What is Solana?
Solana is a platform that aims to build a high-performance decentralized network. The team behind Solana is focused on creating a platform that can scale to handle a large number of transactions per second (TPS) without sacrificing decentralization or security.
One of the critical features of Solana is its use of Proof of History (PoH). This novel consensus algorithm allows the network to achieve high throughput while maintaining low latency. Moreover, Solana is designed to be highly energy efficient, making it more environmentally friendly than proof-of-work blockchain networks like Bitcoin, Litecoin, or Ethereum Classic, which dispense a lot of energy to keep their platforms operational and, most importantly, secure against malicious attacks.
The idea to develop a superior alternative to Ethereum was first proposed in 2017 by the founder of Solana, Anatoly Yakovenko. However, it took three years before this was actualized. Solana launched in March 2020, coinciding with the great crypto boom that saw the platform draw the attention of developers and users attracted by the project’s promise of fast execution, low fees, and zero congestion. At this time, Ethereum was especially facing issues with fluctuating Gas fees which impacted interaction and user experience.
SOL is the native currency of the Solana blockchain. It is used mainly for paying network fees as a utility. However, the coin can also be staked in various protocols for yield. Considering the performance of SOL over the past few years, the coin is available for trading in most cryptocurrency exchanges. For this reason, SOL remains liquid and preferred by most traders who closely watch its performance, expecting a repeat of the great SOL rally of 2020 to 2021.
Factors Affecting SOL Price
There are a number of factors that can affect the price of SOL:
Prevailing Market Conditions: Solana, like the rest of the crypto market, is sensitive to market forces. Also, being an altcoin, the coin’s level of liquidity is relatively lower than Bitcoin and other established coins, including ETH, the native currency of Ethereum. In trending markets, SOL prices will outperform coins with deeper liquidity. However, in tumultuous conditions, the coin tends to shed value at a faster pace.
Solana mainnet Beta Stability: Since launching its mainnet beta, Solana continues to post success. For instance, because of its relatively low, near zero fees, SOL remained in demand, forcing prices upwards during the bull market of 2020 to 2021. However, because of many outages caused by DDoS attacks, and coupled with falling market prices, the coin plunged as investors, protocols, and traders pulled out capital searching for safety.
Network Activity: Solana is the home of DeFi, NFTs, and metaverse activities. Protocols are attracted to Solana because of its high throughput performance and negligible fees. When compared to Ethereum, Solana can be a suitable platform for protocols whose user base are sensitive to high trading fees and scalability. How SOL performs is also directly tied to network activity. The more protocols opt to launch on Solana, the higher the demand for SOL, the token used for paying fees, and this affects its market valuation in the secondary markets.
