Solana coin: Here is the secret of the huge rise in the price of Solana
More investors are turning their attention to the Solana cryptocurrency after its massive price hike. Here's everything you need to know about the bullish Solana coin.
The Solana coin did not attract much attention when it was launched in April 2020. However, its price increased from about $1.5 only in January 2021 to more than 208 on December 6. It is now trading at $114, with a market capitalization of $58 billion. Although this constitutes a significant decrease, it is normal with the recent decline in the digital market.
In this article, we will try to get to know more about what the Solana coin is, as well as the justifications for its notable rise in price.
What is Solana?
Solana Coin is a blockchain platform for decentralized applications. It's an open-source initiative run by the Solana Foundation in Geneva. This platform has been built and developed by developers at Solana Laboratories in San Francisco.
Solana rivals Ethereum, which is currently the largest decentralized application platform, thanks to its promise of a faster operating system and lower transaction fees.
Solana is a Proof of Stake platform, which makes it more environmentally friendly than a Proof of Work blockchain like Bitcoin. The original Solana cryptocurrency is also called Solana coin and has the SOL index.
Is there a distinction between proof of labor and proof of stake?
In a decentralized blockchain system, many computers (nodes) check the validity of transactions.
The hacker might want to add a new set of nodes in order to take control of the network. You can prevent this by making the computers running the network work harder by solving a math puzzle, which in turn makes it very expensive to attack the network. And so it goes with the Proof of Work mechanism.
It's an efficient mechanism, but it can end up consuming a lot of electricity on the grid.
On the other hand, with the Proof of Stake mechanism, this validation process consumes less power. And that is by choosing the auditors from among the people who store this currency and who own shares of it, as the greater the number of stored currencies, the greater the chances of choosing a person to become an auditor, metal, or block certified. Although validators on the Soluna network also consume power to run, their power usage is much lower than, say, bitcoin validators.
Both Proofs of Work and Proof of Stake mechanisms reward auditors or miners for their efforts; Bitcoin validators get bitcoin and Solana validators also get Solana coin. It should be noted that in Solana, end users cannot run a validation node to earn rewards directly, and instead they can delegate their stake to the validator who will pass the rewards on to them for some fee.
Bitcoin Proof of Work also acts as a kind of timing check for the network, making sure that all nodes (verifiers) on the network can agree to the correct order of transactions. In Proof of Stake-based systems, this isn't easy to achieve, so Solana uses an additional technology called Proof of History, which it claims helps the network time transactions more efficiently. Solana claims that these and other innovations make it more secure and able to operate better than other blockchains.
Most modern blockchain systems use some form of proof of stake mechanism. But Solana's biggest competitor remains Ethereum, which still relies on the PoW mechanism even though it is in the process of switching to Proof of Stake.
From the end user's point of view, the Solana platform is a place where they can use Solana to interact with various decentralized applications. Most of which are related to finance, such as platforms for lending or borrowing money, trading cryptocurrencies, or investing in various assets. But there are also apps that allow you to buy and sell NFTs or even dating.
What are the factors for the rise of Solana currency?
The price of the Solana coin has witnessed a tremendous and amazing rise. The person who participated in the initial public offering of this coin (IPO: A method of crowdfunding a project by selling its tokens) was able to buy it for $0.22 to achieve a return of 95,000 percent with its price reaching $208 on December 6, 2021.
To be fair, the prices of other promising competitors in the Ethereum network, including Cardano, Polkadot, Dfinity, Terra, Polygon, and Avalanche, have also increased significantly over the past year. But Solana's high price tag was something special.
The support of the famous cryptocurrency exchange FTX, which has launched many projects based on this coin, is among the most important reasons and factors that led to this huge price hike. Alameda Research, the company that supports FTX, is also one of the largest investors in Solana's coin, along with Andreessen Horowitz and Polychain.
Transaction fees, which are much lower than those charged by most competitors, are among the factors that have helped Solana rise as well.
Then there is the Total Locked Value Factor (TVL), a metric that calculates how much value has been secured in projects based on the Solana ecosystem. According to DefiLlama, a website that tracks decentralized finance projects, Solana is currently the third-largest network by total locked value TVL, with an estimated $7.9 billion locked-in projects on its networks.
The main factor that has caused this coin to attract a lot of attention lately is the Solana Network's entry into the non-fungible tokens industry, which can be anything digital As an example, technology may be used to sell art or music.
Solana launched the Degenerate Ape Academy, which sold a collection of cartoon monkey pictures. 10,000 of them were sold in the first 10 minutes of launch, which drove the price of Solana tokens up, as people then needed Solana tokens to buy those cartoon monkeys.
The August rally for NFTS, which set a sales record of nearly $900 million (€761 million), helped Solana's currency rally.
Solana has also focused on Defi projects, which are dispensing with financial institutions and intermediaries and executing financial transactions over blockchain networks in recent months.
What does Solana do differently?
Solana prioritized smart contracts, which are software stored on the blockchain that runs when pre-set conditions are met in such a way that deals are automated so that all parties are certain of the outcome. And that without the intervention of any intermediary and in a way that speeds up the process.
This allowed Solana to take advantage of the non-fungible currency market (NFT) and Defi. But there are many other cryptocurrencies like Cardano that are also planning to enter the smart contract space, so there is likely to be increased competition.
The Solana coin network also uses a Proof of History (PoH) mechanism, which means that blocks and transactions are grouped together so that there is evidence and a log of the time of each transaction. This mechanism allows gaining further scaling and trust in the blockchain network. Among the other major promises made by this network is that its users will not be surprised by the increased taxes and fees.
Traders are also speculating about the possibility of Solana launching a possible new feature in early September, but no one knows more about the feature.
Is Solana a Competitor to Bitcoin and Ethereum?
Solana's coin isn't likely to kick Bitcoin off the top spot anytime soon, but Solana is seen as a competitor to Ethereum as the technology it's based on is cheaper and offers faster transaction speed, at 50,000 transactions per second.
Are there any threats to the rise of this currency?
With an increasing number of blockchain networks using smart contracts and focusing on non-fungible tokens, it is likely that Solana's coin will face more competition in the space it has carved out for itself.
But another threat hovers around it, as Chinese crypto market regulation caused a 60 percent drop in the price of Solana this summer amid the crypto market crash.
The US is also investigating the cryptocurrency market, and this may pose another threat to the values of all coins and tokens.
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