Why I am betting big on Solana (SOL) – Price prediction, review, and more.

Aug 13, 2021 | Community Guides

I’ve covered the unsuitability of Ethereum in a few previous posts before so I won’t go too far into it.

In short, gas fees are ridiculous and multiple efforts to scale the network are also being greeted with added adoption which effectively makes it redundant.

I understand Ethereum is pretty much the gold standard and I am still a huge fan of it in general, I am just looking for something that delivers on all its promises as a true layer one.

We have seen a huge demand for the average retail investor wanting to participate on-chain. Whether that be borrowing, lending, yield farming or buying jpegs, people want in.

The problem as we know is that unless you are very well off and have a bottomless pit of ETH, you are going to struggle.

It isn’t just the fees either, the transaction times on Ethereum are painfully slow and if you have ever experienced a failed transaction because of this, kiss goodbye to the gas fee, in return for sweet fuck-all.

Binance Smart Chain proved the appetite for all of the above and has even recently surpassed all-time highs on unique wallets and daily transactions.

But, as we all know, despite spending November through to May being completely reckless and aping into anything that mentioned quadruple-digit APYs… it isn’t the most stable environment. Given the added underlying CeDeFi concerns, it left me personally looking for something different and a little less, you know… ctrl c, ctrl v.

Anyway, I have tried it all, Polygon, HECO, Avalanche, OKEx, KuCoin Community Chain and even Cardano… well, we all know that the last one is a lie but, it’s good for a laugh.

Are these smart contracts in the room with us now?

Are these smart contracts in the room with us now?

I’m just joking, I know they are “coming soon”…

Some have merit, others, not so much… but, I get it, particularly for the exchanges, it is inevitably going to be an on-chain world free from the regulatory stranglehold which is currently spreading throughout the globe.

Anyway, Solana…

For the uninitiated Solana is a layer one blockchain that solves what is known in the industry as the scalability trilemma.

This idea was first proposed by Vitalik Buterin, the Ethereum co-founder and it describes the tradeoffs that layer one blockchains have to weigh up when designing a network.

To increase scalability at all costs comes with deficient decentralisation and/or security. Which is seen on BSC and Polygon with BSC’s 21 validators and the Polygon multisig. 

Solana has effectively called the scalability trilemma’s bluff in creating a high-speed, low-cost, fully decentralised proof of stake blockchain.

How fast? Currently 400-500 ms per block time. For reference, BSC is 3 seconds Polygon roughly 2 and Ethereum is around about 13 seconds at the time of writing.

How cheap? $0.00025 per transaction or around 4,000 transactions for $1. With the quickest transactions on ETH setting you back around $2.61 despite the recent upgrades, you are saving roughly $10,000.

“WhO WoULd Do 4,000 TrANSaCncTIOns?” … Developers, protocols and degenerates like me.

The team claim there doesn’t need to be a trade-off when using their Proof of History (PoH) innovation.

That is quite a brainfart so in short, PoH can act as a historical record on the blockchain.

It effectively allows transactions to be time-stamped. Validators can process as many transactions as possible using Proof of Stake and then validators can arrange the transactions because PoH has enabled them to assort based on the timestamp. Clever eyy?

I have included a video as I have a habit of butchering explanations…

The use of PoS and PoH enables lightning-fast speeds of up to a tried and tested, 65,000 transactions per second, whilst retaining a theoretical upper limit of 710,000 tps.

With Visa, you are looking at anywhere from 1,700 average transactions per second whilst the Nasdaq can hit around 250,000 on its centralised server.

So you can see they could destroy Visa and that makes sense, but why am I mentioning the Nasdaq?

Well, from watching many interviews and reading as many SOL induced documents as I could, according to Anatoly Yakovenko, CEO at Solana, their original seed round pitch deck included the phrase “blockchain at Nasdaq speeds”…

So despite being labelled the Ethereum killer, there could always be room for both in the inevitable multi-chain world.

But, Solana might not be trying to take Ethereum’s crown, it might be aiming a lot higher.

