The cryptocurrency space has emerged as an alternative asset class for investors on the back of the widespread adoption of Bitcoin, the massive surge in institutional investment, and market-thumping gains generated by multiple digital assets.
The global cryptocurrency segment touched a market cap of US$3 trillion this week, and there are more than 12,000 cryptocurrencies available to invest in right now. But one top cryptocurrency that should be part of your shopping list is Solana.
Launched in 2019, the price of Solana has appreciated by a staggering 31,000% in just over 18 months. So, a $500 investment in Solana in April 2020 would be worth close to $160,000 today.
With a market cap of US$73.3 billion, Solana is currently the sixth-largest cryptocurrency in the world. Despite its mouth-watering gains in the past, here’s why I think Solana is a top cryptocurrency bet right now.
What is Solana?
Solana is a public blockchain network that aims to facilitate the development of dApps, or decentralized applications. Basically, dApps are a set of complex programs that are executed using smart contracts and without any intermediary. These applications support several use cases that range from decentralized finance to non-fungible tokens.
Right now, the Solana blockchain is home to 400 dApp projects, and this number is all set to move higher in the future. Further, the total value of Solana’s dApp ecosystem has surpassed US$100 billion.
Solana needs to keep onboarding dApp projects on its platform, as these projects use its native token called SOL to execute transactions on the blockchain network.
However, Solana is not the only network that is optimized to run dApps on its blockchain. The digital asset, in fact, competes with Ethereum in this space. Ethereum is the second-largest cryptocurrency in the world with a market cap of US$560 billion. It has enjoyed a first-mover advantage, as Ethereum already has 3,000 projects running on its network. But Solana is well positioned to gain traction here, as it enjoys certain competitive advantages.
The bull case for SOL token
Ethereum currently uses a PoW, or proof-of-work, mechanism. Here, users who mine the Ether token have to do so by validating transactions. This process is expensive due to the high gas fees associated with it. Comparatively, Solana uses a PoS, or proof-of-stake, mechanism, where miners validate transactions in a process known as staking, which is cheaper and environment friendly.
Solana claims to be the fastest blockchain network in the world and can handle 50,000 transactions each second. Comparatively, the Ethereum blockchain can process between 10 and 15 transactions each second. So, Solana is a top blockchain network for developers looking for scalability as well as for investors due to its robust utility.
The Foolish takeaway
Most of the cryptocurrencies including meme tokens such as Dogecoin and Shiba Inu lack fundamental advantages, making them a high-risk bet right now. The average equity investor might also find it difficult to value cryptocurrencies, as these assets don’t generate profits or cash flows. However, Solana remains a solid option for long-term investors given its transaction capabilities and scalability, which will positively impact the blockchain’s ability to attract dApp projects.