Solana (CCC:SOL-USD) crypto is currently the 13th largest cryptocurrency with a $10.9 billion market capitalization. This puts it just behind Litecoin (CCC:LTC-USD) in the listings of the largest cryptos, according to CoinMarketCap. Moreover, I reckon its prospects are quite bright, despite the crypto’s recent drop.
The SOL token fell from a peak close of $55.91 as of May 17. Today, it opened at $39.03, or down about 30%. However, since the end of December last year — when it was trading at just $1.84 — Solana crypto has risen 20.2 times, or 2020% year-to-date (YTD). That makes it one of the best performing cryptocurrencies on a YTD basis.
But that’s not the only reason to like Solana. On top of this, there seems to be every reason to believe that once cryptos recover, SOL tokens will move considerably higher as well. This crypto should be able to rebound to its former heights. Here’s why.
Solana’s Standout Features
Solana is a blockchain technology focused on the decentralized app (or “Dapp”) market on a super-fast basis. Basically, it wants to do incredibly fast transactions at high throughput.
For example, Solana claims a maximum throughput of more than 50,000 transactions per second (TPS). By comparison, Bitcoin does about 4.6 TPS while Visa (NYSE:V) does about 1,700 TPS as of 2019. This scalability is something Solana is known for with its transactions.
This makes Solana highly tuned for price-related apps in the blockchain. For example, Solana can provide price feed updates every 400 milliseconds. In addition, it can handle 30,000 price updates per second (i.e., high throughput), making it uniquely suited for Dapps on the blockchain.
Solana is also unique because it uses a “third-generation” valuation system. Instead of proof of work (POW) like Bitcoin (CCC:BTC-USD) and proof-of-stake (POS) like Cardano (CCC:ADA-USD), it uses proof-of-history (POH). POH orders transactions in a chain of hashes without a date and time stamp like Bitcoin transactions. According to Binance Academy, “using a hashed version of the latest state of transactions greatly reduces the time of confirming a new block.”
As such, this is not a consensus validation system as opposed to other cryptos. This is the secret to how it speeds up the time spent confirming the order of transactions. Moreover, the Binance Academy article cited above also lists several other novel technical features which make Solana stand out. However, none are as important as SOL’s speed and POH validation system.
Where This Leaves Solana Crypto
The Solana Foundation sponsors the development of the Solana crypto. Its motto is “Build Crypto Apps That Scale” and the front page of its site shows that the average fee per transaction on its apps is just $0.00025 per transaction.
What’s more, Coindesk has a number of articles showing that large financial institutions are now using Solana in key projects. TechCrunch also has an article discussing the Solana founder, Anatoly Yakovenko, who used to work at Qualcomm (NASDAQ:QCOM). It discusses his “lightbulb moment,” when he figured out how to speed up the validation system. More importantly, the article says that there are now 47 Dapps presently using Solana as of May 2021.
This is important because, as the universe of Dapps using Solana grows (as well as its utility as a super-fast blockchain), the SOL token will gain significant value. I expect this will occur over the next year. As a result, look for SOL tokens to move back up to their previous highs sometime within a year or so.
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On the date of publication, Mark R. Hake held a long position in Bitcoin and Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.