Cryptocurrency is a speculative asset class, but leading blockchains like Solana (SOL -0.05%) and Cardano (ADA 0.16%) have fundamental advantages over rivals in sophistication and potential uses. Let's explore why their innovative designs and technical capabilities could create sustainable value for investors.
With a market cap of $23 billion, Solana is the seventh-largest cryptocurrency. And it isn't hard to see why. The blockchain's blazing-fast speed and wide-ranging use cases in fintech could help it maintain its dominant position for decades to come.
Solana is designed to be a platform for decentralized applications (dApps), which are programs that use smart contracts to offer services on the blockchain. DApps expand cryptocurrency's uses outside of simply storing and transmitting value. But the increased traffic has caused scalability challenges for the current market leader, Ethereum.
With a transaction capacity of 50,000 per second (compared to Ethereum's 15), Solana is better suited to handle large volumes of dApp activity. And over the long term, it can gain market share from its rival.
But Solana's developers haven't limited themselves to dApps. They are also aiming for real-world utility in the fintech industry.
In February, the team launched Solana Pay, a peer-to-peer payments system designed to allow merchants and customers to interact without relying on traditional financial institutions like Visa or Mastercard. Solana Pay allows users to send and receive Solana's native token, SOL, and other supported coins such as USD coin, which is pegged to the U.S. dollar. While Solana is not the first blockchain to tackle the payments industry, its industry-leading speed gives it a huge advantage over rivals.
Cardano, which is worth $22 billion, is the eighth largest cryptocurrency, just behind Solana. And while it doesn't compare to its close rival in raw technical prowess, it makes up for it with an aggressive development road map that could help it dominate the industry over the long term.
Unlike Solana, Cardano doesn't have industry-leading speed. With a transaction capacity of 250 per second, it manages to beat Ethereum, but it is hardly at the bleeding edge of blockchain technology. That said, investors should bet on Cardano's future, not its present.
Its developer, Input Output Hong Kong (IOHK), has outlined a multiphase strategy for scaling up the platform. The first three phases, named Byron, Shelly, and Goguen, focused on launching the platform, made its basic design, and launched support for dApps. The next phase, Basho, will focus on scalability.
IOHK suggests that the technologies involved in Cardano's Basho phase could potentially bring its transaction capacity as high as 1 million per second. But the developer stresses that this is an aspirational goal. And it plans to scale up the platform based on demand.
Down but not out
The total cryptocurrency market has fallen by about a third to $1.4 trillion so far in 2022. But this isn't the time to jump ship. Crypto has a track record of bouncing back from similar challenges. And investors should look at this as an opportunity to scoop up quality assets at a discount.
Solana and Cardano look poised for long-term success because of their industry-leading technical capacities and active development teams.