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Solana (SOL) is a leading Layer 1 blockchain in the crypto industry among today’s most innovative and fastest-growing blockchains. Since the launch of SOL in April 2020, the token has experienced immense growth. In January 2021, the token price was approximately $1.50 and rose to just over $230 in late 2021, making it the 4th largest cryptocurrency globally with a market capitalization of around $70 billion. However, the crypto collapse of 2022 pushed the token down to around $40 in the summer of 2022.
The Solana ecosystem allows users to interact with various decentralized apps (dApps) via the SOL token. Developers at Solana have placed a heavy emphasis on building decentralized finance (DeFi) projects like Raydium. Raydium is a full-featured dApp that allows users to trade, yield farm and provide liquidity for any token. Moreover, some apps allow users to buy and sell non-fungible tokens (NFTs), such as Solanart, the first and largest NFT marketplace on Solana. On Solanart, you can avoid thousands of dollars in gas fees by buying, selling or minting NFTs on Solana versus Ethereum. Solana is rapidly developing a wide range of dApps, including games that reward players in SOL, crypto wallets and dating apps. Increasing token utility and developer activity should increase buying pressure on SOL for the foreseeable future.
How Is Solana Secured?
The Solana platform uses the SPL protocol, the token standard of the Solana blockchain, similar to the ERC20 token standard of Ethereum. Governance on the Solana network combines proof-of-stake (PoS) and proof-of-history (PoH) consensus mechanisms. Solana can create historical records with associated proofs of time using PoH. The network features 200 physically distinct nodes with the ability to achieve more than 50,000 transactions per second.
SOL is the native cryptocurrency of Solana, which functions as a utility token. Staking and paying transaction fees when making transfers or interacting with smart contracts on the network requires the use of SOL. A part of the network’s deflationary model is to burn SOL, and token holders can become network validators. Similar to Ethereum, Solana allows developers to develop smart contracts and create projects based on its protocol.
Currently, more than 1,000 validators participate in the Solana mainnet beta located in over 100 cities across more than 2 dozen nations. The Solana blockchain network design facilitates fast transactions and provides high throughput. With its unique method of ordering transactions, it can achieve more outstanding performance.
Risks of Investing In Solana
Solana (SOL) is a rapidly-growing, legitimate crypto project supported by top companies globally, such as Apple.com Inc. (NASDAQ: AAPL), Qualcomm Inc. ( NASDAQ: QCOM), Intel Corp. (NASDAQ: INTC) and Alphabet Inc. (NASDAQ: GOOGL). A significant number of projects are now using the Solana blockchain. It is important to note that the Solana blockchain is not used in practice regularly, so many judgments about it are evaluative. Additionally, much of the inherent risk associated with cryptocurrency trading comes from its volatility. A sudden change in market sentiment can result in a sharp and sudden movement in price. At present, cryptocurrency regulations being put in place by governments are still unclear.
Nevertheless, cryptocurrency is receiving increasing attention. One question is whether its classification is as a commodity or as a virtual currency. In a smart contract, errors and hacking could occur, and there is no complete way to prevent human error or technical glitches.
Before investing your hard-earned dollars in a project, it is good to research the team, the technology and the token economics. Instead of investing in a project based on hype, consider finding digital assets with a specific use case. In addition to paying fees and staking, new SOL use cases are being brought forth by apps built on Solana. For example, Chainvote is developing a DeFi voting app using SOL tokens to vote in corporate governance.
Investors can see that any market can take a turn for the worst almost overnight, even if the token they’ve invested in did nothing wrong. That is no more evident than with the collapse of UST as it lost its $1 peg. This event brought down the whole crypto industry, and it takes time for the market to recover from circumstances such as these.
Is Solana Safe?
Developed by Anatoly Yakovenko, the Solana platform became available in 2017. Before founding Solana, Yakovenko was an employee of Qualcomm and has extensive experience with compression algorithms, following his previous role at Dropbox Inc. (NASDAQ: DBX) as a software engineer. As part of their collaborative efforts, Eric Williams and Solana’s Chief Technology Officer, Greg Fitzgerald, brought forth a new method of dealing with traditional scalability limitations of legacy blockchains like Bitcoin and Ethereum. The Solana white paper, published by Yakovenko, describes PoH as a means of speeding up both proof-of-work (PoW) and PoS-based blockchains.
