One of the top performing cryptocurrencies this year, Solana (CRYPTO: SOL) has not surprisingly become a hot topic among crypto enthusiasts. The asset has gained more than 15,000% since the start of the year.
There are many reasons behind Solana’s intrigue among investors. However, the performance of the cryptocurrency this year is of the greatest interest to investors right now. This newly minted “Top 10” cryptocurrency by market capitalization has skyrocketed in the last few months. In fact, investors will keep an eye on any asset that grows from less than $ 1 billion to more than $ 70 billion in just a few months.
There are many reasons investors might want to consider Solana right now. However, these three reasons are crucial to understanding the story of Solana.
Let’s dive in.
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1. Solana’s mining model is attractive for several reasons
Lately, there has been a lot of discussion about energy consumption related to proof-of-work mining models for cryptocurrencies such as Bitcoin has led some investors to look for greener cryptocurrencies. Those who work with proof-of-stake models like Solana have outdone themselves. I think this is certainly not a coincidence.
However, Solana’s blockchain technology is truly unique. This network combines a proof-of-stake consensus algorithm with the cryptocurrency’s own proof-of-history system. This means that transactions are processed in sequence and operate as a first-in-first-out system. This speeds up transaction times for the entire network while keeping fees very low (reportedly less than $ 0.01 per transaction).
In a traditional proof-of-work model, miners tend to process higher value transactions first. However, in this type of model, transactions are processed in sequence. This has resulted in users on the network seeing faster transaction speeds regardless of size or relative value. This has also enabled Solana to process up to 50,000 transactions per second. It’s lightning fast.
2. Solana is a great way to play the surge in NFT interest
As one of the potential “ether Killer “Altcoins Investors seek, Solana’s powerful platform has demonstrated an impressive ability to drive innovation in a variety of ways. One such focus for investors is the ease with which consumers can make online purchases with Solana. In fact, this is a cryptocurrency with some fascinating use cases.” from the real world, as opposed to other large capitalization crypto tokens.
However, one of the most talked about use cases that Solana has been pushing lately is the non-fungible token (NFT) market. Through Solonart, an NFT marketplace on the Solana network, NFT investors have the opportunity to buy and sell popular NFTs.
According to reports, Solana is rapidly gaining market share in the NFT world. One of the main reasons for interest in Solana and Solanart lately has been a recent listing of a collection of 10,000 “smoothest” monkey pictures. This NFT collection sold within eight minutes of launch and was implemented without much disruption to NFT investors.
Those who buy NFTs on other blockchains like Ethereum have experienced congestion issues as well as much higher transaction fees. As mentioned earlier, Solana’s low-fee, high-speed network has proven beneficial for NFT investors looking to snag a popular digital work of art.
Those who are optimistic about the growth of the NFT space certainly have reason to consider Solana in this context.
3. Broader market acceptance an important driver for Solana
As we have seen with other cryptocurrencies, the wide acceptance of a particular cryptocurrency by various exchanges or crypto funds has sparked the interest of private investors in this cryptocurrency token. For Solana, this certainly seems to be the case.
At the beginning of June it was announced that Solana would be on the list Coinbase (NASDAQ: COIN) Professional. Being listed on a major cryptocurrency exchange like Coinbase is a big deal. These exchanges make for a broader and more diverse investor base. Accordingly, the additional liquidity for a certain cryptocurrency like Solana has led to a “coinbase effect” for newly listed tokens. According to crypto researcher Messari, cryptocurrency tokens listed on Coinbase have seen an average increase of 91% in the five days following that listing.
Since then, Osprey Fund announced that it would work on the launch of a Solana fund. This move follows an earlier announcement by Grayscale that the crypto fund manager was investigating the short-term inclusion of a Solana trust.
In fact, the wider adoption of any cryptocurrency has proven to be a major catalyst for short-term outperformance. These recent deals mean that Solana will remain as a mega-cap cryptocurrency. At least that’s what the Solana cops hope for.
The bottom line
Like any cryptocurrency, Solana is certainly not without risk. In fact, any asset that increases in value as fast as Solana also carries an increased risk. Momentum works both ways, which means that if the wind changes, Solana’s potential correction could be more abrupt than its peers given how far this cryptocurrency has advanced.
Still, there are many compelling reasons for Solana’s recent rise. Accordingly, investors looking to take the plunge into a cryptocurrency with tremendous momentum and a potentially longer runway for growth should certainly consider Solana now.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all reflect critically about investing and make decisions that will help us get smarter, happier, and richer.
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