The market cap of the Nasdaq 100 last year came in at $15 trillion, which is roughly 7 times the entire crypto market. So, a big hill to climb for a project that currently peaked at TVL all-time highs at $1.5 billion…

I can’t even begin to imagine…

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So, why isn’t this just going to become another Tezos?

So, I tend to follow smart money because they don’t tend to lose it. The backing Solana has received from big names including Andreessen Horowitz, Polchain Capital, Alameda Research, CMS Holdings, CoinShares, Jump Trading, Multicoin Capital, Sino Global Capital and others leads me to believe that it will be okay.

The latest round raised $314m with 2 smaller previous rounds bringing in roughly $22m.

FTX seem to have strong ties to Solana and SBF famously got into a memorable argument on Twitter with another user after they were seemingly bearish on SOL.

On top of that FTX don’t have their own chain and I don’t see them rolling one out if I am totally honest.

Serum (SRM) is a product of FTX and they utilise the rapid block times and low transaction fees to provide a typical and familiar trading environment on-chain.

This could be vital in a few years with the way the regulatory hounds are going.

I think it was a little tongue in cheek but it is worth a mention anyway, SBF mentioned recently that you can’t rule out them one day buying Goldman Sachs and the CME…

What that could mean for a truly expansive and decentralised network for trading stocks and derivatives is beyond my little brains comprehension, but if so, I think Solana plays a part here.

This added to the increasing activity on-chain and huge numbers of dApps being released, I believe it brings something new to the whole industry and it is very refreshing.

Solana recently crossed $1.5b TVL with Raydium and Serum accounting for $600m and $300m respectively.

Screenshot 2021-08-13 at 14.50.23.png

A notable mention for Solfarm who has been killing it recently and with the project still at sub $10m market cap based on circulating supply, one to certainly keep tabs on.

Any concerns I had regarding Solana I have managed to convince myself in my own little echo chamber that there are solutions or pitfalls in the argument.

I’ll highlight a few of my thoughts on typical anti-Solana arguments below:

FDV of Solana projects and SPL tokens – 

The fully diluted market cap of 99% of the projects on Solana is outrageous. I know they are in the early days of development and they can’t limit their options to future investment, but sometimes, they can seem a little off-putting.

Solana itself went through a seemingly catastrophic unlock on January 7th 2021, which funnily enough didn’t affect the price one bit. It just outlined how incredibly bullish people were on SOL and pushed the price higher and higher.

January 8th saw a 75% spread on the day ending up around 36% on the day closing at $3.22…

And… the rest is history, up around 12x at the time of writing since then and has rebounded and sits around 37% from ATHs.

I think with the increasing activity, demand and huge marketing push from Solana, $100 this year are inevitable, where we go from there is anyone’s guess and I think that is slightly conservative. Not financial advice obviously, I am an idiot.

Potential for Divergence to Centralisation – 

There were concerns that with the staking validators than anyone can contribute their SOL to would converge to the larger validators receiving more and more SOL from users and create a centralisation effect.

Why this would be an issue is that the more SOL staked on a particular validator’s node, the higher the chance of that validator being able to verify the transaction and hence a small cause for centralised concern.

Screenshot 2021-08-13 at 14.53.39.png

I think that is probably the case in the early days of a project, but due to the no minimum required stake meaning that users with 1 SOL can become a validator, compared to the 32ETH or roughly $100K required on Ethereum…

The Solana community doesn’t shy away from this though and they actively encourage users looking to stake their SOL to choose a lesser-used validator to increase decentralisation.

If you go to the validators page on Solana Beach, a Solana block explorer, there is a banner stating this and the reasoning for it.

I don’t see this becoming an issue especially with the rise of staking platforms that will inevitably create competition in the staking space such as LIDO, Chorusone etc.

There are currently 899 validators on the network and it is growing rapidly. There are very specific hardware requirements to run a validator node which can be found HERE 

The reasoning behind this is the team didn’t want the software to be constrained by the hardware which is fair enough, but it is met by those screaming that this in and of itself is a form of centralisation.

