In the last couple of years, we have seen an increase in the popularity of cryptocurrencies. Since the first cryptocurrency, Bitcoin, went live in 2009, the attention toward this concept has been steadily growing, but we've seen the trend explode during 2021.
According to one of the largest cryptocurrency tracker websites, the global crypto market cap is $1.13T. This is a large number, and whatever your personal opinion about crypto is, you cant deny its importance and popularity.
One of the cryptocurrencies that are among the most popular among enthusiasts is Solana. Even though it's relatively new, it gained significant popularity, and it's becoming used for various projects. However, even though its popular, it has some downsides that are worth researching.
Whether youre exploring crypto because it seems exciting or youre looking to make an investment, doing thorough research is crucial.
Solana is one of the most popular blockchain platforms. Its quite similar to the largest rival of Bitcoin, Ethereum, yet it brings some interesting novelties with it. You can buy Solana on basically any centralized or decentralized exchange and use it however you like. The token of Solanas blockchain is referred to as $SOL.
Like many popular crypto projects, Solana is open-source, which allows developers to create their own Solana tools. These apps are scalable and user-friendly, and its theoretically the fastest blockchain that you can find. If you want to become a Solana developer, you can find tutorials on their website.
While some blockchains often bring frustration because of their high transaction costs, Solana is often praised for its low-cost transactions. This is not only useful for transactions between two individuals or between an individual and an exchange but also for minting non-fungible tokens. The combination of these factors makes it one of the most popular blockchains for NFTs.
Now lets dig into more technical aspects of this blockchain. Just like Bitcoin, many of the early altcoins chose the proof-of-work system to verify their transactions. A short explanation of this concept is that a computer, in this case, a miner, defines blocks in the chain, a method that requires a lot of power.
Ethereum was the first blockchain that avoided this method and transferred to proof-of-stake, which requires 99.9% less energy, making it a better alternative for the environment. Bitcoins energy consumption amounts to the total consumption of certain countries.
Now, after Ive given you this lesson in blockchain history, lets move on to the method Solana uses(it also has something to do with history). Solana also uses proof-of-stake but with a slight improvement which makes it more scalable and efficient.
Proof-of-history is a concept that implements the order and passage of time into the digital ledger, giving every block a unique timestamp. This provides additional security for the blockchain, making it more reliable and practical for digital payments.
Advantages & uses of Solana
While the trend of cryptocurrencies has become so popular that everyone and their grandma knows about Bitcoin and Ethereum, the developers of projects on the blockchain are often talented and educated individuals. Solana isnt an exception to this, and its founders solved a significant problem by using the proof-of-history concept.
Proof-of-history is an efficient consensus mechanism that increases the security of the blockchain and helps maintain a high level of decentralization.
Because of the way that it was developed, Solana has various advantages. As mentioned before, fast-transaction speed puts it at the very top of the blockchains, and this makes it very scalable and efficient. On top of the speed, low fees associated with transactions are also an attractive aspect, as people dont have to spend extra money.
These advantages have brought a number of developers and people together, and they are all working on creating innovative applications and laying the foundation of a decentralized future. The fact that Solana exists only a couple of years yet its just as popular as various other project shows its importance.
Just like other large blockchains such as Polkadot and Cosmos, Solana was built with interoperability in mind. This means that Solana can facilitate cross-chain transactions and integrate with other decentralized applications.
So after mentioning some of the key features and benefits of Solana, I wouldnt be objective if I didnt list out some of the important concerns and downsides that people have with it. The general problem that all cryptocurrencies have is their volatility and the scams that surround them.
While the developers of Solana, Solana Labs, and Foundation are reputable, as well as their co-founder, Anatoly Yakovenko, the projects built on Solana can be fraudulent. On at least one occasion, fake NFTs were sold on a Solana-based marketplace. This isnt necessarily a problem with this blockchain, as others had similar issues, but its worth mentioning.
Digital wallets are commonly used to store Solana, and they are more convenient than the hardware ones. Unfortunately, they arent as secure as them, and thefts of Solana wallets happened.
Because of the growing popularity, the blockchain suffered from large traffic that led to increased transaction prices as well as the prolonged time it took for them to be executed. The developers addressed this issue by working on solutions such as parallel processing.
One of the most significant problems that Solana has compared to other blockchains is outages. Its tough to say that these outages are frequent, but they happened more than once. In other sections of the article, Ive mentioned some advantages that Solana had over Ethereum. However, Ethereum never had a single outage, while Solana had four in the last two years. Each lasted for at least a couple of hours and up to one whole day.
These situations led to a drop in trust in the community, as well as a decline in the $SOL price.
The word that keeps coming up when people discuss cryptocurrencies is decentralization.  Its considered one of the most important advantages of crypto over traditional money. While there are some concepts of decentralization that blockchain provides, Solana isnt completely decentralized.
A significant portion of its network is validated by validation nodes that are controlled by Solanas Foundation or Labs. Based on previous outages and problems that the network had, people are afraid for the platforms security and whether this centralized approach might compromise it.
Some unfortunate events, both internal and external, happened to Solana. However, even though they impacted the price of their token and the trust in the project, nothing is stopping it from returning to its previous state.
This blockchain has a variety of useful benefits, and it will surely attract many developers and users in the future. As the Web 3.0 industry continues to grow, Solana is surely one of the blockchains that will be used for dApps, services, NFT marketplaces, and a variety of other applications.
The reason why this is the case is Solanas fast transaction speed as well as its scalability. In the February of 2023, large companies Def Jam and Universal Music Group started their gamified NFTs, which surely impacted the project positively.
Its worth mentioning that the price of $SOL increased by 100% from the start of the year, and while nobody can guarantee that the price will continue increasing, we can only hope that large companies and personalities will continue popularizing Solana.
External factors play an important role in whether this cryptocurrency will advance. The price of all cryptocurrencies varies depending on whether we are in a bull or a bear market. Events such as FTX bankruptcy also impacted the price of $SOL, as they held millions of dollars worth of tokens.
The potential future of Solana
Nobody can be completely sure when making predictions about the further development of the crypto industry. However, the events that occurred in the world of cryptocurrencies can provide guidelines for some conclusions.
Solana is definitely a blockchain that has a lot of potentials, and even though its relatively new, it has gained a lot of popularity, and its token has become one of the most traded and worthy assets.
This project had a couple of setbacks that seriously impacted the trust that people had in it. If these problems occur again in the future, they will continue to make serious blows to the reputation of Solana, and its place in the crypto sphere can only drop. However, the positive changes that happened in the first months of 2023 can be a sign that its coming back.
About the author...
Veljko is a student of information technology that paired his passion for technology with his writing skills. He enjoys researching topics such as robotics and programming and cultivates his knowledge in philosophy, classical literature, and fitness. Veljko is currently a marketing specialist for a large NFT marketplace and launchpad called NFTb.