There are, as of this writing, approximately 19,200 cryptocurrencies investors can choose from. The two most popular are Bitcoin and Ethereum, capturing 41.7% and 19.3% of the market respectively. But another cryptocurrency, Solana, is attracting a lot of attention. After launching in March 2020, Solana has grown to become the sixth largest crypto by market cap.
What Is Solana and Why Is It So Popular?
Solana is an open source blockchain platform designed to host decentralized scalable applications. While Ethereum is the most used blockchain in the world, Solana is the fastest blockchain in the world—it has faster transaction times and lower costs than Ethereum.
It’s also home to the fastest growing ecosystem in crypto, with thousands of projects spanning decentralized finance (DeFi), non-fungible tokens (NFTs), decentralized network (Web 3.0), and more.
Solana was first proposed in a white paper by computer engineer Anatoly Yakovenko in November of 2017. In it, he described Proof of History (PoH), a technique that verifies order and the passage of time between events.
Most blockchains do not rely on a standardized time. Instead, each node in their network relies on its own local clock. As a result, most blockchains do not have a trusted source of time, which means when a message timestamp is used to accept or reject a message, there is no guarantee every other participant in the network will make the exact same choice.
Solana solves this issue though its unique PoH algorithm and blazing fast synchronization engine. A version of proof-of-stake, the number of transactions per second (tps) on Solana’s PoH network is limited only by the network bandwidth.
How Does Solana Compare to Ethereum and Bitcoin?
Blockchain systems without synchronized clocks, like Bitcoin and Ethereum, have difficulty scaling beyond 15 transactions per second worldwide. That’s incredibly slow for a decentralized payment application that is continuously “on-chain.”
Solana’s PoH algorithm, meanwhile, can process a block every 400 milliseconds and an industry-leading 65,000 transactions per second. As hardware gets faster, so too will the network. This number far outpaces Ethereum and Visa. But it could do many more. Theoretically, the Solana network can process over 710,000 tps without the need of any scaling solutions.
Solana’s fees are miniscule too, on average, just $0.00025 per transaction. Because of its scalability, the fees will remain under $0.01 per transaction for both users and developers. With Ethereum, the average cost per transaction is $14.00. The mean transaction fee for Bitcoin is $2.06. The average cost of processing a payment with a credit card for businesses that do between just $10,000 and $250,000 in annual payment volumes is between 2.87% and 4.35%.
According to the Bank of America, given its speed, scalability, number of decentralized applications on its network, and low cost, Solana could beat out Ethereum to become the Visa of the digital asset ecosystem.
Like Bitcoin and Ethereum, Solana’s token, which is called Solana and SOL, is available in fractional amounts called a lamport. Each lamport has a value of 0.000000001 SOL. The Solana Foundation announced that a maximum of 489 million SOL tokens will eventually be created; 334 million are already in circulation.
What’s In Store for Solana in the Future?
The big question is whether Solana, which has a market cap of $31.7 billion, can overtake Ethereum, which has a market cap of $338.5 billion, as the destination for everyday digital transactions.
It certainly has the scale, speed, and price point. But there are tradeoffs. Solana is highly scalable but less decentralized and secure than Ethereum.
On September 17, 2021, following a surge in transaction volume that peaked at 400,000 tps, the Solana network suffered an outage that lasted for more than 17 hours. These kinds of issues could provide other networks with an opening to make headway in blockchain for decentralized finance and enterprises.
Like many emerging crypto currencies, Solana has seen large moves in price over the past two years. In November, Solana hit a record high of $260.00. That’s also 51,900% higher than its all-time of low $0.500801 on May 11, 2020. As of this writing, Solana is trading at $92.95.
Ultimately, though, there does not have to be one blockchain that rules everything. Each blockchain—Solana, Bitcoin, Ethereum, and others—provide different solutions for different applications.
Cryptocurrency Investing with Evolve ETFs
As of this moment, only Bitcoin and Ether exist in ETF form in Canada. Deciding which cryptocurrency to own and how much to allocate can be overwhelming for many investors. The Evolve Cryptocurrencies ETF (TSX: ETC) is Canada’s first multi-cryptocurrency ETF. ETC is designed to be a one ticket solution to cryptocurrency exposure. However, it currently holds only Bitcoin (TSX: EBIT) and Ether (TSX: ETHR). As regulators approve other crypto ETFs, they may be added into the fund as well. For more information on ETC, visit https://evolveetfs.com/etc/.
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