Update: December 06, 2021 – Solana has increased tremendously in price outperforming many other cryptocurrencies. SOL is expected to increase in price in the coming weeks and months.
Solana (SOL) is a decentralized cryptocurrency that has been on the rise ever since it was released. Almost every cryptocurrency differentiates itself by claiming to be different from others, having different purposes, or simply offering better solutions to the crypto market than other cryptocurrencies. However, not every cryptocurrency has managed to do so. Solana, on the other hand, has brought a completely different concept to the various decentralized services that are already offered in blockchain technology. That is the concept of time.
Solana has brought to life a decentralized clock that has managed to change once and for all the idea of time efficiency in cryptocurrencies. But does that necessarily make SOL a good investment? To understand if SOL is a worthy investment or not, you need to look at how it actually works, its future goals, price history, as well as SOL price factors. Let’s look at each of these Solana characteristics so you get a better idea about this promising cryptocurrency.
What Is Solana (SOL)?
The name Solana comes from a beach in California, where also the Solana project headquarters are based in. The founder of SOL is software engineer Anatoly Yakovenko, who had worked for Dropbox, Qualcomm, etc. As an expert in this field, he created Solana and released its whitepaper in 2017.
To fund the development of Solana, Anatoly Yakovenko used Initial Coin Offering (ICO), which had 5 rounds in total. In the first round, 80 million SOL were sold for around $3.17 million. In the second round, $12.6 million were raised, with 64 million SOL being sold. In the third round, 25 million SOL were sold for $2.1 million. The fourth round saw 9 million SOL being sold for $2.2 million. It is worth noting that these 4 rounds were private. The public ICO occurred in March of 2021, where 8 million SOL were sold for $1.7 million. So a total of $25 million was raised to fund Solana.
What makes Solana special is its extraordinary performance in the blockchain. As a consensus mechanism, it uses Proof-of-Stake (PoS), where the rate of mining is dependent on the number of coins that a node owns.
Usually, the PoS mechanism in cryptocurrencies entails that the likelihood of being rewarded from mining depends on how many cryptocurrencies a node owns. In Solana, this also depends on the amount of SOL you stake. Staking cryptocurrencies is the process of locking up some of your cryptocurrencies for a certain period of time so that the network can use your staked coins to ensure more security or improve the network. As an incentive to stake, nodes are usually rewarded with additional coins after the staking process is finished.
SOL is the native token of Solana. Every payment within the Solana network is done with SOL. Solana is a layer 1 blockchain, meaning that it is not related to other blockchains such as a layer 2 blockchain. Solana has a total supply of 489 million SOL, with around 270 million SOL in circulation. Because Solana has a limited supply (at least for now), SOL might not be inflationary like cryptocurrencies with an unlimited supply (i.e. Ethereum).
Solana can also be used by innovators to create and launch decentralized applications (dApps). These dApps can serve as voting systems, databases, DeFi, etc. The programming language used on Solana is Rust.
There are 8 key features (8 in total) that make Solana special among other cryptocurrencies:
1. Proof of History (PoH)
Solana achieves this high performance and almost flawless efficiency through a new concept, known as Proof-of-History (PoH). While its name suggests that it serves as a consensus mechanism, PoH is simply a mechanism that signs every transaction with a timestamp. Because of this PoH, a new Solana block is mined within a second, precisely 400 milliseconds. To put it into perspective, a Bitcoin block is generated every 10 minutes, and an Ethereum block every 15 seconds. This makes Solana a rather efficient cryptocurrency in terms of mining when it comes to its big competitors.
Similar to Bitcoin, Solana uses the SHA256 algorithm as a hash function. This type of algorithm is widely considered one of the best hash functions. But the difference between Solana and Bitcoin is that Solana uses Proof-of-Stake (PoS) while Bitcoin uses Proof-of-Work (PoW). What would that mean in terms of verifying transactions in the blockchain? While the purpose of Bitcoin nodes is to solve the hash functions and verify each transaction, Solana uses the SHA256 to sign transactions with timestamps. Through this “decentralized clock” of Solana, transactions are verified with every ‘tick’ of the clock, which is roughly every 400 milliseconds.
Furthermore, each node in the Solana blockchain is considered a Leader. Leaders rotate after every 4 blocks, and they need to verify as many transactions within those four blocks. The leader is rotated after 1.6 seconds because 4 blocks times 400 milliseconds is 1600 milliseconds. After the four blocks are verified with public keys, they are added in the blockchain as Solana Clusters, a reference to this set of transactions within 4 blocks.
2. Tower BFT
Tower BFT is considered an updated model of Practical Byzantine Fault Tolerance (pBFT). Through this mechanism, blockchain validators can vote about the nature of the blockchain and improve it. The difference is that the voting collects previous votes to ensure a faster speed.
3. Gulf Stream
Similar to Bitcoin, transactions in Solana are compiled in a mempool, which is the place where transactions stay before they are verified. Cryptocurrencies such as Bitcoin favor bigger transactions in the mempool. Gulf Stream allows Solana transactions to begin verification through other nodes that are not necessarily leaders so that the transactions are verified quicker.
Just like many other cryptocurrencies, Solana uses smart contracts to regulate the services within the blockchain. However, smart contracts in other cryptocurrencies usually run one after the other. Through Sealevel, Solana smart contracts can operate in parallel and not interfere with the codes of one another. This is also a reason why there is a high-performance level in Solana.
To improve block validation efficiency, Solana uses Pipelining as a part of its hardware structure, which directs the transaction data to certain hardware.
