Solana is a cryptocurrency that was launched in April 2020, i.e. relatively recently. Its popularity has skyrocketed recently as its price has grown exponentially in recent months.
In January its value was set at $1’5, and at the time of writing this article it is priced at $178. However, it reached a market value of $208 in early September.
These figures make it the sixth largest coin in the world with a market capitalization of 61 billion.
In this article we are going to find out everything we need to know about Solana SOL, so we can discover whether this remarkable price rise is justified.
What is Solana (SOL)?
Solana is a blockchain platform for decentralized applications. The project is open source maintained by the Geneva-based Solana Foundation and built by developers at San Francisco-based Solana Labs.
Solana is direct competition to the famous Ethereum blockchain network, which is currently the largest decentralized application platform. However, Solana promises faster operation and lower transaction fees.
It is a proof-of-stake (PoS) based blockchain, which makes it a greener network than PoW (proof-of-work) blockchains like Bitcoin. Its native cryptocurrency is also called Solana and has the token SOL.
What’s so great about PoS?
In a decentralized blockchain system, many computers known as nodes validate transactions. To protect this network, a mathematical riddle is introduced within the algorithm that makes an attack on the network more difficult. This would be the definition of PoW or proof of work, an effective form of protection but one that ends up consuming a lot of energy.
Another way to protect the network nodes is to make the validators have to bet something, and SOL tokens are used for this purpose. This would be the PoS or proof-of-stake system, and although Solana network validators also consume energy to operate, their energy usage is much lower than that of miners of, for example, Bitcoin.
Both PoW and PoS mechanisms reward validators or miners for their efforts; Bitcoin miners get BTC, and in Solana, validators are rewarded with SOL. It is worth noting that, in Solana, end users do not have to run a validation node to earn rewards; they can delegate their participation to a validator who will pass on the rewards for a fee.
History of Solana
The Solana (SOL) platform was founded in 2017 by Anatoly Yakovenjo. Yakovenko worked at Qualcomm before founding Solana. He has extensive experience with understanding algorithms after his previous experience at Dropboc as a software engineer. Together with Eric Williams and Solana’s CTO. Greg Fitzgerald they created a new process to deal with the traditional performance issues that existed on the Bitcoin and Ethereum blockchains.
They hoped to create a distributed, trustless protocol that would allow for greater scalability. Today, the team is backed by the experiences of the world’s leading organizations, including Apple, Qualcomm, Intel, Google, Microsoft, Twitter, Dropbox and more. Solana’s impact also attracted the attention of many investors such as Multicoin Capital, Foundation Capital, SLOW Capital, CMCC Global, Abstract Ventures and more.
Why is Solana better than other cryptocurrencies and blockchains?
All of the above sounds a lot like Ethereum and, in fact, Solana is more easily described as an advanced competitor to Ethereum. There are many more applications in Ethereum – why change?
Ethereum has long been plagued by high per-transition fees that sometimes skyrocket to hundreds or even thousands of dollars, especially at times of high network congestion. Solana has a higher theoretical throughput, meaning it can handle more transactions per second than Ethereum, so fees are currently very low.
In practice, once you have a wallet that can hold Solana-based tokens (SOL, such as Phantom or Sollet, you can interact with the many applications it holds.
You can exchange one token for another on any Exchange such as Raydium or Binance, or you can buy an NFT on the Solanart marketplace.
Why is Solana (SOL) rising?
Solana’s price rise has been astounding. Someone who participated in Solana’s ICO (initial coin offering, a way to fund a project by selling tokens) was able to buy SOL for $0.22. The price went up to 208, which is a 95,000% increase.
To be fair, Ethereum’s other promising competitors, including, Cardano, Polkado, Dfinity, Terra, Polygon and Avalanche, have also risen sharply in price during the year. But Solana’s rise has been special.
One of the reasons for the growth is the fact that Solana is backed by popular coin exchange FTX, which has launched several Solana-based projects. Alameda Research, the same firm behind FTX, is one of the largest investors in Solana, along with Andressen Horowitz and Polychain.
Another reason is transaction fees, which are lower than most competitors.
Then there is TVL (total value locked in), a metric that counts how much value has been locked in projects in the Solana ecosystem. According to DefiLlama, a website that tracks decentralized financial projects, Solana is currently the third largest network in terms of TVL, with a total of 7’9 billion locked in projects on its networks.
Will Solana’s rise continue?
Solana is just one competitor in a world of decentralized application platforms, each with its strengths and weaknesses. It shows great promise, has a thriving app ecosystem and the continued support of FTX and some of the largest venture capitalists in the space. It has a long way to go to catch up with Ethereum, but is well positioned to get a decent share of the decentralized app market. Anyone interested in decentralized apps and the Blockchain space should at least dip their toes in and give Solana a try.
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