If You'd Bought $1,000 Worth of Solana 1 Year Ago, Here's How Much You'd Have Now

$1,000 invested in Solana a year ago would now be worth almost enough to buy a house in West Virginia.

Solana (SOL) is one of the superstar cryptocurrency performers of 2021. Its price has gone up over 10,000% in the past year -- massively outperforming more established cryptos like Ethereum (ETH) and Bitcoin (BTC).

If you'd bought $1,000 of Solana on Nov. 21, 2020, it would be worth a whopping $110,133 today, according to CoinMarketCap data. You can do a lot with $100,000 -- including almost paying for a typical house in West Virginia.

To put that in context, here's how other cryptocurrencies stack up:

• $1,000 of Bitcoin bought a year ago would be worth around $3,150 today.
• $1,000 of Ethereum bought a year ago would be worth almost $8,400 today.
• $1,000 of Dogecoin (DOGE) bought a year ago would be worth almost $75,850 today.

What's behind Solana's rapid growth?

Solana is one of several smart contract cryptocurrencies that have been dubbed potential "Ethereum killers." Smart contracts are tiny pieces of code that live on the blockchain and power many popular decentralized applications (dApps).

Ethereum was the first crypto with smart contract capabilities, but its network is now very congested and users face high transaction costs. As a result, both investors and developers are looking for newer, faster, cheaper, more scalable cryptos -- and Solana is a popular choice.

Here are some of the reasons behind its stratospheric gains:

1. It's the fastest cryptocurrency on the block

Solana can process around 50,000 transactions per second (TPS) which makes it one of the fastest cryptocurrencies available. In contrast, Ethereum can only process about 15-45 TPS, at least until it completes its upgrade to Eth2.

2. Transactions cost a fraction of a dollar

Fees fluctuate, but according to Solana's website, the average transaction fee is currently around $0.00025. Looking at the recent transactions on Solana, each one cost around 0.000005 SOL, which is about $0.0011 at time of writing. Since Ethereum fees can go over the $100 mark at times of heavy demand, this is a substantial difference.

3. It has over 500 projects on its network

There are a lot of programmable cryptocurrencies available right now. One good way to see which ones have legs is to look at the number of projects and applications that are running on their networks. Solana hosts over 500 projects, including NFT apps, decentralized finance, and other tools.

Buying Solana today

It's always good to be cautious about buying a cryptocurrency that's just hit another all-time high. But the more important question is what you believe that token will do in the long term. If you think Solana will continue to outperform its competitors, then its recent highs are not necessarily a reason to hold back -- especially if you can buy one of the dips.

That said, if you're buying in the hope of another 10,000% return in the next year, you will almost certainly be disappointed. Solana may continue to do well, but it's unlikely to produce the same gains.

All cryptocurrencies carry risk, so it's important to only invest money you can afford to lose. Here are a few Solana-specific issues to be aware of:

• Potential technical difficulties. Solana has not had the same level of road testing as older and more popular cryptocurrencies like Ethereum. It already experienced one 17-hour outage in September and there's no guarantee it won't happen again.
• Over centralization. Solana will become more decentralized in time, but right now, a common criticism of Solana is that it's not as decentralized as other cryptocurrencies. Decentralization is important because it makes the network more resilient and harder to hack.
• Increased regulation. Authorities worldwide are concerned about various aspects of the cryptocurrency space, and increased regulation is inevitable. Decentralized finance applications are likely to be impacted, which will have a knock on effect on networks like Solana which host those apps.
• Even newer technology. The smart contract crypto space is evolving at a rapid pace, and we may well see another, even faster crypto emerge.

Solana is available from most top cryptocurrency apps and exchanges. As with any investment, do your own research and make sure you fully understand the risks and potential gains. Ultimately, only you know how it may fit into your overall portfolio.