Yet another feature that enhances efficiency in Solana is Turbine. Turbine breaks down transaction information into smaller pieces so that the time needed to be sent to nodes is lower. Additionally, less bandwidth is used.
Cloudbreak allows the Solana system to read and interpret data at the same time by building on previous versions.
Together with Pipelining, Archivers is another hardware-based mechanism. This allows leader nodes to access important information much faster than other transaction-based information in the blockchain.
Solana can be traded in cryptocurrency exchanges. The most trusted among the Solana exchanging options is Binance. As for storing Solana, you can store SOL in hot or cold crypto wallets. Hot wallets are online wallets such as Exodus, SolFlare, or Trust Wallet. Cold wallets are hardware wallets that are considered the safest way to store your private keys. Since Solana is a new cryptocurrency, the only hardware wallet that supports it so far is Ledger Nano S.
Solana (SOL) 2021 Price Analysis
According to Coinmarketcap, Solana successfully debuted on the crypto market with a price of around $0.7 on April 11 of 2020. The price was stable in the next few weeks, with the lowest price being at around $0.50 in May of that year. It had its first significant bull run by the end of August 2021, with the price going as high as $4.7. That was roughly a 571% increase from its launch, in just a matter of months. The price was stable once again in the following months, ranging from around $1 to $2 until late December. On January 1st of 2021, the price was around $1.8. It then started its biggest bull run, among many other cryptocurrencies that followed the price pattern of Bitcoin (BTC). Within two months, the price reached as high as $17 on February 24, which then dipped to $13 shortly after that. The price began increasing again at larger rates, finally reaching its highest ever on May 3rd, 2021, with a value of $49.6. This price is a %2650 increase from the first day of 2021 and a 6980% increase from the day it was launched in April 2020.
As of May 4, 2021, Solana is ranked at 16 on the crypto market, based on the market capitalization. SOL market cap is around $10.1 billion, and its fully diluted market cap is around $18.4 billion. As such, it is safe to say that Solana has been an incredible investment for traders so far. But can we say the same about its future price? Let’s look at what the experts think about it.
Solana (SOL) 2021 Price Prediction
For 2021, Digitalcoinprice predicts an increase in the price of SOL, with the price reaching as high as $70 in September. It may drop back to $62 by December. Walletinvestor also predicts an increase in the price of SOL. The price may range from $50 to $116 in the following months. The latter price can be reached by the month of December.
Tradingbeasts have a rather pessimistic opinion about the short-term price of Solana. They predict that the price of SOL might range from a minimum of $32 to $57 by late December. A slight increase is still predicted nevertheless.
There are others who predict an even bigger increase in the price of Solana. YouTuber CryptoBusy predicts that Solana might reach the top 10 cryptocurrencies list based on its market cap in 2021. The price may reach triple digits for the first time, ranging from $100 to $150.
Long-term Price Predictions for Solana (SOL) 2022, 2023, 2024 and 2025
As for the long run, Digitalcoinprice predicts the price of SOL to reach as high as $80 in 2022, around $90 in 2023, $108 in 2024, and an average of $130 in 2025.
Walletinvestor predicts that the price of SOL may range from $96 to $233 in 2022. In 2023, it can range from $160 to $360.As for 2024, it can go from $210 to as high as $493. In 2025, the price of SOL might exceed $500 for the first time and reach $630 by the end of the year.
Tradingbeasts forecasts a range from $40 to $80 in 2022. In 2023, Tradingbeasts predicts that the price of SOL can reach $100 for the first time. In 2024, the price can range from a minimum of $73 to a maximum of $124.
What Potential Factors Can Affect the Price of Solana (SOL)?
But what affects the price of SOL that has convinced many experts of the field that the price of Solana can increase in the future?
Solana has a limited supply. Around 50% of its total supply was already distributed through the five rounds of ICO for the purpose of securing enough funds to develop the project. The rest is planned to be mined in the following years. With the supply of Solana decreasing and demand increasing, a shortage might occur, which in return leads to an increase in the price of Solana.
A lot of people stake their SOL to earn an interest in return after the staking period is finished. Since a lot of people have found staking profitable, and since more staking is needed for the purpose of developing the German database center Hetzner Falkenstein, the circulating SOL supply can decrease, which can also cause an increase in the price of Solana.
Since most of the cryptocurrencies are interdependent, an increase or decrease in Solana competitors might have an influence on the price of Solana as well.
What’s Next for Solana (SOL)? What to Expect in 2021?
Since the majority of experts predict that the price of Solana may increase, and since it has become a large-cap cryptocurrency, it is safe to say that Solana is becoming one of the best cryptocurrencies in the market. The decentralized clock has established a powerful reputation for the Solana blockchain, making a lot of investors interested in this relatively new cryptocurrency.
Is Solana (SOL) a Good Investment?
To conclude, SOL has proven to be a very good investment so far, with the price experiencing steady increases ever since it was released. Since predictions indicate that the future of Solana looks bright, Solana might prove out to be a very wise investment.
- Solana (SOL) is a decentralized cryptocurrency that has come up with the concept of a decentralized clock.
- It has eight key features that make it unique from other cryptocurrencies. One of these features is Proof-of-History (PoH).
- PoH allows nodes to timestamp each transaction to improve the time efficiency in the network.
- Solana had an increase in price ever since it was released in 2020.
- Experts predict that the price of Solana can keep increasing at the same rate in the short and long run.
- Limited supply, outage from staking, and competitors can have an influence on the price of Solana.
- Overall, Solana has proved to be a good investment.