Shiba Inu (SHIB 2.36%) was relatively unknown until Elon Musk tweeted a picture of his dog Floki on Oct. 4, 2021. Floki happens to be a Shiba Inu, and in the following days, the number of tweets mentioning the meme token soared more than 20-fold.
When the dust settled later that month, Shiba Inu had hit an all-time high of $0.00008616, representing a gain of 153,000,000% in less than one year. In other words, if you had invested $1 in Shiba Inu in November 2020, you would have made more than $1 million by the time it peaked in October 2021.
However, the meme token's price has since fallen 65%, and unless some significant new use is introduced, its price is unlikely to rebound. On the bright side, there are numerous other blockchain projects with tremendous potential.
Solana is a smart-contracts platform built on blockchain technology, a system of record used to track transactions and prevent fraud. In the context of cryptocurrency, blockchains store data across hundreds or thousands of nodes (computers), and that decentralized architecture helps secure the network. Unfortunately, it also makes it hard to scale those networks.
When verifying transactions, nodes must agree on the order in which those events occurred. To do that, nodes time-stamp transactions using the local system's clock. But as the network becomes more decentralized (i.e., more nodes are added), slight discrepancies among local clocks become more common, and it takes time to reconcile those discrepancies.
Solana solves that problem with its unique consensus protocol, which blends proof of stake and proof of history. Rather than relying on each system's local clock, time stamps are built into the blockchain itself, creating a verifiable order of events, which accelerates throughput. In fact, Solana can theoretically handle 50,000 transactions per second (TPS), and it achieves finality (i.e., it irreversibly adds transactions to the blockchain) in roughly 13 seconds.
As a result, Solana has become popular with decentralized application (dApp) developers and decentralized finance (DeFi) investors. The platform supports over 1,300 projects, including an array of video games, NFT marketplaces, and DeFi protocols. In fact, Solana ranks as the sixth-largest DeFi ecosystem in the blockchain industry, holding a 3.9% market share in terms of total dollars invested on the platform.
Even better, the developer team recently announced Solana Pay, a potentially disruptive payments solution. It bypasses banks and credit card networks, allowing consumers to pay merchants directly using stablecoins like USD Coin, a cryptocurrency pegged to the price of the U.S. dollar. And because Solana's blockchain powers the service, payments are settled in seconds, and transactions cost a fraction of a penny.
As Solana's decentralized ecosystem of applications and services becomes more popular, demand for the SOL token (the currency used to pay transaction fees) should rise, driving its price higher. That's why this cryptocurrency looks like a smart investment.
Blockchain-powered smart contracts are computer programs that run automatically when predefined conditions are met. For instance, a smart contract could be used to facilitate sports gambling. The protocol would first collect wagers from participants, and once the sporting event was over, it would credit the winner's account. More importantly, smart contracts are tamper-proof and unchangeable once deployed, meaning they are a very secure and efficient way to enforce agreements.
Unfortunately, blockchains can't interact with external systems. Doing so would compromise the very problem they try to solve (i.e., centralized control). Relying on a single external system would undo the decentralized nature of the network by creating a single point of failure. Of course, that security feature severely limits the real-world utility of smart contracts. For instance, in my gambling example, how would the protocol know who won the bet? The answer is Chainlink, a decentralized network of oracles -- entities capable of bringing real-world data onto any blockchain.
Here's how it works: Chainlink node operators (i.e., people running the oracle infrastructure) must stake Link tokens in order to participate. That ensures their honesty. Next, when a smart contract requests external data -- such as the outcome of a sporting event -- node operators bid on that job, and the Chainlink protocol selects multiple oracles to fetch the data. The keyword is "multiple." By aggregating and reconciling data from several sources, Chainlink can provide accurate data, without compromising the decentralized nature of the network. Once complete, node operators are paid in Link tokens.
Of course, Chainlink isn't the only oracle network, but it is the most popular by a long shot. It has over 1,100 partnerships, including 90 blockchains and over 550 DeFi products, while its next-closest competitor -- the Band protocol -- has less than 60 total partnerships. In other words, Chainlink is virtually unrivaled.
And in the future, assuming dApps and DeFi products continue to gain popularity, more smart contracts will likely call upon Chainlink oracles for data. In turn, that will create demand for the Link token, driving its price higher.