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Missed Out on Ethereum? Here's What to Buy Now

By Katie Brockman – Dec 10, 2021 at 6:00AM

Key Points

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There's a lesser-known cryptocurrency that could be a real competitor with Ethereum.

Ethereum (ETH 3.27%) is one of the hottest cryptocurrencies of the year, with a market cap of more than $521 billion -- nearly one-quarter of the crypto market as a whole. Because Ethereum is so popular, it's also one of the most expensive cryptocurrencies. It's currently priced at just over $4,400 per token, up nearly 700% over the past 12 months.

Cryptocurrency is still in its infancy, so Ethereum has plenty of room for growth. Although it's one of the highest-priced cryptocurrencies, that doesn't necessarily mean you've missed out on investing in it.

However, if you're eager to get in on the ground floor of a newer cryptocurrency, you have another option: Solana (SOL 2.95%). This investment has experienced explosive growth and even has outpaced Ethereum in some ways. It could be the next big thing in the crypto space.

Person sitting in front of a laptop and thinking

Image source: Getty Images.

Solana: Shining bright where Ethereum falls short

Each cryptocurrency has unique strengths and weaknesses, so it can be challenging to compare them against each other. But Solana and Ethereum share several qualities, and in some regards, Solana is stronger than its larger competitor.

Both Solana and Ethereum are open-source smart-contract platforms that allow developers to build projects on the blockchain. These projects include non-fungible token (NFT) marketplaces, decentralized finance (DeFi) projects, and many other types of decentralized applications (dApps).

While Ethereum is the biggest player in the dApp market, Solana is much more efficient. It can handle up to 50,000 transactions per second, while Ethereum lags at around 15 to 45 transactions per second. This speed will make it easier for Solana to scale, and it could become a strong competitor to Ethereum.

In addition, Solana is more energy-efficient than Ethereum. The former uses a proof of stake (PoS) protocol to verify transactions, while the latter currently uses a proof of work (PoW) protocol. PoS systems are far more efficient and use significantly less energy than PoW protocols, making them more sustainable over time.

Ethereum is currently transitioning to a PoS system, and that update is expected to be completed sometime next year. Once that's complete, Ethereum will be much faster and more efficient. Because Solana already uses a PoS protocol, however, it has a leg up over Ethereum at the moment.

Finally, Solana is much more affordable than Ethereum. It's currently priced at just below $200 per token, compared to Ethereum at around $4,400 per token. Solana's price has also increased by a whopping 10,000% over the past year, while Ethereum is "only" up by around 700%.

Is Solana a good investment?

Solana has many strengths and could become a major player in the crypto space. However, it's one of the riskier cryptocurrencies, simply because it's newer and doesn't have the same track record as its more established competitors.

Despite its shortcomings, Ethereum is still the second-most-popular cryptocurrency behind Bitcoin. The vast majority of dApps use the Ethereum network, so Solana will have its work cut out for it to compete in that space. Also, once Ethereum rolls out its upgrade and transitions to a PoS system, Solana may lose its biggest competitive advantage.

This doesn't necessarily mean that Solana is a bad investment, but it's important to consider how much risk you're willing to tolerate before you buy. Solana has had a fantastic year, but it's more speculative than Ethereum at the moment, making it a riskier option.

If you're willing to take on more risk for higher potential earnings, Solana may be the right cryptocurrency for you. Otherwise, there are other, less-risky options that may be a better fit for your portfolio.

Katie Brockman owns shares of Bitcoin and Ethereum. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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