIO) uses the Solana network, which may also be a factor behind SOL's earlier price rise.

Solana is also a well-known player in the non-fungible token (NFT) market. Degenerate Apes was Solana's first big foray into NFTs. This collection of costumed apes features various traits (from glasses to sandwiches) with several degrees of rarity. The collection of 10,000 apes sold out in less than 10 minutes.

Earlier this year, the Solana team announced a rebranding of its NFT analysis website, from Solanalysis to Hyperspace. This rebranding came alongside an announcement that this site has raised $4.5 million in seed financing and growth capital the Solana team hopes will drive growth with this network's NFT ecosystem.

Those buying NFTs on other blockchains such as Ethereum have noted congestion issues as well as much higher transaction fees. Notably, Solana's low fee, high-speed network has proven to be beneficial for NFT investors looking to catch a popular piece of digital artwork. Those bullish on the growth of the NFT space certainly have reason to consider investing in Solana in this context.

Experts have pointed out a number of key developments Solana investors remain bullish on. Important updates on the network are the introduction of Solana Pay earlier this year and the Riptide Hackathon, where the team brings more developers and, as a result, more projects to the Solana ecosystem.

Read Also: Solana (SOL) Price Prediction

Investing In Solana: Cons

Because Solana has a smaller community of users and a shorter track record than Ethereum, investors may not be able to rely as much on the network's stability. In September, Solana's reputation took a hit when the Solana Foundation tweeted that the Solana blockchain was experiencing "intermittent instability."

Solana Labs CEO Anatoly Yakovenko said that the network had experienced similar stability issues in the previous week too. The company blamed "resource exhaustion" for the problems and said its engineers were resolving the problems. Reliability is key for cryptocurrency investors, many of whom were not happy with the relatively vague explanation.

Secondly, Ethereum's first-mover advantage means that the network has far more projects than Solana. However, it remains to be seen just how valuable Ethereum's first-mover advantage is and whether or not Solana can build up its network of programs enough to truly compete with Ethereum.

The Verdict

Cryptocurrencies are trending worldwide and for a good reason. Digital assets are fast transforming the way we look at money and storing value. Diversification of assets is always the smart thing to do when it comes to investing. Buying Solana now while its cheap could help you diversify your portfolio with an emerging crypto token. If you envision a big future for smart contracts and blockchain technology, it would be worthwhile to invest in Solana.

If you are buying SOL because you are hoping for another 100% jump next month, you might want to think again. Solana may be a good long-term choice, but it is 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 it stacks up against other investment opportunities. Investing in Solana now could make you rich in the long run if it continues its growth trajectory.