The Solana blockchain platform is one of Ethereum’s biggest challengers—and its future looks bright. Here’s how to invest in SOL, Solana’s native coin.
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Cryptocurrencies got a real boost recently when U.S. president Joe Biden announced an executive order that directs government agencies to study the risks and benefits of crypto and other digital assets. The move comes at a time when virtual currencies are already in the limelight, in the wake of the widespread monetary disruption caused by the Russian invasion of Ukraine.
As cryptocurrencies become more mainstream, investors are looking beyond bitcoin and ether to get in on the action. These two coins still command the lion’s share of the $972-million global crypto market (all figures in U.S. dollars), but as they increasingly move in sync with stock markets, some investors are buying altcoins to diversify their holdings.
One of the beneficiaries of this trend is SOL, the native coin of the Solana blockchain. It is currently the ninth-largest crypto, with a market cap of about $11 billion, as of mid-October 2022, per CoinGecko. SOL traded at over $175 at the start of January and has since fallen to about $30, amid a broader market decline. As of mid-October, there were about 358 million SOL tokens in circulation.
If you’re looking to expand your crypto exposure or add coins that are less sensitive to news headlines, SOL merits a closer look—here’s what you need to know and where to buy it.
Solana was co-founded by Anatoly Yakovenko, Greg Fitzgerald and Stephen Akridge, all former employees of U.S. chipmaker Qualcomm. Solana Labs is the company that runs the Solana blockchain. Launched in March 2020, Solana is a high-performance, open-source blockchain platform designed to support smart contracts and the creation of decentralized applications (dApps). For that reason, Solana is considered one of the strongest challengers to Ethereum, a much bigger rival with similar capabilities.
Solana runs on a hybrid protocol of proof-of-stake (PoS) and proof-of-history (PoH), a proof for verifying order and passage of time between events. Due to this unique protocol design, Solana can handle up to 50,000 transactions per second, compared to 15 to 30 transactions for Ethereum. (Ethereum is currently transitioning from its proof-of-work (PoW) consensus protocol to a more energy-efficient proof-of-stake (PoS) mechanism.)
Lower fees and faster transactions are sticky features that encourage users to stay within the Solana ecosystem, especially for their decentralized finance (DeFi) apps and non-fungible token (NFT) purchases, says Michael Zagari, an investment advisor with Mandeville Private Client and Zagari+Simpson.
“When it comes to gaming, finance and NFTs, having transactions processed quickly, at low fees, and an easy-to-use platform to build on top of make for a better user experience and help scale decentralized applications,” he says, adding that Solana seems to be attracting developers faster than ethereum did at the same stage of its growth cycle.
Solana’s ecosystem comprises a suite of technologies that work synergistically, including decentralized apps, DeFi projects, NFT marketplaces and lending protocols, which are built on Solana’s open infrastructure. The more users a dApp attracts, the greater its network effect and value. In the case of Solana, “the higher the demand for dApps built on its network, the stronger the demand for SOL, its native coin,” Zagari says.
Investors can stake SOL to generate yield. Crypto staking means pledging or locking up crypto holdings in exchange for rewards or interest payments. Here’s an excellent primer on how it works.
You can also spend SOL on accessories while playing games built on top of the Solana protocol. “If you feel like entering the metaverse, you can use SOL tokens to purchase attire for your avatar,” says Zagari, pointing out that luxury brands like Gucci and Burberry are already in the metaverse, a market projected to skyrocket to $800 billion by 2024, from $500 billion in 2021. The market for virtual luxury goods alone could reach $50 billion by 2030, say analysts at Morgan Stanley.
Solana also works as fiat money and can be used to buy NFTs and other tokens, which is indicative of its growth runway and the coin’s price appreciation potential. “With the rise of NFTs, a market that went from $80 million to $17 billion in just one year, having an asset like solana may be worth considering,” Zagari says. (Learn more about buying NFTs.)
Watch: 10 cryptocurrencies you need to know about
SOL had a bumper year in 2021. The coin saw a monumental rise in value, from $1.80 in January to a whopping $260 in November—an eye-popping 14,000% gain. It’s currently trading at about $30, as of mid-October 2022, per CoinGecko, amid a broader crypto market decline.
Marcus Sotiriou, an analyst at GlobalBlock, a U.K.-based digital asset broker, thinks that SOL’s low fees and enviable speed mean that “it will become a blue-chip digital asset over the coming years.”
In fact, the Solana blockchain is so cheap, fast and scalable that it could be the Visa of crypto networks, according to a recent Bank of America analyst note. This bodes well for the future potential of SOL and makes it an attractive asset that “long-term investors should consider having an allocation to,” Sotiriou argues.
If investors believe dApps, NFTs and the metaverse are the future, then SOL may be a worthy addition to their holdings. “New data demonstrates how the rapid expansion of the NFT space is presenting opportunities for the Solana network, which recently reached its all-time high of 10,000 unique daily NFT buyers,” says James Parker, head of business development at Creaticles, the world’s first NFT requests marketplace. Solana’s ecosystem is young, but it has massive growth potential, he adds. The total value locked (TVL)—the cumulative value of assets staked on the Solana protocol—jumped from just under $1 billion in mid-2021 to nearly $15 billion by year’s end. It has since fallen to about $922 million as of mid-October 2022, caught in a drawdown across the cryptoverse, per DefiLlama data. Nevertheless, the numbers bear out the growing activity on DeFi apps built on Solana, which correlates to the higher demand for SOL as a result.
SOL is one of the many cryptocurrencies available on CoinSmart* (ticker symbol SMRT), where you can pay in Canadian dollars. It was the first fully regulated crypto platform in Canada and also one of only two with marketplace registration status.
CoinSmart allows you to access your funds the same day you make a deposit. The platform is secure, and it offers a transparent fee structure. Customer support is available 24/7, and seasoned investors will appreciate the Advanced Trading Tools. CoinSmart also has a referral program. Once your account has been verified, you can share your unique referral link. When new users make a deposit, you’ll get CAD$15 in bitcoin, and so will they.
From NFTs to DeFi and the metaverse, Solana offers many plays. However, investors should carefully consider their objectives and risk tolerance, and weigh the perils against any potential payouts. Cryptocurrencies can offer windfall-like gains, but they’re also prone to extreme volatility.
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