Exploring Crypto World #5 - Solana
At the time of writing, The Solana token (SOL) has skyrocketed in value, recording a jump in value by a factor of 66 in 2021 so far. So what is Solana? What's behind its price rise?
At the time of writing, The Solana token (SOL) has skyrocketed in value, recording a jump in value by a factor of 66 in 2021 so far. So what is Solana? What's behind its price rise? Is it too late to get in? Find out as we explore the fifth edition to Crypto World.
What is Solana?
If you had to compare Solana to one of the more established blockchain projects, Ethereum would definitely be a good comparison of the principle behind the project, although the methods do vary. Solana aims to support a vast array of decentralised applications and marketplaces. At the core of these functions, NFTs and decentralised finance have played the most important roles in Solana's rise to prominence as it has reached a market capitalisation of around $45bn USD. To put that in perspective, it is about the same size as Spotify. So if you're looking to invest in cryptocurrencies, Solana is definitely something you should be paying attention to.
Competitive Advantage
People
The Solana project has attracted a wealth of experience, bringing in people who live on the cutting edge of human civilisation. The founder Anatoly Yakovenko, previously had high level experience at established tech giants Qualcomm and Dropbox. Additionally, the core team at Solana is backed by experiences at Apple, Qualcomm, Intel, Google, Microsoft, Twitter, and Dropbox. These are all companies that have had major successes in establishing themselves as dynasties, which is a refreshing change from some of the other teams behind cryptocurrency giants who have exclusively worked in the blockchain industry. The Solana team can provide something different, and have proven that they can build out a successful blockchain network, exemplifying their adaptability using a principle based approach to technology development.
Innovations
Proof of History (PoH) - This has helped to create more efficiency and higher throughput rate within the Solana network. So by having historical records of events or transactions, it allows the system to more easily track transactions and keep track of the ordering of the events.
Tower BFT - The Tower BFT uses the PoH as its cryptographic clock which allows consensus to be reached without excessive messaging costs and transaction bandwidth.
Turbine - a block propagation device that makes it easier to transmit data to the blockchain users. Turbine is able to do this by breaking the data into smaller packets. This allows Solana to address issues of bandwidth and also increase transaction speed.
Gulf Stream - Mempool-less transaction forwarding system. This allows the validators to execute the transactions ahead of time, reducing confirmation time, faster leader switching, and reduced memory pressure on validators from unconfirmed transaction pools.
Price Catalysts
Solana is one of Ethereum's biggest competitors in terms of the NFT marketplace. While there isn't much difference in terms of quality, the general macro sentiment on NFTs has skyrocketed since the middle of 2021 which has naturally brought the value of Solana with it. This has been especially advantageous for Solana, as Ethereum continues to run into scaling issues for their marketplace, allowing Solana to benefit to a much greater extent to the rise of NFTs.
On the decentralised finance side of things, Solana has seen growth that can only be described as explosive, with the value of DeFi projects tripling in August alone, with the innovations outlined above resulting in higher speed, and lower fees for transactions compared to Ethereum. Hence, it is very easy to see why the impressive results we have seen from Solana, in a period of upheaval for the cryptocurrency marketplace, should be treated as a statement of intent rather than a false dawn as it climbs the leader boards.
The Moon's the limit?
In the macro landscape, the most accurate level of innovation to compare to in my opinion is the internet. Right now, the user base for blockchain is less than the user base of the internet back in 1995. If you want to operate under the expectation that blockchain will be as big as the internet is today (which isn't as insane as it sounds) then you're talking about an insane growth capacity that Solana can take advantage of by simply existing.
From a bottom-up perspective, Solana has a lot going for it in terms of an effective team, and innovative solutions to the challenges of blockchain. It's currently value at about 9% of Ethereum's valuation at the time of writing. The similar scope and competitive advantage could mean Solana could one day overtake them. At the very least, it could bridge a fair portion of that gap, even if Ethereum continues to grow.
Takeaways
Solana operates in the same space as Ethereum
The developers of the network have engineered numerous competitive advantages that has allowed Solana to take advantage of NFT popularity and DeFi
There's plenty of room for it to go
Coming Soon...
The Future of Central Banking
The Currency Front