- Transaction volume on Solana degenerated quickly as network volume broke 1 billion on August 15th.
- Institutional investors see Solana as a good Etheruem contender.
- New NFT projects and marketplaces on Solana showcased the network use cases’ exposure from Solana’s price surge.
- Solana is vouched for by new-age blockchain endeavors that generate mass audience hype, such as FTX.
Being an “Ethereum Killer” is a cryptocurrency project’s golden ticket to stardom; however, to date, no project has managed to accomplish this feat yet. Value propositions forwarded by blockchain ecosystems orbited around the same issues: scaling and transaction speed. Within 18 months, Solana managed to stir up the community after reaching a market cap of $42 billion.
Bridging the Future
New ecosystems cannot meet market demand by simply patching and improving existing codes. Instead, alternating consensus protocols and new functionalities factor into community adoption.
Solana’s Proof of History (PoH) alters confirmation standards in the industry and makes validating decisions based on a series of events. Anatoly Yakovenko, Solana’s CEO and founder, noted that the new consensus iteration structurally improves the network’s “speed and capacity.
In an interview for Tech Crunch, Yakovenko mentioned Solana’s goal is to “disrupt Wall Street and other financial markets,” yet he believes that Etherum should succeed in order to retain the trust of cryptocurrency users.
Solana successfully deployed the Wormhole project, which fundamentally can reshape the blockchain industry by making all networks agnostic. Currently, users on Solana can transfer assets between Ethereum and Solana fast and at a low price, making the two networks interconnected to a certain extent.
Solana did not fully benefit from 2020’s DeFi trend. In hindsight, investors are recognizing the network’s fast transaction output as more dApps are deployed on Solana. According to DeFiLama data, the TVL on Solana reached $5 billion, representing an estimated 300% increase since August 1st.
Moreover, NFTs have been catalyzing products that helped Solana break into the Top 10 coins by market capitalization. Degenerate Ape Academy helped add $5.9 million or 96,000 SOLs in transactions in roughly 10 minutes after launching. Data from CoinMarketCap shows network volume surpassed $1 billion on August 16th after Degenerate Ape Academy launched and maintained a volume of over 1 billion throughout the rest of August.
Ethereum copycat NFTs such as Solpunks or Solmees have been released on Solana to facilitate faster transaction speed. Additionally, Audius, the Ethereum-based music streaming service, also announced the possibility for users to showcase their Solana NFTs alongside their Ethereum NFTs.
With new products being released and transacted on secondary markets such as Solanart and new markets such as DigitalEyes.market being piloted to facilitate the growing NFT demand, volume surged on the platform.
Yet faster transactions don’t always equate to a seamless experience. Solana’s network experienced problems. RPC services run by the foundation have experienced “intermittent issues” due to high network load. However, products that are using their own RPC endpoints have not suffered any outages or dApp delays.
On The Flipside
- Solana’s $5 billion TVL is substantially lower than the $131 TVL on Ethereum.
- The hype generated by FOMO is never a good sign for the continuous growth of an ecosystem.
- Network delays caused by RPC endpoints show Solana is not fully ready to substitute Ethereum.
Growing Institutional Demand
Osprey Funds, which previously released investment trust funds for institutional outreach for coins such as PolkaDot or Bitcoin, have filed an intent with the SEC for a Solana trust fund. Thus, Crypto Twitter seems to be on the same page as both institutional and retail investors regarding Solana’s price goal.
Mukund Mohan, a trading specialist, noted in a Tweet that “institutional demand for SOL has increased in recent weeks” as Solana is reaching new all-time highs. Moreover, Justin Sager notes that new institutional capital inflows will focus on bluechip projects.
"This cycle will be much more discriminating as institutional capital has their eyes on REAL L1 value, through-put, and ecosystem growth."
As Etheruem is becoming an upscale network and financially restrictive for new investors, institutions recognize the demand for scalable and cost-effective networks, including Solana. AlcoinMo notes:
"With $ETH and $SOL pumping into the heavens, I'd imagine institutional money will be pouring into blockchains with their own ecosystems as they look for the next #ETH 'killers.'"
While retail investors are more willing to speculate on a price with lower capital, institutional money seeks financial safe havens that can turn a profit without many risks. As an “Ethereum Killer,” Solana is well-positioned in the market to obtain added market shares and project its value. Still, the current retail narrative is similarly building onto what the industry demands:
"#Solana to 200! Change my mind."
Why You Should Care?
If people are investing in such a novel project that’s not yet proven, it can show the industry that copycat networks with little adjustments are not the solution. Instead, the industry needs to reconsider its development process to create a competitive market. And, while the price of Solana is surging due to market hysteria, a parabolic price rise might not be sustainable.