Is Solana a Good Investment in 2022? Explore its 5 Pros and Cons


Solana

Solana has been the best performing crypto in 2021 and might continue to grow beyond expectations in the future

Solana has been a top performer in 2021, rising through the ranks of altcoins to become the fifth-largest cryptocurrency in the world. According to coinmarketcap, the SOL’s market cap currently stands at US$500.20 billion, and its growing community of investors is excited to witness how Solana’s technology compares to market leaders like Bitcoin and Ethereum. Even though crypto is relatively a newcomer in the market, investing in Solana has been increasingly gaining momentum, despite its extreme volatility. But there are still many crypto traders who are unsure about Solana’s winning streak and contemplate investing in it. In this article, we have listed 5 Solana pros and cons for investors to decide if Solana is a good investment for 2022 or not.

 

Pros

  • Fast transactions and low fees: Crypto enthusiasts believe that Solana is Ethereum’s biggest rival. ETH can currently process 14 transactions per second (TPS), whereas SOL can support 50,000 TPS. Ethereum is converting from a proof-of-work consensus algorithm to a proof-of-stake since the gas fees are quite expensive. But SOL still has the edge on transaction speeds and costs.
  • Solana has the third-largest futures market: Solana currently owns the third-largest futures open interest, which is the most relevant metric in derivatives contracts. The aggregate derives the total number of contracts held on its network by market participants regardless of its recent trading capacity. Despite its sharp dive in price value in early November, its current open futures interest held its previous positions.
  • NFTs and smart contracts: The NFT industry has gone wild over the last year. The non-fungible tokens became a high-growth industry opportunity followed by epic sales hosted by eminent digital artists. Leveraging this expanding industry, Solana jumped into the market to share the NFT option. Solana is gaining market share with Solanart, the NFT marketplace running on the network. One of the biggest advantages for NFT fanatics using this platform is its minimum fees and transaction speeds.
  • Solana leads in TVL, users, and derivatives market: Undoubtedly, there has been an incredible amount of activity going on in Solana’s on-chain data and derivatives market. The network’s TVL has increased over 15% in the last six months. It seems to be quickly closing the gap between TVL, active users, and the derivatives market.
  • There is a strong institutional attraction for SOL’s ecosystem: Solana’s market cap is more than the doubled value of Avalanche and Terra. The year 2021 has presented itself with strong evidence about SOL’s growing investor community, and with growing investor adoption, comes enhanced institutional adoption.

 

 

Cons

  • Solana is not decentralized enough: Some crypto enthusiasts believe that there might not be too many disadvantages of investing in SOL, but this feature of the crypto is particularly considered as its biggest con. The ETH network has over 200,000 validators, but the Solana network only has 1,000 validators to date. The more the number of validators, the more secure the network.
  • Fewer projects: Ethereum’s first-mover advantage means that the network has more projects than Solana. SOL claims to have about 350 projects on its network, including decentralized finance, NFT projects, and gaming apps. As more investors will become aware of the crypto’s fast transactions and low fees, more new projects may choose SOL over ETH.
  • Inflation: Cryptocurrencies became popular in 2020 due to many reasons, and one of the many reasons was to use them as a hedge against inflation. Most digital currencies have a hard cap on how many coins will ever exist in total. But Solana has no fixed supply of coins. The creators began increasing the yearly supply of SOL tokens by 8%, which means that the inflation rate will decrease by 15% until it is 1.5%, and then it will cease to decrease beyond that point.
  • Unstable network: Solana’s investor community is still in its nascent stage. And with a shorter track record than Ethereum, investors may not be easily convinced to buy SOL over Ether. The crypto’s reputation took a hit when the Solana Foundation tweeted that its network is experiencing some instability. Since reliability is key for crypto investors, this con sets SOL back from its biggest rivals.
  • Solana’s testing phases: Solana has big plans for the future, but many of those plans still remain in beta testing. Until those plans are put into action by the company, it will not be possible to analyse how successful the crypto might become.

Solana is an impressive cryptocurrency. With thousands of cryptocurrencies in the market, it stands apart by showing consistent growth and potential. But investors estimate the value that they are safe to risk and then dive into experimenting with their lucks in crypto investments.

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