Solana is the brainchild of developers from some of the world’s most renowned companies like Microsoft Corp. (NASDAQ: MSFT) and Twitter Inc. (NASDAQ: TWTR). Hsin-Ju Chuang, Jeffrey Levy and Raj Gokal are among notable members of the Solana development team that joined this project to address legacy blockchains’ inefficiencies and support the transition of blockchain technology into the mainstream.
Several smart contracts for decentralized exchanges (DEXs) are offered by Solana. However, they represent a significant risk because, unlike centralized exchanges, they do not have a mechanism for recovering lost, stolen or misplaced funds. An absence of a Know Your Customer (KYC) process or a way to void a transaction means that the account owner may not be able to recover their assets if a problem occurs. Blockchain technology, which stores and processes transactions in smart contracts without owners and overseers, is incompatible with refunds, so users cannot usually retrieve their assets when issues or hacks occur.
Where To Invest in Solana
The Solana cryptocurrency has established itself in the market, so no complicated procedures are necessary to acquire it. SOL tokens are available on various crypto trading platforms, including Coinbase Global Inc. (NASDAQ: COIN) and eToro. For those new to crypto markets, Coinbase, a centralized exchange, is a straightforward and excellent choice. It is advisable to examine several exchanges since each has unique advantages to offer.
- Social Investing
Solana Hacks
A couple of days of intermittent network failures have taken their toll on the Solana project. In September 2021, an attack related to Denial of Service (DoS) affected the network, making services inaccessible to users. Another occurred in January of 2022, causing the token to tumble almost $20 in value.
In a tweet, the blockchain platform acknowledged that its mainnet beta was experiencing intermittent instability. The devastating cyber-attack caused a prolonged network outage that left transaction validators unable to produce new blocks for hours at a time.
SOL’s price dropped by over 26 percent due to the unexpected outage in September of 2021. A team of Solana engineers attributed the DoS attack to resource exhaustion on the network resulting from bots flooding the network with 400,000 transactions per second. The increased demand caused the network nodes to shut down.
The influx of transactions stemmed from increased publicity surrounding the Grape Initial Dex Offering (IDO), contributing to unprecedented demand. During the outage, community members criticized Solana’s semi-centralized construction, which allows the blockchain to operate at higher speeds due to its semi-centralized structure. Twitter users have criticized Solana for being one of the most centralized projects within the blockchain industry. Some believe that financial cartels seeking to control crypto own most of the tokens, making the project easier to manipulate.
Best Hardware Wallet for Solana
It is advisable to store your SOL tokens in a secure wallet. Wallets that are offline or cold and those that are online or hot are available. Ledger and Trezor, 2 of the most secure cold wallets, are not connected to the internet and, therefore, are less vulnerable to hacking. SOL tokens can also be stored in the Solflare wallet.
- ERC-20 tokens
Best Hardware Wallet: Ledger
Among the best hardware wallets for securing your digital assets is the Ledger wallet. Although Ledger devices can store SOL coins and Solana assets, the Ledger Live app does not support Solana accounts. Benzinga recommends using Solflare with your Ledger device to create your first account. The Ledger device protects accounts created through Solflare.
Bonus section: Upon its release in August of 2021, the cryptic teaser for Star Atlas, a AAA-level crypto game, set the crypto space ablaze with excitement. Star Atlas is a Massively Multiplayer Online (MMO) game set in the year 2620. In the game, you earn in-game currency ($ATLAS and $POLIS), buy anything from ships to space stations and embark on missions. Solana’s blockchain games may enhance the utility of the SOL token and increase demand for it.
Cryptocurrency Market Outlook
Cryptocurrency’s total market capitalization is in a state of flux. Bitcoin’s price has not recovered they way some thought it would. The price of Ethereum (ETH) is experiencing similar trouble. The current crypto prices are below:
Is Solana a Safe Investment?
Even though Solana is a relatively new project, it has delivered on its promises of speed and scalability. Investors have also found the token price’s performance attractive. Investors need to remember that network adoption and usage are still in their infancy. As traffic volumes increase and more use cases emerge, it will be easier to estimate Solana’s impact on the cryptocurrency world because a fast network is most beneficial when more people use it.
Frequently Asked Questions
Is Solana a good investment?
You can turn Solana into a good investment if you do your research and budget properly. Crypto investments are not for everyone, and your situation could change at any time.
Should you use Solana to diversify your investments?
You can use Solana to diversify your investments, but you should only choose Solana if it aligns with your situation and portfolio.
About Tyran Christian
His expertise is in blockchain technology and cryptocurrencies.