Solana was the top-performing Best Defi crypto in 2021 and may continue to perform well beyond expectations in the future. It rose through the ranks to quickly become the fifth-largest cryptocurrency in the world. According to Coinmarketcap, Solana currently has a market capitalization of US$500.20 Billion. Its growing active investor community is eager to see how Solana technology compares with market leaders like Ethereum and Bitcoin.
Despite crypto being relatively new to the market, Solana’s investment has been growing in momentum despite its volatility. However, there are still many cryptocurrency traders that aren’t sure about Solana and are considering investing in it. We have listed 5 Solana pros & cons to help investors decide if Solana will make a good investment in 2022.
Pros of Solana
- Fast transactions & low fees
Many crypto fans believe Solana to be Ethereum’s greatest rival. ETH currently processes 14 transactions per second (TPS), while SOL can process 50,000 transactions per hour. Ethereum is moving away from a Proof-of-Work (PoW) consensus algorithm to one that uses Proof-of-Stake (PoS) because the gas fees can be pretty high. SOL has the advantage in terms of transaction speeds and costs.
- Solana is Home to the 3rd Largest Futures Market
Solana currently holds the third-largest open interest in futures, the most important critical metric for derivatives contracts. The aggregate is the sum of all contracts on its network held by market participants, regardless of their recent trading capacity. Despite the sharp fall in its price in November, its open futures interest still maintained its position. It even posed a positive impact on the Solana to INR values.
- NFTs & Smart Contracts
NFTs and smart contracts have been a massive success in the market over the past year. After a boom in sales, non-fungible tokens were a lucrative industry opportunity. Solana took advantage of this growing market and entered the NFT marketplace to offer its services. Solana is growing market share with Solanart NFT marketplace. This platform provides NFT enthusiasts the most remarkable advantage: it charges minimal fees and speeds up transactions.
- Solana Leads TVL, Users, and Derivatives markets
There has been a remarkable and stunning amount of activity in Solana’s on-chain data and derivatives markets. The network’s TVL increased by more than 15% in the past six months. It appears to be closing the gap between TVL and active users and the derivatives markets.
- SOL’s Ecosystem has Strong Institutional Appeal
Solana’s market capitalization is greater than Terra’s doubled value. SOL’s growing investor base has been demonstrated by substantial evidence in 2021. With increasing investor adoption comes enhanced institutional adoption.
Cons of Solana
- Solana Does not Have Enough Decentralization
Some crypto-lovers believe there are not too many downsides to investing in SOL. However, this is the most significant con. Networks are more secure if they have more validators. While the ETH network boasts over 200,000 validators, the Solana network has only 1,000 validators. If you want an excellent crypto platform with a good enough number of validators, you can also buy Litecoin in India, besides Ethereum.
- Less projects
Ethereum’s first-mover advantage means the network has more projects than Solana. SOL claims that it has 350 projects in its network, including decentralized finance and NFT projects. SOL may be preferred over ETH by more investors as they will soon become more aware of its fast transactions and low fees.
Inflation cryptocurrencies were popularized in 2020 for many reasons. One reason was to hedge against inflation. Many digital currencies have a hard limit on the number of coins that can be created. Solana does not have a fixed supply of coins. Creators increased the annual supply of SOL tokens to 8%. This means that the inflation rate will fall by 15% until it reaches 1.5%. After that, it will stop decreasing beyond that point.
- Unstable Network
Solana’s investor community remains in its early stages. Investors may be less likely to choose SOL over Ethereum because of its track record. When the Solana Foundation posted that its network was experiencing instability, it caused a major blow to crypto’s reputation. This con puts SOL behind its largest rivals because reliability is crucial for crypto investors.
- Solana’s Beta Testing
Solana has excellent plans for the future, but many of these plans are still in beta testing. It is impossible to assess how successful crypto will be until the company implements these plans.
Solana is a remarkable cryptocurrency. It stands out among thousands of other cryptocurrencies on the market because it shows consistent growth and potential. However, investors should first estimate how much they can risk, then try their luck with crypto investments.