As the world's second-most valuable cryptocurrency, Ethereum certainly has some clout in the world of digital assets. Since its launch in July 2015, the top programmable blockchain has skyrocketed more than 100,000%, a return even Bitcoin can't match during the same period. 

Following in the footsteps of Ethereum are other blockchains that have smart-contract functionality, are attracting developers, and are building out use cases. Solana (SOL 1.28%) is one that stands out, and it's starting to make a name for itself in the cryptocurrency space. Plus, it still has the potential for outstanding returns in the years ahead. 

If you missed out on Ethereum, you might want to take a serious look at Solana. 

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Overview of Solana 

Publicly launched in April 2020 by former Qualcomm engineers Anatoly Yakovenko and Greg Fitzgerald, Solana is trying to solve some of Ethereum's biggest problems, particularly when it comes to speed and scalability. Solana has skyrocketed more than 12,000% in value in its short history, and it is now the eighth-most valuable cryptocurrency in the world with a market cap of more than $35 billion.

Unlike Ethereum (although an upgrade is in the works), Solana operates on a proof-of-stake consensus mechanism. This simply means that holders of SOL, Solana's native token, can stake their holdings in order to validate transactions (and earn rewards) on the network. It's more sustainable and energy-efficient than the proof-of-work method and its huge need for computing power used by Bitcoin and Ethereum. 

But Solana has an innovative feature, called proof of history, that allows it to theoretically process as many as 50,000 transactions per second at an average cost of fractions of a penny. Proof of history basically adds a time stamp to each block, which eliminates the need for all the computers on the network to agree on the chronological order of transactions. It's a special characteristic that separates Solana from other cryptocurrencies out there. 

DeFi paradise 

A cryptocurrency's long-term relevance depends entirely on its potential to create real-world use cases. Solana, with its fast transaction speeds and low costs, is a promising blockchain for the development of decentralized finance (DeFi) protocols. 

DeFi hopes to disrupt the outdated, expensive, and slow traditional financial services industry by removing the need for intermediaries. Think of saving and borrowing without a bank controlling the entire process or charging high fees for basic services. Rates offered by top DeFi services like Aave and Compound can be much more favorable for consumers. However, because they both run on the Ethereum network, they are limited by its slow transaction processing times, as well as expensive "gas" fees. 

This scenario makes Solana, and its strengths, an extremely attractive blockchain protocol to help bring DeFi, the most promising cryptocurrency use case, to the mainstream. For example, Serum is a decentralized exchange that emphasizes speed and low fees. And it's the most popular decentralized application on Solana, with roughly 10.1% of the $8.5 billion in total value locked (the amount deposited in DeFi protocols) on the network. 

And the introduction of the Solana Pay platform, a payment protocol meant to create a seamless peer-to-peer connection between merchants and consumers, is a catalyst. Solana Pay can revolutionize how merchants communicate with customers, and it can introduce new opportunities to build loyalty, offers, and rewards. 

There are still risks 

But because this is still a novel technology, and because DeFi users aren't protected by insurance, the risk of losing your deposited funds is always present. Just last week, Wormhole, a bridge that connects the Ethereum and Solana blockchains, was exploited by a hacker who stole more than $320 million worth of wrapped Ether, the coin that powers the Ethereum blockchain. It's a difficult lesson that proves just how much safety and security is still lacking when it comes to digital assets. 

Nonetheless, Solana shows real promise to become a major winner in the cryptocurrency industry. An analyst from Bank of America even said that Solana could become the "Visa of the digital asset ecosystem." The analyst, Alkesh Shah, thinks Solana is optimized for micropayments and gaming, and that it will take market share from Ethereum. That's not a bad endorsement. 

For those who missed out on Ethereum, Solana makes for a worthy addition to a well-diversified, long-term-focused portfolio.