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This morning, my news feed was overloaded with articles about Solana's massive price increase over the past few days. According to CoinGecko, Solana is up over 62% for the week meaning that it has outperformed almost all the other cryptocurrencies in the top 10. So, what does Solana do, and how does Solana stack up against competitors like ETH? Find out in this post!
What Is Solana?
According to their official website, Solana is a fast, secure, and censorship resistant blockchain designed to provide infrastructure for global adoption. Some of the key advantages of Solana include:
Support for Smart Contracts - Supports multiple languages
Blazing Quick Transaction Speeds < 1 second
Low Transaction Costs - Less than .01 cent
Easy Staking ~7% Rewards
As I discuss in the video, Solana stands out among its peers for a number of reasons. First, Solana doesn't rely on Layer 2 or Sharding to achieve such high TPS. Second, the high TPS shown here isn't just theoretical, and if you check on the block explorer, you can see that Solana is currently humming along at about 1,000 TPS in practice.
Additionally, Solana supports staking at a current rate of about 7.25% on SolFlare wallet which could make holding and staking Solana a nice form of passive income. An additional benefit is that Solana can be developed using Rust, C, and C++ which are general purpose programing languages. This stands in contrast to Ethereum which is coded in Solidity and has few (if any) uses that I know of outside blockchain development. I believe this can give Solana an edge in attracting great developers who wish to roll their existing skillset over and begin blockchain development.
Although Solana boasts an impressive set of statistics, its also important to consider that Solana is facing an uphill battle against smart contracting platforms like ETH and BSC that are well established with a large set of existing Dapps. Although the Solana ecosystem page shows over 100 Dapps, many of them are still in development / not fully released. Just as a trial, I selected three DeFi apps to test and wasn't able to use any of them.
This isn't a criticism of Solana itself as I realize that any kind of Dapp is going to take time to be developed, but I think that it is important to consider that Solana is essentially starting from scratch and building its suite of Dapps that will have to compete with protocols on BSC and ETH that people have been using for years.
Will the speed and cost advantages of Solana be enough to convince users to migrate over to Solana, or will people prefer to remain with their old favorites on BSC and ETH? I think that depends on a lot of factors including the price of gas and how ETH 2.0 rollout goes. If you would have asked me this question several months ago when it was costing $30 to send on ETH and $100 to interact with a smart contract, I would have had a much different answer than now with ETH gas fees hovering around only $2. I think that everyone has their own price point at which they are willing to try a new chain to get away from fees, and I don't think this is a "winner take all" situation. Regardless of how low (or high) the fees on ETH get, I think there will always be people that are encouraged to hop to other chains for lower fees, and there will always be people who buckle down and bear the high gas costs to continue operating on ETH.
Overall, I liked being able to take this chance to learn a little bit more about Solana. I think that it is an interesting project especially with the incredibly high TPS and low costs. I think that low cost and high TPS is going to be necessary if we ever want to see mass adoption of crypto, and I like that Solana is working on a solution to this problem. I would like to see a stronger, more robust DeFi ecosystem, but I also realize that this is something that will take time to develop. In closing, I'm optimistic about the project, and can't wait to see it bring more choice and innovation to crypto.
As always, nothing is financial advice. Thanks for reading!