It’s safe to say that the cryptocurrency market is back in the good graces of investors. After crypto asset prices plummeted in 2022, they have seen a monstrous rise over the past 15 months. There is perhaps no better beneficiary of this positive momentum than Solana (CRYPTO: SOL).
This cryptocurrency has soared 800% in the last 12 months alone. An investment of $1,000 would be worth $9,000 today. Good luck finding a better performing asset.
Before you rush out to buy Solana, make sure you take the time to understand these three facts about it.
1. Transaction mechanism
As EthereumSolana operates a proof of participation consensus mechanism. This means that token owners are the ones who help approve transactions and validate the blockchain. Solana also has features for smart contracts.
But this innovative cryptocurrency has a unique feature called proof of history. This system changes the way time is recorded on the blockchain, reducing the need to carry additional data and resulting in faster throughput. This helps explain why Solana can theoretically process 50,000 transactions per second (TPS). This is astronomically higher than the 14 TPS or BitcoinIt’s 5 TPS.
2. Develop use cases
Solana’s differentiated infrastructure, particularly focused on speed and low costs, helped introduce a valuable use case. Launched in February 2022, Solana Pay could be the flagship application of this network. It allows consumers and merchants to connect directly through the blockchain, managing transactions in the native token, SOL or a stable coin. Payment is instant and virtually no fees.
For retailers, payment processing represents a huge expense that can eat into their already thin margins. Solana Pay can help these merchants retain more of their revenue as profits.
Not only that, but because a blockchain is used, new features can be introduced. Merchants can contact a non-fungible token (NFT) with each purchase which acts as a receipt. This NFT could also offer future discounts or access to special events hosted by this merchant. The ability to interact with customers is what’s exciting here.
Solana is also moving into the mobile space. It launched a Web3-enabled smartphone, called Saga, in summer 2022. The hope is that this product can onboard more users to crypto by making it easier to interact with various decentralized applications. A second, cheaper version of the smartphone was also introduced.
I think it’s encouraging to see a popular cryptocurrency like this trying to bring greater utility, with the goal of moving Solana from a tool primarily used for financial speculation to one that people can turn to in their daily lives. Time will tell if these initiatives are truly successful.
3. Investor enthusiasm is high
Investors considering owning cryptocurrencies should be fully aware of the cyclical nature of this industry. Narratives seem to determine price movements, especially in the short term. The result is that things will remain volatile for the foreseeable future.
With its current market capitalization of $77 billion, Solana has a valuation close to companies like Ferrari, Free marketAnd PayPal. I don’t know if this is justified, but it probably gives rise to a lot of optimism about Solana’s future. If there’s one thing for sure, it’s that there’s still a lot of long-term uncertainty.
You now have more information on this booming cryptocurrency. But before you buy, you should ask yourself if you believe in Solana’s prospects for the next decade and beyond. If you do, it might be a good idea to start a small position in this digital asset now.
Should you invest $1,000 in Solana right now?
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Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin, Ethereum, MercadoLibre, PayPal, and Solana. The Motley Fool recommends the following options: Short June 2024 calls at $67.50 on PayPal. The Mad Motley has a disclosure policy.
3 essential facts about Solana, before buying the cryptocurrency was originally published by The Motley Fool
