2021 got off to a fast start and the latest crypto bull market saw commodities including Bitcoin (BTC) and Ether (ETH) shoot fresh all-time peaks almost regular.
Although recent price hikes are good for consumers, they raise a number of problems related to fees, transaction rates and the centralisation of what is supposed to be a decentralised environment. After mid-2020 institutional funds have been gradually pouring into cryptocurrencies and this exacerbates the problem of scalability, high transaction costs and long confirmation periods on the Bitcoin and Ethereum blockchain.
Eth2 continues to roll out, but it may also be some time before consumers can take advantage of its host of new features. This leaves the door open for other potential candidates to fill the vacuum, and a handful of layer 2 initiatives are gaining momentum in the decentralised finance sector.
Mr Solana is one such project that has made headlines in the last 6 months (SOL). Created by Anatoly Yakovenko and built a team of former engineers from internationally recognised firms, including Intel, Dropbox and Qualcomm, Solana promises to be a censorship-resistant blockchain that offers the decentralised infrastructure needed for global adoption.
Some analysts consider the project to be a future Ethereum rival and FTX exchange co-founder and CEO Sam Bankman-Fried backed the project by selecting it to host his DeFi project called Serum.
According to Bankman-Fried, Ethereum is unable to deal with the exponential development seen in the decentralised financial market and the only way to overcome the problem of scalability and transaction costs is to expand on other networks such as Solana.
Bankman-Fried claims to have thoroughly checked more than 30 of the biggest blockchain ventures, including Ethereum, until it settled on Solana, and in the past pointed to the network’s capacity to handle 50,000 transactions a second.
When asked about scaling changes for Eth2, Bankman-Fried indicated that it is already inadequate, saying that the crypto industry wants something that is “not just 100 times faster than Ethereum, we need, like, a million times faster than Ethereum.”
Solana token gains traction
Initially after an exchange listing, the SOL token traded between $0.50 and $0.91 in April and July 2020. This was before any major project updates were revealed, but on 27 July, Bankman-Fried tweeted:
“Serum is built on the @solana blockchain. Solana can process 10,000 times as much as Ethereum; and it’s 1,000,000 times cheaper. And unlike many side chains, Solana is a fully-fledged, decentralized blockchain with over 100 validators.”
Shortly after the launch, SOL saw a substantial uptick in buying pressure as and over the next two months the value and price soared as the average daily volume grew from $1 million to $41 million and the token price rose to $4.89.
As the DeFi bull run ended and the traders made money, SOL was not spared the carnage and its price fall as low as $1.21 before reclaiming the $3.00 range in the last month.
Apart from serving as an effective solution to the Etheruem network, the Solana blockchain has followed the footsteps of other networks that understand how integral stablecoins are to the development of the crypto market.
In response to the recent announcement by the OCC that banks “may use new technologies, including INVNs and related stablecoins, to perform bank-enabled functions, such as payment activities,” the Solana team tweeted that acceptance would also help SOL and the network.
The team said:
“Big news for public blockchains & stablecoins! USDC is already integrated on Solana, which is the only chain today that can settle 50k+ txns per second, with fees as low as $0.00001 per txn. Over $50,000,000 in USDC-SPL is currently in circulation!”
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