In August, Solana broke $80, an all-time high for its crypto SOL. At this time, SOL has a 15% profit in the daily chart and trades at $76,38. This jump marks serious 2021 growth for the crypto, and SOL may only continue to rise.
Solana is a blockchain platform launched in March 2020. SOL is the token of the Solana network. Solana is a very new altcoin, or crypto other than Bitcoin founded in 2009. Solana has made a name for itself because of its fast-growing ecosystem.
Engineer Anatoly Yakovenko founded Solana. To support the creation of smart contracts and decentralized applications, or dapps. Smart contracts are blockchain programs that run under agreed-upon conditions. They are crucial in running decentralized finance, or DeFi, apps, and NFTs, or non-fungible tokens.
Ethereum is the #2 crypto by market cap and leading smart contract blockchain. For this reason, many are drawing comparisons between the two. Some have even gone as far as calling Solana and new-gen blockchains like it an “Ethereum Killer.”
Some investors believe Solana will continue its bullish trend. This might pose a serious threat to Ethereum. DeFi Investor David Cheung has been bullish on Solana. Cheung published a report breaking down his high hopes for this cryptocurrency.
Cheung thinks that investments in Solana will pay off in the long term. Cheung expects that Solana will only continue to build on its market advantages. He predicts that Solana may again rally and quadruple its current value.
Cheung is not the only prominent investor to think this way. “Solana is the leading Ethereum competitor,” said Matt Hougan to CNBC Make It. Hougan is Bitwise Asset Management's chief investment officer. “I wouldn’t put all my chips on it, but I’m a big fan.”
The market is showing increasing support for Solana as well. Solana has several aspects of its ecosystem that support this. These benefits offer a credible challenge to leading crypto, Ethereum.
Both Ethereum and Solana are top ten cryptos. Both support DeFi and smart contracts. But what are the key differences to grasp between the two?
These are the three main distinguishing factors between Solana and Ethereum:
These elements boil down to a question of scalability. Which crypto can provide customers with the fastest, cheapest, and most secure services? Differences like Solana’s fast processing speed might make the difference. Timing is also key. Ethereum is gearing up for an Ethereum 2.0 update to compensate for its present weaknesses.
Solana uses a hybrid consensus algorithm which distinguishes it from other blockchains. It combines a Proof of Stake (PoS) blockchain with a new Proof of History (PoH) technology. This hybrid allows the network to support up to 50,000 transactions every second. Solana allegedly has a theoretical capacity of over 700,000 transactions per second.
Ethereum currently operates on a Proof of Work (PoW) model. In this model, miners compete to solve puzzles to confirm transactions. But Ethereum seeks to shift to a PoS model in 2022 with the launch of its new Ethereum 2.0.
Slow transaction processing speed limits Ethereum’s scalability. Solana’s lightning-fast processing speed gives it a real edge. Due to this processing speed, Solana has almost no transaction fees. In comparison, a frequent complaint about Ethereum is its high transaction fees. They hit a record $70 in 2021.
Network reliability is a crucial part of any cryptocurrency. One advantage of Ethereum is its first-mover advantage. This means that Ethereum has an edge by being one of the first in the cryptocurrency space. It has name recognition and an established user base and ecosystem.
Sam Trabucco, co-CEO of cryptocurrency trading firm Alameda Research describes this advantage as,
“Ethereum has more users, more applications that already exist, and more stability.”
Ethereum supporters also say Solana has a long way to go before it offers Ethereum's level of quality. Solana has had outages. In September, Solana suffered a 17-hour transaction outage. Solana developers later blamed “resource exhaustion,” according to a report by Bloomberg.
While Solana has risen to great highs in a short amount of time, as with any crypto, the market is volatile. This means that investments come with risks. Solana investors should consider that this bullish trend can change at any time. Once Ethereum 2.0 launches in 2022, Solana will have to work harder to keep up its momentum.
A bright spot for fans of Solana is its promising growth in the DeFi and Non-fungible token (NFT) sectors. Many users see Ethereum as an ideal blockchain on which to launch NFT projects. But more users are seeking alternative blockchains for broader communities. Solana is doing a great job at attracting these NFT creators, fans, and gamers into its ecosystem. Solana launched a $5 million fund in 2021 to grow in this market. Degenerate Ape Academy and other new collections are bringing in hundreds of millions of dollars in trades.
Solana is a cryptocurrency on the rise with its adaptability and remarkable processing speed. It has a promising future to watch in 2022 and beyond.