Cryptocurrencies had a great year in 2021. In this period, we have seen the market go from being classified as a billion-dollar economy into a trillion-dollar economy. Aside from that, cryptocurrencies are gaining visibility in the mainstream world with, for example, El Salvador's adoption of Bitcoin as the official digital currency. As a result, investors are looking for the "new Bitcoin" on the market, hoping to find a great alternative in so-called altcoins. Unfortunately, many traders value an altcoin exclusively…
Solana led other significant cryptos in recovery after a powerful endorsement from a central U.S. investment bank.
Its price rose over 7% in the last 24 hours. For comparison, Bitcoin, Ethereum and BNB rose less than 1% in the same period.
Solana’s strong performance resulted from a powerful endorsement by a major player. Specifically, Bank of America covered Solana in a research note to its clients.
The investment bank said Solana could become the “Visa of digital asset ecosystem” and even take Ethereum’s place.
Currently, Ethereum is the oldest and the largest smart contract blockchain network. It is also the largest NFT marketplace.
However, due to its focus on scalability, Solana could put Ethereum’s position in danger, said the researchers at BoA.
Solana launched in 2020 and has seen rapid growth since. The network settled over 50 billion transactions and has an $11 billion value.
As developers optimized the Solana blockchain for decentralized finance (DeFi) use cases, the growth is not surprising. That means that Solana leads other intelligent networks in terms of cost and the speed of transactions.
Fastest Blockchain Out There?
Developers claim that Solana can process 65,000 transactions per second. Theoretically, this number could reach numbers up to 28.4 million. It also offers low fees or $0.00025 per transaction. For comparison, Bitcoin fees are currently at $1.8, and Ethereum’s are about $90.
The network can do that by using an innovative way to validate transactions.
While Bitcoin and Ethereum use costly proof of work validation, relying on miners to validate transactions, Solana uses a different approach. Its network uses the proof of stake (PoS) model, used by Cardano, Polygon and others. PoS allows users to stake their tokens to validate transactions. Ethereum is also transitioning to that model.
However, Solana is one step ahead, building on PoS with proof of history. By considering the time passed between transactions, stakers can validate transactions more quickly.
The network is excellent for consumer use cases, such as micropayments and gaming, said Alkesh Shah of BoA. However, this also comes at a cost in terms of network stability.
Solana prioritizes scalability, but a relatively less decentralized and secure blockchain has trade-offs, illustrated by several network performance issues since inception.
Solana has experienced several significant outages since it started. The most recent outage happened last week, for which the developers blamed a DDoS attack. On the other hand, the researchers noted that Ethereum suffers from a different set of issues.
Ethereum prioritizes decentralization and security, but at the expense of scalability, which has led to periods of network congestion and transaction fees that are occasionally larger than the value of the transaction being sent.
Moreover, users minted more than 5.7 million NFTs on Solana. So much of Solana’s growth could be coming from the NFT space. So far, NFTs have seen much faster growth than DeFi.
Thanks to its low fees and high speeds, Solana may flip Ethereum in NFT use. Low transaction costs also allow developers to create NFTs with more complex smart contracts or whole NFT games.
For comparison, an NFT game, CryptoKitties, brought Ethereum to its knees in 2018. Users were breeding too many of these kitties for the network to handle.