Cryptocurrency enthusiasts see Solana as Ethereum’s major contender owing to its fast transactions and low costs. SOL supports 50,000 TPS, whereas ETH can only tolerate 14 TPS at the present. Because of the high gas costs, Ethereum is transitioning from a proof-of-work to a proof-of-stake consensus mechanism. However, SOL continues to lead in terms of transaction fees and speeds.
Pros of Investing in Solana
Solana is the third largest futures market.
The most important number in derivatives contracts is open futures interest, and Solana currently ranks third. Despite a severe drop in market value in early November, its public futures interest remained at previous levels. Regardless of its current trading capability, the aggregate receives the entire amount of contracts held on its network by market participants.
Smart Contracts with NFTs:
The NFT market has grown dramatically during the last year. Non-fungible tokens became a rapidly expanding commercial opportunity, followed by enormous sales by notable digital artists. Taking advantage of this burgeoning company, Solana joined the market right once to provide the NFT option. Solana participates in the network’s NFT business, and Solanart is extending its market share. The platform’s minimal fees and rapid transactions are two of its most major advantages for NFT fans.
Solana is the market leader in terms of TVL, users, and derivatives.
Undoubtedly, Solana’s on-chain data and derivatives market has seen a lot of activity. Over the last six months, the network’s TVL has increased by more than 15%. The gap between TVL, active users, and the derivatives market looks to be closing quickly.
The SOL ecosystem has strong institutional appeal since Solana’s market capitalization exceeds the combined worth of Avalanche and Terra. There is solid evidence that the SOL investment community will expand in 2024, and as investor acceptance grows, so will institutional adoption.
Cons of Investing in Solana
Some cryptocurrency enthusiasts believe that there are few negatives to purchasing SOL, although this is seen as the coin’s primary drawback. Solana isn’t adequately decentralized. The Solana network today has just 1,000 validators, whereas the ETH network has about 200,000 validators. The number of validators on the web increases its security.
Less projects: Because of the first mover advantage, the Ethereum network has more projects than Solana. According to SOL, the network hosts around 350 projects, including decentralized banking, NFT ventures, and gaming apps. More new companies may employ SOL instead of ETH as more investors become aware of the cryptocurrency’s rapid transfers and low expenses.
Inflation: One of the many reasons cryptocurrencies gained popularity in 2020 was their ability to hedge against inflation. Most digital currencies have a strict limit on the overall amount of coins available. However, Solana does not have a continuous source of money. Inflation will reduce by 15% until it hits 1.5%, at which point it will plateau. The developers began increasing the yearly supply of SOL tokens by 8%.
Unstable network: The investment scene in Solana is still in its early stages. When the Solana Foundation announced that their network was experiencing some volatility, the cryptocurrency’s reputation fell. Because SOL has a shorter track record than Ethereum, investors may be more hesitant to buy it. This deception separates SOL from its main competitors since reliability is critical for bitcoin investors.
Solana testing phases: Despite Solana’s great future objectives, many of them are now in the beta stage. It will be impossible to estimate how effective the currency will be unless the firm executes those goals.
Conclusion
Solana is a really fascinating cryptocurrency. It distinguishes itself from the other cryptocurrencies on the market by exhibiting consistent growth and potential. Before venturing into cryptocurrency investment, investors must first choose how much risk they are ready to take.