Solana: 5 things to know before buying it

When the price of Solana (SOL) started rising in July, people dubbed it Solana Summer. As we come to the end of 2021 and the price continues to climb, perhaps we should just call 2021 the year of Solana instead.

Why is everyone talking about Solana? Is it a good investment? Here are five things you should know about Solana cryptocurrency before buying it .

The price of Solana has increased by 13,300% since January 1, 2021

At the start of the year, 1 SOL was priced at $1.51 and Solana’s market capitalization was around $86 million. It has gained over 13,300% since then – 1 SOL is now worth $202.42 according to CoinMarketCap , as of this writing . With a market cap of nearly $62 billion, Solana has become the sixth largest cryptocurrency by market cap.

It is available on most applications and cryptocurrency exchangers. And many investors have “staked” their SOL – immobilized it for a fixed period to help keep the network secure – to earn interest.

Solana is a popular alternative to Ethereum (ETH)

One of the big drivers of Solana’s growth is people looking for alternatives to Ethereum. Ethereum is the second largest cryptocurrency in the world, and was the first to introduce smart contracts. Smart contracts are small pieces of code that allow blockchain platforms to run decentralized applications (dApps) and other programs.

The problem is that Ethereum’s network is heavily congested and transactions have become expensive. Therefore, the spotlight is on newer platforms that are both faster and less expensive. Several “Ethereum killers” are lining up, each trying to attract developers and grab a piece of the market.

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Like many newer smart contract cryptocurrencies, Solana has not been tested like Ethereum. If you are considering buying Solana , carefully consider the competitive environment, as each smart contract cryptocurrency has its own advantages and disadvantages. Keep in mind that this is probably not going to be a “win or lose” scenario. We will likely see four or five smart contract cryptocurrencies come out on top.

It is the fastest cryptocurrency on the market

One of the main draws of Solana is its ability to process around 50,000 transactions per second (TPS). To put that into perspective, Ethereum trades between 15 and 45 TPS, although an upgrade to Eth2 is in the works which will make it a bit faster.

Speed ​​isn’t everything, but few cryptocurrencies come close to Solana in this race. It’s also worth noting that Visa says it handles around 24,000 GST, which means Solana could give existing payment networks a hard time.

all about solana before buying

Solana uses the “proof of history” – proof of anteriority

The magic of blockchain technology is that it removes middlemen from all kinds of transactions. For example, bitcoin (BTC) is a form of digital currency that does not require bank or government backing.

But without an intermediary, blockchain networks need other methods to secure themselves and avoid fraud . To do this, bitcoin uses a “proof-of-work” validation model. Without going into technical details, it has a series of network validators that must provide huge amounts of computing power. The idea is that it would take so much computing power to create fake records, that it would be almost impossible. This method secures the network, but is not energy efficient.

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Other systems use a proof-of-stake validation model, which limits the number of validators to those with enough tokens, making the process faster and more sustainable. Solana goes a little further. It incorporates timestamps into its aging validation model, which allows it to process transactions so quickly.

More than 350 applications run on its network

As competition intensifies between alternatives to Ethereum, the number of projects running on each network is a key battleground. Ethereum may be slow, but it has a first-mover advantage and developers are used to using its platform and programming language. Therefore, Ethereum still hosts the largest share of digital applications.

Solana has more than 350 projects in its ecosystem. These include decentralized finance (DeFi) applications that offer free banking services through, non-fungible token (NFT) projects, gaming applications, and various other projects. NFTs are a unique type of digital collectible that incorporates authorship and ownership information. DeFi and NFTs are booming right now, which is another growth driver for Solana.

Should you invest in Solana?

Cryptocurrency investments can be risky and extremely volatile, so if you are considering buying Solana, be prepared for the price to go down as well as up. It is advisable to ensure that cryptocurrency investments only represent 5-10% of your overall portfolio, and only invest the money you can afford to lose.

When weighing the pros and cons of investing in Solana , try to keep a long-term perspective. Solana’s price may have just hit a series of all-time highs, but where do you think it will be in five or ten years?

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