In 2021, solana was considered the top performer in the cryptocurrency market. From being just an altcoin to becoming the fourth most valuable cryptocurrency in the market, it has come a long way. Today, it is worth 64.2 billion dollars compared to Bitcoin and Ethereum technology.
However, since it is still a newcomer and the crypto market is highly volatile, investors should be aware of the high-risk speculation at this point. Moreover, if you are willing to take this risk, here are the pros and cons you need to go through to get the answer to your question.
What Is Solana (SOL)?
Solana was launched in March 2020 by Solana Foundation in Geneva, Switzerland. It began as an open-source and highly-functional project that focuses on providing Defi solutions and facilitating dApps creation.
Solana has one unique property. It is a hybrid model of consensus. It means it uses both Proof of Work (PoW) and Proof of Stake (PoS) consensus mechanisms, which improves scalability. Moreover, its processing and validating times are extremely short for executing smart contracts and transactions.
Advantages Of Investing in Solana
Speed And Fees
The substantial selling point of Solana is its fast transaction speed. Among altcoins, it is considered the most potential Ethereum rival because of its speed. It is capable of supporting thousands of transactions every second. Moreover, it uses a hybrid model of mechanism to verify transactions on the basis of ownership of coins, thereby costing lower fees as compared to Ethereum.
Third-Largest Future Market
Currently, Solana owns the third-largest future market, which is considered the most relevant metric in the derivative market. It derives the total number of contracts held on its network by market participants no matter whatever its recent trading capacity is.
NFTs And Smart Contracts
Over the last few years, the NFTs market has gone really crazy. It has become the highest-growing industry after an epic sale of the NFT ‘Everyday’ is witnessed. Following that, the market exploded with several NFT platforms opening online to sell a wide range of these tokens.
Expanding in this market is a savvy move, and Solana jumping into it has made it more beneficial. It is gaining market share with Solanart, which is the NFT marketplace running on its network. It provides instant transactions at lower fees.
Being a next-generation technology, Solana is also known for its positive impact on the environment. It is because the hybrid consensus mechanism makes the process far less energy-efficient, thereby making crypto a greener alternative to Ethereum and Bitcoin.
Leads In TVL, Users, And Derivatives Market
There is no doubt about the incredible activities going on in Solana’s on-chain data and derivative markets. Its network’s TVL has witnessed a significant increase of 15 percent in the last six months, which seems to close the gap between TVL, active users, and the derivatives market instantly.
Disadvantages Of Investing in Solana
Since Solana constitutes a smaller community of users and has a short track record in terms of Ethereum, it is arduous to rely on this network for stability. And because reliability is considered a crucial factor for cryptocurrency investors, it is not the cryptocurrency they will look for.
Has Fewer Projects
Ethereum is an established crypto network with several active projects. On the other hand, Solana has more than 350 projects. However, it is early days for Solana and users are experiencing significant progress in the short time.
In 2020, investors chose to invest in cryptocurrency to save themselves from inflation. Several cryptocurrencies have hard caps on the total number of coins that will ever exist. However, Solana does not have a fixed number of coins and started to increase its supply by 8 percent yearly, which makes it not a reliable asset to acquire if you are seeking zero inflation.
As discussed earlier, some investors consider it a rival of Ethereum. However, the latter is still ahead of it due to a vast number of projects, faster transaction speeds, and lower fees. Moreover, even though some crypto experts anticipate a rise in Solana but there is no guarantee of it. Therefore, if you have the budget and want to add Solana to your portfolio, you can go ahead by investing in it.
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