Fool.com editor Eric Bleeker, The Motley Fool's Lead Crypto Advisor Bernd Schmid, and Fool.com contributor Chris MacDonald discuss the bull case behind Solana (SOL -0.17%) and Cardano (ADA -1.27%) and which crypto may come out ahead in the end. This clip from "The Crypto Show" on Backstage Pass was recorded on Nov. 4.
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Eric Bleeker: So let's move onto Solana.
I know there's a ton of interest. I feel like every week we've got a lot of questions about Solana. The returns are definitely there. It is up probably at this point 150-folding past year. It is seeing a lot of traction, especially in the NFT space.
As I note on this light it is now the fourth-largest cryptocurrency it has passed Cardano as of before the show, is valued at $72 billion. Popular NFTs on the platform have brought a lot of interest, but in total, it promises much higher transactions per second. Then competing blockchains, it is at stated goals right now more than 10,000 folds higher volume than Bitcoin itself can process. Also cheaper transactions.
If you're looking to purchase an NFT through Ethereum (ETH -0.02%) and you've got gas fees of $100 and Solana's fractions of a center or whatever it might be right now, you can see why this is appealing to the broader space.
I think some Solana's truly fascinating to talk about because it definitely shows the speed at which technology is moving into space. It takes a radically different approach than other blockchains. Maybe we could just talk about Solana. Where do you even start wrapping your head [laughs] on this kind of project? [laughs]
Bernd Schmid: You introduced it so well already and interesting that it overtook Cardano because Solana really has made progress.
Actually I know where to start because they do something like I say, radically different than other blockchains, at least according to my understanding, and that's something I also one of these many things that I want to understand really better. It was actually a communications engineer who came up with this, who conceived this idea. He thought the problems that blockchain have or that they try to solve is very similar to the problem that the communication networks, like a cellular network needs to solve. It's like having these many mobile phones, cellphones, communicating through a single tower, access the same frequency band, and so on. This is where it came from, and then he design something based on actually co-communications networks work for blockchain.
I'm not sure if he calls it that way. But in the white paper that they wrote, they call it proof-of history. That's essentially an algorithm that makes it possible, according to my understanding, for not having the distributed nodes like normally in the blockchain you have several nodes, it can be tens of nodes or hundreds of thousands or even more nodes which all want to produce blocks to the blockchain and validate. They need to communicate with each other.
What Solana with this proof-of history has apparently achieved is, that this competition happens on a single entity which needs to do this, and there doesn't need to be a communication happening between those nodes to process this and this makes it really fast to process these transactions.
Apparently, the security isn't suffering from that. This proof-of history algorithm that I try to introduce, it actually comes before consensus is being built in the network.
I don't understand yet exactly how these things interact, but it's essentially you have to distribute a network of nodes, but on a singular one you can't compute, the next transaction to say, and this makes it really fast. Also but that's designed, they get a level deeper. It is designed in a way that actually the hardware that needs to or process these transactions then it has high requirements, much about the exact numbers, but I think you need to have 120 gigabytes of RAM, random access memory to run such a node quite a big hard disk space and computing power as well in other networks, it's not like this. Actually due to that also a bit less, potentially significantly less de-centralized than others.
But it comes at this immense benefit of this incredible speed that this network already offers today.
Eric Bleeker: Just one note, I just wanted to go through a few quick questions. One Gator tells us that he uses uphold for Theta (THETA 3.96%). Thank you for that one Gator. Marco adds, blockchain capital is a big venture firm than less in multiple start-ups, the big money. I just wanted to get those through since it was off our most recent conversation.
Now, Chris, we introduced two weeks ago five of your favorite cryptocurrencies and you had both Cardano and Solana on them. I'm going to intentionally cause a little conflict here because it makes a little more interesting. Bernd, I think your view is you specifically prefer Cardano over Solana. Chris, what would be your argument for maybe investors who are looking for Ethereum alternatives to own both of these?
Chris MacDonald: I think like Bernd said, there's a reason why Solana has passed Cardano, it probably deservedly, I think touching on the proof-of history piece is really important, in how Solana is able to have the speed that it does and be able to theoretically process more transactions than Visa (V -0.30%) at a given point in time per second is incredible. At a fraction of a second, like you mentioned, Eric.
The speed and cost functionality of Solana has really given it a leg up. Maybe just to build a little bit on what Bernd was saying about the proof-of history as I understand it, when nodes are validating blockchains, they need to do it in an order.
What Solana has done is introduced timestamps to the equation. When 1,000 transactions are put forward, there's an exact time of when each one was put in, so there's no wait with regard to well which one was submitted first so the nodes can just process them in order. That is an absolute incredible innovation in the space. It's likely to be copied in the future, but Solana is the leader.
I think you mentioned that the various de-centralized applications that are built on top of Solana right now like the Solana NFT Marketplace, is just taking off and there's a reason for that. In addition to the NFT space, there's so many other opportunities that Solana opens up relative to the market. Right now it's among the fastest and cheapest blockchain networks out there, so that's a big competitive advantage.
I think there's a reason to be bullish on both Cardano and Solana, but there's a strong argument to be made that Solana can go much faster and much higher.
Eric Bleeker: What would be the argument in your opinion then for Cardano, just because I was a very great bullish description of Solana itself, but I'm just curious what the pros for Cardano would be in your comparison.
Chris MacDonald: I think Cardano is interesting to me in how the network scales. Cardano is interesting in that it allows for more nodes as the network grows, which allows for essentially the blockchain gets trumped up into smaller pieces, and each, as the blockchain grows.
In theory, Cardano can scale up and accelerate it's speed. Both are extremely fast in that regard. I think the argument that can be made with Cardano is it's the interoperability of the network. It's able to communicate with other blockchains using the KMZ side gene protocol. That's interesting because more crypto projects are being built across various blockchains.
We're moving, I think from a siloed crypto world to more of an integrated one, so Cardano is more of the leader in that space and so there's really solid arguments to be made for both for sure.