Buy Solana for the Speculation, Not for Its (Impressive) Utility

If market valuations of cryptocurrencies came down to efficiency and potential, you’d be hard pressed not to put money down in Solana (CCC:SOL-USD). More than just a fast-rising digital asset, the underlying blockchain network could be a gamechanger for developers hoping to spark greater utility from innovative platforms.

Macro shot of a physical coin from the cryptocurrency Solana (SOL-USD)
Source: Rcc_Btn / Shutterstock.com

According to its website, Solana is the “fastest blockchain in the world and the fastest growing ecosystem in crypto, with thousands of projects spanning DeFi, NFTs, Web3 and more.” One of the features that makes the SOL network so great is that it encompasses the best attributes of prior blockchain-based inventions.

For instance, Solana ensures “composability between ecosystem projects” even as the network scales. This is accomplished through the maintenance of a single global state, thus preventing problems associated with fragmentation. In other words, Solana isn’t a complete free for all; rather, the network provides sensible guidelines for greater efficiency and utility.

Better yet, Solana combines its scalability and blistering speed with low transaction costs. Unfortunately, onerous transactions costs has recently become the bane of Ethereum (CCC:ETH-USD), at least from a developer’s perspective. It’s no wonder that so many have switched over to competing networks, giving rise to the concept of Solana being a possible Ethereum killer.

To be sure, SOL’s success isn’t just limited to functionality. On the profitability angle, Solana wins out against many if not most other cryptos. Back in 2020, SOL-USD was trading in literal penny stock territory. Though the digital asset has come down in price significantly, it’s still trading at over $100. That’s a massive lift if you had gotten in early.

Naturally, casual observers who missed the first boat are eager to get on the next one. However, caution needs to be the overriding sentiment.

Solana and the Utility Conundrum

As its website mentions, “Solana is a decentralized blockchain built to enable scalable, user-friendly apps for the world.” It’s a similar mission statement for other utilitarian networks. Essentially, decentralized protocols facilitate a better way of conducting business.

Implicit in this understanding, though, is the concept of financial access and democratization. To be clear, I’m not sure where the executives behind the Solana project stand regarding their broader social goals. But blockchain advocates have long stated that the greater efficiencies of decentralized protocols allow for developing communities to integrate themselves to a wider financial ecosystem.

Under the traditional fiat currency system, microtransactions are difficult to conduct because the costs associated with such transactions may exceed the value of the currencies being transacted. Thus, large institutions don’t even bother with developing communities, leaving their economies languishing. Theoretically, a high-speed, low-cost network like Solana could address the indirect discrimination that the harsh realities of microtransactions impose.

Such goals are absolutely noble. However, decentralization — no matter how quick, how scalable, how efficient — might not move the needle.

Recently, I came across a personal testimony of William Perry, a former convicted felon who served time for a drug-related charge. Today, he helps people in similar circumstances regain their sense of dignity and purpose.

Ironically, though, despite Perry turning his life around, he encounters rejection after rejection from companies that are concerned about his record, even those organizations that talk about “changing lives.”

It’s a similar story with cryptos. While many blockchain advocates will point to networks like Solana and wax poetically about access and democratization, who ends up being the ultimate beneficiaries?

Why, the folks that already have all the access and democratization in the world of course! Blockchains are merely tools.

The Greatest Irony

When discussing his job search struggles, Perry dropped a harsh truth bomb:

The paradox is, that which makes me remarkable for this job is the exact thing that also disqualifies me. I have been homeless, I have been addicted. Am I a role model for others who need the same help that someone gave to me? Or am I still an outcast, wearing this mark for all time?

It’s the same concept with decentralization, whether you’re talking Solana, Ethereum or any one of the 17,000-plus cryptos out there. Decentralization by nature is amoral. Therefore, he who has the nodes wins. It’s that simple; there’s no centralized authority to distribute wealth to prevent gross inequities.

The very innovation that facilitates the possibility of democratization is also the one that routinely crushes it. Thus, it’s no surprise that the wealth gap in crazy crypto land is similar or perhaps worse than the wealth gap caused by good ole fiat currencies.

If you’re going to buy Solana, do it because you believe other people will buy it. Regarding the functionality argument, the broader outcome is really no different than if cryptos didn’t exist at all.

On the date of publication, Josh Enomoto held a LONG position in ETH. 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.


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