Solana (CCC:SOL-USD) has been garnering a lot of attention from investors and the crypto community of late. SOL-USD has gained a whopping 546% in the past three months alone. With its high throughput and low costs compared to Ethereum (CCC:ETH-USD), industry experts believe Solana could pose a major threat to Ethereum in its dominance in decentralized finance (DeFi) space. Moreover, despite the substantial run-up of late, SOL-USD still has more gains ahead.
Solana has a simple unique selling preposition (USP) — it can perform transactions much quicker and more cost-effectively than other layer 1 blockchains such as Ethereum.
Additionally, it can drive massive adoption to various parts of the crypto-economy with its ease of use. Furthermore, it has the backing of some of the bigwigs in the investing world in Andreessen Horowitz and billionaire Sam Bankman-Fried. Hence, Solana has an incredible growth runway ahead and is worth investing in for the long haul.
Solana’s Bull Case
Solana’s goal is to maximize security and scalability. If we take its incredibly low transaction fees of $0.00025 per transaction, the network could potentially generate 65,000 transactions per second (TPS) at full capacity. Moreover, according to its white paper, its developers believe it could facilitate 710,000 transactions per second (TPS). Though it recently had a network failure after reaching 400,000 TPS, it’s clear that it can easily handle an impressive 100,000 TPS.
Security is another element that sets Solana apart from its competition. A lot of it is due to the high barriers to entry in becoming a validating node for the crypto. There are roughly a thousand Solana validators in the world due to its costly and complex hardware requirements.
Furthermore, its application in the DeFi realm is growing fast. The reported funds locked up in Solana were at $1.8 billion in August. Additionally, the NFT (non-fungible token) markets are also popping on Solana and could threaten Ethereum’s clear dominance in the sector.
Moreover, Solana’s low cost and impressive speeds make gaming much more practical on the platform than on Ethereum. The popular Star Atlas game was recently launched on Solana’s platform, enabling players to earn while playing.
Risks
Solana’s technology has come a long way, but it has received a lot of flak for its semi-centralized platform. The Solana Foundation controls all its development. Moreover, the cost of being a validator is extremely high, which limits participation in the validation process. Additionally, the risk of centralization is that the transactions on the network may not be indisputable. For instance, Ethereum had to roll back several transactions during the Dao hack.
Solana was recently the target of a denial-of-service attack (DoS). A DoS attack is where a whole network gets knocked out and is made inaccessible to its users. It does not, however, result in a loss of assets or data.
Resource exhaustion was deemed the reason behind the attack. The cynics started criticizing Solana’s centralized nature, which it relies on for speed. For over three hours, the network was down and didn’t accept any transactions.
Final Word On SOL-USD
SOL-USD has been one of the hottest digital assets, having posted dumfounding returns in the past few months. Solana boasts a high throughput and low costs compared to other blockchain protocols and is quickly gaining traction across various sectors. The platform focuses on optimizing security and scalability for its users and increasing its adoption across various parts of the crypto-economy. If it can become a more decentralized protocol, it could limit the likelihood of future outages and cyber-attacks. Nevertheless, SOL-USD is a buy based on its tremendous outlook and multiple use-cases.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
