Amid a sea of blockchain assets that now numbers over 14,000, it’s difficult to pick out which cryptocurrencies will be winners and which ones will be relegated to the digital trash heap. However, Solana (CCC:SOL-USD) has put on quite an impressive performance, boding well for its future trajectory.
Seemingly out of nowhere, Solana is now the fifth-largest cryptocurrency by market capitalization at $67.7 billion as of this writing. In terms of market valuation, this puts SOL on par with FedEx (NYSE:FDX), which has a market cap of $67.3 billion.
Of course, many people will find the comparison absurd. FedEx is an extraordinarily valuable business, particularly as e-commerce accounts for a greater and greater share of total retail transactions. It contributes to the economy, hiring people to manage and operate its vast fleet and keeping goods flowing around the world. It pays dividends to its shareholders.
Solana, on the other hand, is basically a digital commodity. It’s worth something because people have assigned it an arbitrary value. And that value can change rapidly, making big moves in either direction.
To be fair, one could make the argument that Solana has at least some direct fundamental value. As its whitepaper explains, there is a lack of a trusted mechanism for time in the blockchain arena. Such a vulnerability opens the door for manipulation and other threats.
Through Solana’s proof-of-history protocol, time is yet another variable that’s subject to a decentralized distributed vetting process. Long story short, Solana’s underlying technology could make blockchain networks much more secure.
Still, the big dilemma behind this otherwise incredible utility is that it depends on other people to “submit” themselves to a decentralized ecosystem, which has always been a problem for cryptos.
Solana Can’t Force You to Comply
While I generally support the case for cryptocurrencies, I also get bored touting the same ideas. In my opinion, life is much richer stepping outside the echo chamber. Fortunately, I came across Jared A. Brock’s insightful article about Bitcoin (CCC:BTC-USD) and it got me thinking about the entire blockchain complex.
In short, Brock states that cryptocurrencies have become Ponzi schemes in the way they are currently treated by the masses. Not tied to actual enterprises, the only way for one to make money off Bitcoin (or Solana or anything else) is to find someone (a victim) to offload your holdings to.
Now, Brock is hopeful that Bitcoin — or a similar alternative — becomes the currency of the internet due to its frictionless, trustless model. But in their current form, he says cryptos are basically fraudulent investments.
While I’m not ready to go quite that far, I’ll say this much: Solana, as with every other crypto, requires our participation and submission to its rules and protocols.
Strictly in that sense, SOL is no different than a sovereign fiat currency. For instance, if a country attempts to trade commodities using currencies other than the U.S. dollar, that nation could face repercussions. At a minimum, it may incur sanctions. At worst, it could find itself on the wrong end of the American military-industrial complex.
Heck, you can even consider lower-level hypotheticals. According to the Bureau of Engraving and Printing, the penalty for manufacturing fake dollars is possible imprisonment for up to 15 years. To use Brock’s language, fiat currencies are violence-based currencies. If you don’t comply, you will suffer.
But there’s no imposed suffering, per see, with Solana or any other crypto. That’s the beauty of them, but also the reason why they can’t stick.
The Catalyst for Centralization
While Americans take the greenback being the world’s reserve currency for granted, citizens from other parts of the world don’t exactly have the warm fuzzies about it. Without getting too bogged down, the common criticism is that the dollar imposes an unfair tax on the rest of the world.
From a geopolitical standpoint, then, I can appreciate why the concept of decentralized cryptocurrencies has spread like wildfire. For many people, it’s a way to flip the bird to American hegemony.
The flip side to this narrative is that decentralized currencies have no teeth. Put another way, if you’re Solana rich, nobody will care if you get kidnapped. But if you’re dollar rich, the U.S. government will most certainly care. You would be important to keep the system going.
Ultimately, I think most people appreciate the security of centralized currencies more so than decentralized ones. It’s like the crushing weight of U.S. citizenship. Sure, the IRS will hound you for all eternity. But when stuff goes down, the violence of the dollar works in your favor. Probably only a minority of investors will disagree with this tradeoff, thus limiting the true potential of the broader crypto complex.
On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.