In recent months, a would-be challenger of Ethereum has got more traction than others: Solana. With Ethereum surging in popularity and leading decentralised finance (DeFi), which has become an influential movement in the world of cryptocurrencies, the crypto world is currently booming with so-called Ether-killers.
A lot of these Ether killers claim that they can uproot one of the biggest whales from the market. Many of the claims can be written off as a stunt to grab money and attention since, for now, there is little evidence that Ethereum's empire faces any severe threat.
So, how is Solana any different? Over 2020-22, its market value rose from just $85.8 million to over $50 billion, according to Coinmarketcap.com. “Solana has the capacity to take market share away from Ethereum banking on its differentiated design," said Bank of America Analyst Alkesh Shah in a recent note, as quoted by Business Insider.
Solana is not simply a cryptocurrency. According to the project's creators, it is a decentralised smart-contract blockchain designed to be the backbone of an ecosystem of projects, more than 400 of which exist now.
Founded in 2020 by ex-Qualcomm executives, Solana unfurled its blockchain to the public earlier in 2021. Like others contending for Ethereum's crown, Solana also offers a swifter and more robust alternative. Its rising popularity led the Solana token to soar in value and received a huge $314 million in funding from investors including Polychain Capital, a crypto hedge fund. Solana’s network allows for a theoretical throughput of 65,000 transactions per second, which is much higher than Bitcoin’s seven transactions per second and Ethereum’s 15 transactions per second, and transactions cost a fraction of the price of other blockchains, averaging at $0.00025, according to blockworks.co.
In layman's terms, Solana works like putting money into a bank. Every data entered into the system requires computational power for operation and security. Each new block containing data introduced into the blockchain requires an increasingly higher amount of energy for mining.
Like many coins, Solana has a restricted annual allocation, as coins are awarded to those helping in sustaining the cryptocurrency. Solana began by expanding its supply by eight per cent yearly, but that figure plunges 15 per cent each year until it eventually reaches 1.5 per cent yearly.
Solana may face some critical setbacks primarily because of the notion that it is a competitor to Ethereum. According to experts, if Ethereum performs consistently without hitting a severe technical snag or mismanagement from the administration's end, its position will remain strong. As of now, the platform is widespread and well rooted and its ouster is unlikely.
Nevertheless, that does not imply that there is no margin for other competing blockchains to give Ethereum a run for its money in the coming years. Solana is currently one of the several underdogs aiming to challenge the pack leader, but it has had a head start in these early days thanks to technical superiority, savvy associations, and an enduring vision.
As noted above, Solana is banking on support on several fronts from FTX, the cryptocurrency exchange established by Sam Bankman-Fried—known in crypto circles as SBF. An approval from SBF, who is also a substantial financer in Solana, is noteworthy because SBF is considered one of the godfathers in the industry. However, if such endorsement and support wear off due to unforeseeable circumstances, the Solana Giant Slayer project can come to a grinding halt, leading to a loss of millions of dollars riding on it.