Is Solana the real Ethereum killer?

Its price is up an extraordinary 40 times over 12 months, and it’s not all hype. There’s some brilliant technology behind this exceptional surge.
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Solana came from virtually nowhere to No 8 in the crypto market cap rankings in the blink of an eye. In February, Solana was ranked number 42.

With a market cap of around $34 billion, it shouldered past Polkadot, USD Coin and Uniswap in the last few weeks and looks to be on an absolute tear. The price is up 40-fold over the last 12 months, from $3.50 to $140 last week. It’s been billed as the ‘real Ethereum killer’ (Cardano and Polkadot being two other contenders for this title) and with good reason.

Here’s why there’s so much excitement about Solana (SOL): while the Bitcoin blockchain can handle about seven transactions a second, Ethereum (ETH) can handle 30 and Solana – wait for it – around 65 000 a second.

By way of comparison, Visa card is reputed to be able to handle 24 000 a second, but these transactions only settle several days afterwards, meaning the actual transfer of funds from one bank account to another is delayed. SOL settles in real time, in fractions of a second. ETH is undergoing a major upgrade called ETH 2.0 to improve its transaction speed and reduce costs, and the next target is to reach 100 000 transactions a second. But it’s still a long way from that.

We asked Brett Hope Robertson (BHR), investment analyst at crypto investment platform Revix, to explain Solana and why it has been on such a tear.

What is Solana and what is it trying to accomplish?

BHR: Though Solana was first conceived in 2017, it was only launched in 2020 by the Solana Foundation. The main person behind Solana is Anatoly Yakovenko, a highly regarded engineer who previously worked at Dropbox and Qualcomm. Yakovenko teamed up with another colleague from Qualcomm, Greg Fitzgerald, and they launched Solana Labs.

Ethereum went live in 2015 as an open-source blockchain project that was decentralised and would allow for the execution of smart contracts. It’s a brilliant invention that really heralds the beginning of a new financial architecture for the world. One of the innovations introduced by Ethereum is decentralised finance (DeFi) where you can borrow, lend and earn interest on your cryptos, all completely outside the banking system, and all without the need for an intermediary. The range of financial products that are about to be unleashed to the world by this development will be staggering in its scale and will bring the world much closer to the goal of bringing financial services to the masses.

Solana solves many of the weaknesses baked into Ethereum, notably its ability to scale, and the costs of transacting.

If you are planning a new financial architecture to run the world, it’s now fairly clear that blockchain is the way to do it, and Solana is a real contender. Solana is the name of the blockchain and SOL is the token on which it runs.

Solana has been called the ‘Ethereum killer’ – like Cardano and Polkadot. Explain what this is all about.

BHR: The blockchain is a ledger that records all transactions, not on a single computer or node, but on thousands of them (which is why it’s called a ‘distributed ledger’). What makes these blockchains theoretically unhackable is that thousands of computers must coordinate with each other (almost) simultaneously to understand when transactions are validated and blocks are added. Although fully distributed, this creates chokepoints that slow the speed of the network. Bitcoin is attempting to solve this with the Lightning Network, which sits on top of the Bitcoin blockchain and allows vastly more transactions than seven per second to be processed. Ethereum is attempting to solve its choke point (and the consequent high costs of transacting, also called ‘gas fees’) through the ETH 2.0 upgrade.

This leaves us with the ‘Ethereum killers’ – Cardano (ADA), Polkadot (DOT) and SOL being the main ones. All of them have been designed in such a way as to address Ethereum’s weaknesses, being its lack of scalability and the high costs of transacting.

Solana has solved this with some neat technology. Without going too deep into the technical aspects behind this, one of the reasons its competitors struggle to achieve higher transaction volumes is often due to the fact that miners or validators need to communicate with each other to figure out how to order blocks. Solana has solved this with a system of cryptographic time-stamping that currently can accommodate 65 000 transactions a second, which is astonishing. Nobody has come close to this, including Visa.

This is why the SOL price has been blowing up. There is a race to dominate the DeFi space and many believe that SOL may be the one to do it. That said, ETH, ADA and DOT have also been on a tear in the last few weeks. The race is still wide open.

What are the costs of transacting on Solana?

BHR: This is the amazing part. It currently costs between $0.00025 and $0.0001 per transaction. Compare this with the roughly 3% cost of transacting via Visa, $5 on Bitcoin, or $10-$65 on Ethereum (depending on network congestion).

Ethereum fees should come down to the extent that it solves the issues around scalability, but for the time being, they are very high.

Does Solana stand a chance of winning this race to dominate decentralised finance?

BHR: It does, and many people believe it has some clear technological advantages, but the race is still wide open. Yet, many die-hard blockchainers would debate Solana’s decentralisation and air on the side of it being more centralised. Many crypto investors believe Solana is a prime candidate to dominate this space because of what it is building and the names behind it. With one of those names being the man himself, Sam Bankman-Fried (SBF). SBF’s stamp of approval is a big deal in the crypto industry and many hail him as the most prominent crypto investor in the world.

It needs wider adoption by developers, and there is evidence this is happening. Solana has seen a 130% growth in its projects over the last few months (up to 181 projects). Solana’s total value locked in smart contracts is now north of $3.5 billion, growing 200% in the last month.

How can South Africans purchase SOL?

Revix will launch SOL on Friday September 10, and like our recent launch of Polkadot and Cardano as standalone crypto investments, those who buy SOL using ZAR or GBP during the week (September 10 to September 16) can do so without paying any fees.

Revix now offers multiple stand alone cryptocurrencies, from Bitcoin and Ethereum to Uniswap and Polkadot and many in between.

In addition to this, Revix offers ‘bundled’ products:

  • The Top 10 Bundle: which spreads your investment equally across the 10 largest cryptocurrencies as measured by market cap
  • The Smart Contract Bundle: which spreads your investment equally across the Top 5 smart contract cryptocurrencies.
  • The Payments Bundle: which spreads your investment equally across the Top 5 cryptocurrencies focused on payments. Giving you balanced exposure to these crypto sectors.

About Revix

Revix brings simplicity, trust and great customer service to investing. Its easy-to-use online platform enables anyone to securely own the world’s top investments in just a few clicks.

Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.

For more information, please visit www.revix.com

This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

Brought to you by Revix.

Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.

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