What Is Solana & Why Is It So Popular?

Solana is a Layer1 blockchain that launched in 2020 with an ICO (Initial Coin Offering) price of $0.22. The project was slow to take off. However, within a very short period, Solana exploded and eventually entered the Top 10 cryptocurrencies according to market cap. Solana is an established high-speed blockchain favored by NFT and memecoin traders. Centralization concerns, however, do pose a threat to crypto purists.

How To Find Altcoin Gems Before Everyone Else

Unless you are actively seeking out altcoin gems, you are not going to find them. You need to study price action, market cap, and other metrics to identify potential gems. How else will you spot them? Now and again, when the market allows it, I go on a bit of a deep dive for potential altcoin gems. This will involve me browsing CoinGecko and some of the exchanges I use to find under-the-radar projects. I also use this time to assess which projects are worthy of further investment and to add to existing positions if the conditions are attractive or acceptable.

I was initially intrigued by Solana because FTX adopted the blockchain. This encouraged me to begin investigating Solana to see what might lead a leading name to choose SOL over ETH, BSC, and other potential alternatives. What I discovered was rather impressive. Solana can process up to 50K transactions per second. At the time of writing my article on Solana, approximately 6 months ago, the average transaction cost was $0.00001! The average fee at the time of writing this article is $0.00025, which is still super affordable.

Scalability and cost efficiency are two of the most important factors to consider when seeking out a blockchain for mass adoption, or even just a significant user base. The ranking of Solana back then was 129, which, when you consider that SOL just broke into the Top 10, only serves to confirm how this project has absolutely exploded in just 6 months. I initially thought I had bought my first SOL position at $3, but a dive into my history today revealed it was actually approximately $0.24! In hindsight, I sincerely wish I had bought more, but at least I did manage to secure a position at those levels and am still HODLing.

How FTX Helped Drive The Next Wave Of Solana’s Growth

During the early days of FTX, the project formed a strong relationship with Binance, which they later turned on. This was one of the most important signs for me, as most projects will seek to leverage the Binance name to gain traction and rise to prominence. The move by FTX showed that not only were they not that interested in riding the Binance wave, but they were actually challenging Binance for dominance.

FTX was indeed aiming very high, and they were choosing to build their DEX on Solana. Sam would need to have a lot of confidence in Solana if he were using it as the base layer to Serum, as he challenged Binance for supremacy. This was one of the more obvious and profound signs signaling Solana’s future greatness. It triggered immediate FOMO for those paying attention.

When you look at what the Solana blockchain is capable of, and that big players such as Sam from FTX have chosen it as a base layer, it becomes pretty obvious that there is a bright future ahead. Assessing these facts and fundamentals leads me to take a very strong view regarding Solana and Solana-based projects, such as Raydium, which I also wrote about 6 months ago.

What Is The Layer1 Effect?

The typical effect is now busy playing out on the top projects built on Solana. After DOT pumped, the projects built on DOT followed, such as Kusama and others. We are now seeing both Raydium and Serum pumping by more than 30% today. This is a dynamic I refer to as the Layer1 effect. Essentially, when a Layer1 pumps, projects within the ecosystem usually follow suit. 

What is capital rotation in the crypto markets? Essentially, it is the movement of capital from one niche or ecosystem to another. This is a trend that was predominant in the 2021 bull market, and a sure way to secure gains. However, it was not exclusive to 2021; rather, it reflects how capital tends to flow in crypto markets. Understanding capital rotation is key to altcoin investing, especially identifying the rotation from Bitcoin to altcoins.

Congrats to my readers who invested in Solana 6 months ago. To the content creators busy scrambling to push out content about Solana now, all the best! That’s not how alpha is discovered. You have to be ahead of the wave if you want to catch it. That’s how the game is played. At the end of the day, discovering altcoin gems is all about research and disciplined investment practices, such as risk management.

How Solana Solved Crypto’s Scalability Problem

The ICO craze in the 2017 bull market firmly established Ethereum as the leading Layer1. However, as time passed, concerns regarding Ethereum’s scalability began to surface. The bear market of 2018 and 2019 was instrumental in the birthing of the DeFi sector. As DeFi projects began hitting the market, Solana arrived! It was timely to capitalize on the DeFi narrative and to address Ethereum’s scalability concerns.

By this time, concerns had become real issues, though not severe enough for users to make a noise about. Furthermore, gas fees began to soar to unimaginable levels, ultimately excluding many DeFi participants. This also helped to quickly establish Solana as another contender for the Layer1 crown. Solana immediately began to enjoy adoption as excluded DeFi participants joined the community.

Final Thoughts

In hindsight, Solana was an amazing opportunity. However, before the price explosion, it looked like every other micro-cap. Don’t be fooled by appearances. One of the most prominent Layer1s was once a worthless micro-cap. Make sure you are watching closely, as future gems are always hidden at first.

Solana continues to go from strength to strength and has found strong backing from American financier and investor Anthony Scaramucci. Buy Solana (SOL) on leading exchanges like Binance and Bybit. Store your SOL on trusted hardware wallets such as Trezor and Safepal. All the best! See you next time!

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