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Is Solana Crypto's Hidden Gem?

By Isabelle Korman – Updated Jul 12, 2021 at 4:08PM

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This new blockchain and its token, SOL, keep climbing the crypto charts.

The Solana blockchain network has been quietly making waves by enabling online businesses to make sales and purchases online with crypto. Thanks to Solana's innovative blockchain solutions, merchants can now enjoy instant payouts, without waiting days or even weeks for funds to settle in their bank accounts. Launched in the spring of 2020, its native token, SOL (SOL -2.08%), is one of the Top 15 coins on the charts. As more companies start using its network, investors who get in on Solana now stand a better chance of striking gold in the future.

Girl investing in cryptocurrency on her smartphone.


Real utility for real businesses

Solana is a blockchain network built for speed, security, and efficiency. It combines the proof of stake consensus algorithm -- PoS for short -- with a novel proof-of-history, or PoH, system.

In PoS, the more of your own money you add to the pot, the larger chunk you get from the network's reward pool. PoS relies on having as many people staking as possible, to keep the network running smoothly and securely.   Some networks, including the popular Ethereum, approve the most expensive transactions faster than smaller ones. That's because Ethereum uses proof-of-work, PoW, giving miners the option to select the most lucrative transactions first.  In contrast, PoH is built like a clock; it records all transactions in real-time, making sure they are processed in order while speeding up the entire network.

Think of it like a traffic jam on the freeway. If the biggest cars get to push through first, everyone else has to sit and wait, and the whole roadway moves slower. Solana's approach keeps traffic running smoothly and constantly, helping its network process 50,000 transactions each second, while the Bitcoin (BTC -0.76%) network -- which relies on brawny computers racing to crack tough math puzzles in order to approve transactions -- can only handle five.

And since Solana's ultra-efficient blockchain consumes far less energy than proof of work blockchains like Bitcoin's, it can also offer some of the lowest transaction fees on the market -- less than $0.01 per transaction.  

These numbers suggest that Solana has all the makings of a successful blockchain, backed by a solid native token that is holding its own on the crypto charts, outperforming the likes of Bitcoin and Ethereum (ETH -3.51%). SOL's price is up by more than 6,000%from its all-time low a year ago.

Since that low point, the Solana project has been busy racking up game-changing partnerships. Chainlink, one of blockchain's largest smart contract networks, integrated with Solana at the beginning of 2021. And to handle its rapidly growing community, chat app Kik's native crypto token, Kin, completed the migration process to Solana at the end of 2020, resulting in 58,925,415 wallets with a positive balance on the ecosystem -- Solana's largest number of accounts by far. 

Solana's utility makes it a great choice for corporate crypto adoption. Perfectly positioned to offer fast, secure, and transparent solutions for online shopping, Solana allows businesses to get paid instantly, while customers can rest easy, knowing their card information won't get compromised. 

Small fish in a blue ocean?

Solana is picking up steam fast. In October 2020, Circle, one of the Internet's largest payment systemspartnered with Solana to enable the immediate issuing of payments of USD Coin, a stablecoin that pegs its value to the U.S. dollar. In turn, Solana delivers Circle a highly efficient ecosystem of payments, commerce, and financial applications entirely on the blockchain, all at lightning speed. 

But things get even more interesting when you remember that Circle partnered with VISA in December 2020 to let people easily spend USD Coins through Visa's network. That likely means even more people will use Solana's network to pay others and get paid, further boosting the value of SOL tokens over time.

Coins that offer utility have the best shot at rising in value. Their underlying tech needs to solve real-world problems, and that's what Solana's blockchain does. As more people sign up to the network -- and buy SOL tokens to interact with it -- its value should continue to rise.

Adding to Solana's momentum, Digital Assets AG now offers tokenized stocks -- digital assets listed on crypto exchanges -- on Solana, with shares of Facebook, Google, Tesla, Netflix, and Nvidia all available to trade at launch. Tokenized stocks give investors all over the world easy access to the U.S. stock market, and let smaller investors easily buy fractional shares if they can't afford whole ones. Additionally, users can trade tokenized assets traded 24 hours a day, rather than only when the market is open -- great if you're a night owl who loves to watch the market around the clock. 

The stock market is currently worth almost $100 trillion, which points to the massive potential of projects like Solana to gain a sizable chunk of the market share for investing transactions. If more Fortune 500 companies take the plunge into tokenized assets, early investors could stand the best chance of raking in any resulting profits. 

SOL could be a buy and hold. It's a token with real utility, at a fair price, that you can add to your crypto holdings while taking advantage of the crypto dip. But it's not a definite buy, since SOL, like all other coins, can fluctuate during bearish markets. Add SOL to your crypto watchlist so you can actively monitor its price dips and its gains, as the Solana project secures more lucrative deals in the coming weeks and months.

Keep an active eye out for any dip in SOL's price, and watch Solana's news page for more announcements that mainstream players are joining its network. Those two factors together might offer an ideal time for crypto investors to buy in.

Editor's note: A previous version of this article misstated the number of accounts Kin migrated to the Solana blockchain. It has been corrected. The Fool regrets the error.

Fool contributor Isabelle Korman owns shares of Bitcoin and Ethereum. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

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Solana Stock Quote
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