3 Reasons Why Solana Could Just Be Getting Started

Solana ( SOL 2.26% ) has been on an amazing run this year, becoming the fourth largest cryptocurrency by market cap and recently surpassing older, more established blockchains like Cardano (CRYPTO: ADA) and Ripple (CRYPTO: XRP) .

Moving forward, Solana could have even more runway ahead of it as momentum for the blockchain continues to build. Here are three reasons why Solana could just be getting started.

Lightning fast transaction speed (at a fraction of the cost!)

The Solana network processes a remarkable 50,000 to 65,000 transactions per second, compared to just 15-30 transactions per second for Ethereum (CRYPTO: ETH) , or 250 for Cardano. This throughput also compares favorably to traditional financial networks like Visa (NYSE: V) , which processes about 24,000 transactions per second. Furthermore, Solana does this for a low fee of $0.00001 to $0.00025 cents per transaction, which is much cheaper than the current cost of transacting on the Ethereum blockchain. Transactions on the Ethereum blockchain cost anywhere from $4 to $20 per transaction in 'gas fees,' making it impractical for smaller transactions. While these fees are coming down after Ethereum's move to proof of stake, Solana still has a distinct advantage here.

Amazing projects are coming to the Solana blockchain

The advent of decentralized applications (dApps) like CryptoPunks, Crypto Kitties, and NBA Top Shot on the Ethereum blockchain helped turn Ethereum into a $500 billion asset. Developers flocked to the Ethereum blockchain to build new projects while artists minted NFTs, adding value and excitement in the process.

Solana is developing a dynamic ecosystem of its own. One interesting project is Audius , a decentralized, blockchain-based music streaming service whose AUDIO token utilizes the Solana blockchain. The service has 5 million listeners as of 2021.

There's also Solend, a lending platform built on the Solana blockchain that will allow users to lend out tokens and generate yield.

Additionally, there is a burgeoning array of NFTs sprouting up on Solana, like the Degenerate Ape Academy, which has generated over $100 million in secondary sales since August. As more users and developers take advantage of the Solana blockchain, its value will continue to rise.

Hitting exit velocity

We could be at the point where Solana has reached 'exit velocity.'

Last year, a run from $10,000 to $20,000 seemed to make Bitcoin more risky based on valuation. However, this strong performance and larger market cap put it on the radar of institutional investors and hedge funds. This institutional interest helped propel Bitcoin from $20,000 to $60,000. While seemingly counterintuitive, growing to this larger market cap helped 'derisk' Bitcoin in the eyes of larger investors and made institutions and corporations feel safe dabbling in the asset.

Now that Solana is approaching a $70 billion market cap, we are at a point where hedge funds, institutions, and other large investors and corporations may be comfortable investing in Solana, and propel it to the next level.

Looking ahead

With unparalleled transaction speed for a fraction of a cent, a flurry of development and interesting projects being built on its blockchain, and the potential for growing institutional interest as it reaches exit velocity, Solana is here to stay.

This article first appeared in The Motley Fool.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Michael Byrne owns shares of Solana, Ethereum and Bitcoin. The Motley Fool owns shares of and recommends Ethereum and Visa. The Motley Fool has a disclosure policy.