In 2021, Solana was the best-performing cryptocurrency, and it may continue to outperform expectations in the future.
In 2021, Solana was a standout performer, surging up the ranks of altcoins to become the world’s fifth-largest cryptocurrency. The SOL has a market worth of US$500.20 billion, according to coin market cap, and its increasing community of investors is eager to see how Solana’s technology compares to market giants like Bitcoin and Ethereum. Despite its severe volatility, investing in Solana has been gaining traction, despite the fact that crypto is a relative newcomer to the industry.
Many crypto traders, however, are skeptical about Solana’s winning run and are hesitant to buy in it. In this article, we’ve compiled a summary of 5 Solana advantages and disadvantages to help investors determine if Solana is a suitable investment for 2022 or not.
- Solana is Ethereum’s main competitor, according to crypto fans, because of its fast transactions and minimal costs. ETH now has a transaction rate of 14 transactions per second (TPS), while SOL has a rate of 50,000 TPS.
- Because gas expenses are so high, Ethereum is switching from a proof-of-work consensus method to a proof-of-stake consensus mechanism. However, SOL still has the upper hand in terms of transaction speeds and pricing.
The third-largest futures market is Solana: Solana has the third-largest open interest in futures contracts, which is the most important measure in derivatives contracts. Regardless of its current trading capacity, the aggregate derives the entire number of contacts stored on its network by market players.
- Despite a steep drop in price in early November, open futures interest has maintained its prior levels.
Smart contracts with NFTs: Over the past year, the NFT business has exploded. non-fungible tokens became a high-growth market prospect, with massive sales sponsored by renowned digital artists.
- Solana went into the market to provide the NFT alternative, taking advantage of the growing sector. With Solanart, the network’s NFT marketplace, Solana is increasing its market share. The platform’s low costs and fast transaction speeds are two of the greatest draws for NFT enthusiasts.
- Solana is the market leader in TVL, users, and derivatives: There has undoubtedly been a tremendous amount of activity in Solana’s on-chain data and derivatives market. In the previous six months, the network’s TVL has climbed by almost 15%. It seems that the distance between TVL, active consumers, and the derivatives market is rapidly decreasing.
- The environment of SOL has a significant institutional appeal: The market capitalization of Solana is more than quadruple that of Avalanche and Terra. The year 2021 has seen significant signs of SOL’s rising investment community, and with more investor acceptance comes increased institutional adoption.
- Solana is insufficiently decentralized: Some crypto aficionados claim that there aren’t many drawbacks to investing in SOL, yet this element of the cryptocurrency is often regarded as its largest negative. The ETH network currently has approximately 200,000 validators, whilst the Solana network has just 1,000 validators. The more validators there are, the more secure the network becomes.
- Fewer projects: Because of Ethereum’s first-mover advantage, it has more projects than Solana. SOL claims to have 350 projects on its network, including decentralised banking, non-financial tokens, and gaming applications. More new ventures may pick SOL over ETH as more investors become aware of the crypto’s rapid transfers and minimal costs.
- Inflation: Cryptocurrencies were popular in 2020 for a variety of reasons, one of which was to utilise them as an inflation hedge. Most digital currencies have a hard limit on the number of coins that will ever exist. However, Solana does not have a set supply of currencies. The designers started boosting the annual supply of SOL tokens by 8%, which implies that the inflation rate will reduce by 15% until it reaches 1.5 percent, after which it will stop decreasing.
- Unstable network: The investment community in Solana is still in its infancy. Investors may be hesitant to use SOL over Ethereum since it has a lesser track record. When the Solana Foundation stated that its network is experiencing some instability, the crypto’s reputation took a knock. Because crypto investors value trust, this flaw sets SOL apart from its competitors.
- Phases of Solana’s testing: Solana has huge plans for the future, but many of them are still in the early stages of development. It will be impossible to assess how effective the coin will be until the corporation puts those plans into reality.
- Solana is a cryptocurrency with a lot of potential. It distinguishes out among the hundreds of cryptocurrencies on the market by demonstrating steady growth and promise. Investors, on the other hand, determine the value at which they are willing to take a risk and then plunge into trying their luck with crypto investments.