I think this is a non-starter too. Mining companies have been battling it out to build the most efficient and powerful rigs since crypto began. Is this classed as centralisation? 

EVM Incompatibility – 

So everything has to be plugged into the Ethereum citadel or it is worthless? No.

Solana is built using the Rust programming language as opposed to Solidity.

This throws up adoption issues and also attracting devs from the solidity world can cause a few hiccups as noted by several projects that are looking to recruit and finding a shortage according to the latest round of Solana pitches on Twitch.

That being said there are two positives I can take from this.

  1. No shitcoin copy and paste ELONDOGEMOON coins although this will come, for now, the space is full of those wanting to build, disrupt and stick around for the long run.

  2. Wormhole… this genius creation is a bridge across different chains allowing SPL ERC20 BEP20 and tokens in the Terra ecosystem. Projects like Neon labs are building a framework for those looking to build in an EVM environment in Solana.

Tokenomics –

The ecosystem is driven by the SOL token as you might have guessed. We have addressed there was a huge unlock earlier in the year, so what does the spread of the rest of SOL look like?

The is a *current* max supply of 501,621,046 SOL, with around 284,432,614 of that circulating and the current market cap of around $12 billion.

Currently sat at rank 11 on coin market cap perched in between BUSD (12) and UNI (10), the SOL token is busting to break into the top 10 again, which I foresee happening very soon.

How does it stack up compared to other layer ones in market cap and potential for growth?

Well, Ethereum is $370bn (30x difference), BNB given the argument this is the native currency on BSC is $67bn (5.5x), Cardano $62bn (5x) no comment, Polkadot $21bn (1.75x) so yeah, I think Solana has some decent room to grow given its development compared to a lot of the above… again, no comment.

Token distribution – 

  • Seed Sale tokens comprise 16.23% of the total token supply.

  • Founding Sale tokens comprise 12.92% of the total token supply.

  • Validator Sale tokens comprise 5.18% of the total token supply.

  • Strategic Sale tokens comprise 1.88% of the total token supply.

  • CoinList Auction Sale tokens comprise 1.64% of the total token supply.

  • Team tokens comprise 12.79% of the total token supply.

  • Foundation tokens comprise 10.46% of the total token supply.

  • Community tokens comprise 38.89% of the total token supply.

Currently, the protocol is inflationary at 8% a year beginning in February 2021. These rewards are for validators and those who are staking with them. Before you run for the hills the “I” word isn’t as bad as you think it is. Currently, 50% of all transaction fees are burnt with the remaining going to validators.

Given that around 76% of all SOL is staked, this leads me to believe that the buyer side pressure and demand will feed well into low liquidity and hence drive the price high and fast.

There is something that I will mention, 76% of the 500m SOL is also made up of locked tokens. Given the VC investment of SOL, this is something to be aware of when taking into account these stats.

Marketing – 

Just to touch on the marketing, the shades are everywhere you can’t miss them, they recently sponsored a stage at lollapalooza and the sponsored #SolanaSummer hashtags on Twitter are a nice touch.

Marketing is way too overlooked in the crypto space, some are too purist to do it whilst others are terrible shillers.

I think if they keep this up, it can only be of benefit to Solana and consequently the SOL token.

Summary –

Anyway, I am tired and could go further down the rabbit hole but to summarise I am very bullish on Solana, I do have fears of unlocks and being used as retail from private investors who more than likely got a discounted price, but at the end of the day, I don’t see myself touching my SOL for a long long time.

If the ecosystem continues to develop, hopefully in its own way and not just another carbon copy of competitors (which up to now it is doing), I think Solana will be a top 5 market cap coin.

Before I leave some notable mentions to some projects building on Solana which are doing amazing things:

Raydium – DEX/AMM

Serum – Orderbook DEX

SolFarm – Yield aggregator and leverage yield farming

Solend – Lending and borrowing

Boring Protocol – Decentralised VPN

Degenerate Ape Academy – Amazing NFTs.

Phantom Wallet – Best Web 3 wallet available, imo.

If any Solana based projects want to collaborate hit me up on Telegram @blocmates or [email protected]

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