The last few months have been rough for crypto investors. Rising inflation and geopolitical conflict have led to a stock market correction, and that caution has spilled over into cryptocurrencies. In fact, after peaking in November, the crypto market has since fallen over 40%, shedding roughly $1 trillion in value.
However, unless this is your first rodeo, you know this sort of thing happens fairly frequently where digital assets are concerned. In fact, the crypto market actually lost 50% of its value between May 2021 and July 2021. But every time the market has crashed, it's eventually rebounded and gone on to hit new highs. For that reason, now is a good time put some money to work. And Solana (SOL 4.61%) and Terra (LUNC 3.29%) look like smart buys.
Here's what you should know.
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1. Solana
Solana is programmable blockchain built for scalable decentralized applications (dApps) and decentralized finance (DeFi) products. The project was started by former Qualcomm software engineer Anatoly Yakovenko, and his technical expertise shines through in Solana's architecture. Specifically, Solana blends proof of history with proof of stake (PoS) to achieve consensus, allowing the platform to achieve blazing-fast speeds.
Generally speaking, PoS protocols require each validator to reach agreement with every other validator on the network before a transaction can be confirmed. To accelerate that time-consuming process, Solana timestamps incoming transactions to create a verifiable order of events. That means each node (computer) can validate transactions independently, rather than waiting for consensus from every other node. As result, Solana can theoretically handle 50,000 transactions per second (TPS) and it reaches finality in 13 seconds, meaning transactions are rapidly incorporated into the blockchain.
So why invest in Solana? DeFi applications make it possible borrow, lend, earn interest, and more, all without the help of a traditional financial institutions. By eliminating those middlemen, DeFi can make financial services cheaper, more efficient, and more accessible. And Solana's scalability makes it particularly well-suited to achieving that goal.
On that note, Solana is currently the fifth-most-popular DeFi ecosystem, with $6.7 billion invested on the platform. Assuming its popularity continues to rise, demand for the SOL coin -- the blockchain's native cryptocurrency -- will rise as well, driving its price higher. That's why this cryptocurrency looks like a smart buy.
2. Terra
Terra is a programmable blockchain built to make financial services and payments more efficient. It's built on the Cosmos Hub, a protocol that aims to connect thousands of interoperable blockchains. That's particularly important, because Cosmos (and therefore Terra) relies on the PoS consensus mechanism known as Tendermint, which is capable of processing 10,000 TPS and finalizing those transactions in just six seconds.
Unlike most blockchains, Terra is built around two cryptocurrencies. The first is the Terra stablecoin, which tracks the price of fiat currencies -- for example, TerraUSD is tied to the price of the U.S. dollar. The second is Luna, an altcoin designed to absorb volatility and keep stablecoins at the desired price. For instance, if a sharp uptick in demand drives the price of TerraUSD above $1, the network incentivizes investors to convert Luna to TerraUSD, which increases its supply and brings its price back to $1. The system functions the same in reverse.
In other words, increased usage of Terra stablecoins leads to increased demand for Luna, which theoretically makes the altcoin worth more. For that reason, the Terra blockchain features an array of dApps and DeFi products that aim to drive demand for Terra stablecoins. PaywithTerra is a great example. The platform allows merchants to accept Terra stablecoins at checkout, and because it's built on blockchain technology -- meaning no banks or credit card networks are necessary -- merchants pay just $0.05 per transaction. Similarly, Anchor is a lending protocol that currently pays 19.5% APY when you deposit TerraUSD, a far better interest rate than you would get from a traditional savings account.
Here's the big picture: Terra is the second-most-popular DeFi ecosystem in the blockchain industry, with $25 billion invested on the platform. That's more than double the $12 billion invested at the beginning of December, evidencing its rapid adoption. Going forward, as products like PaywithTerra and Anchor become more popular, demand for Terra stablecoins will rise. And because Luna is designed to absorb price volatility, demand for Terra stablecoins should create demand for Luna, driving its price higher. That's why this cryptocurrency could make you richer in the long run.
