What’s behind Solana’s growth?
Solana’s DeFi projects have crossed $3 billion this month. This is another milestone that shows Solana’s promise and ability to give competition to Ethereum. At the moment, Ethereum hosts the maximum number of DeFi and NFT projects.
What also contributed to SOL’s dramatic rise was the launch of NFT Degenerate Ape Academy built on Solana blockchain on August 15. A collection of 10,000 cartoon apes sold out in merely 8 minutes, involving 96,000 SOL or $5.9 million. So far, Ethereum has a nearly complete monopoly on DeFi and NFT projects.
Over the last few months, institutional interest in Solana has increased, which may have contributed to the spike in investor interest. On its part, Solana forged new contracts with Hacken Foundation and Gate.io.
Osprey Funds and Grayscale are in a race to win Solana for inclusion in their respective bouquet of products. Osprey Funds has already registered Osprey Solana Trust with the US Securities and Exchange Commission (SEC).
How is Solana placed against other networks?
Solana’s bullish run on the market is attributed to a general sentiment among investors that favour blockchains with smart contract capabilities. Terra, Cardano, and Polkadot blockchains have also made significant gains this month. All these networks have smart contract capabilities and are considered ‘Ethereum Killers’ because of their potential to compete with Ethereum.
These are also Layer-1 blockchains in contrast to Layer-2 blockchains such as Polygon developed on the Ethereum network. All of them offer faster transactions, lower fees, and higher scalability compared to Ethereum. Layer-1 can compete with Ethereum while Ethereum-based Layer-2 networks can end up scaling Ethereum rather than competing with it.
DeFi and NFT have emerged as the new frontiers of growth in the blockchain ecosystem. And, investors seem to be bullish on the potentials that Solana brings to the table.
Investors seem to be retracting from their positions in major coins to invest in these alternative coins. According to a report by CoinShares, investors are increasingly selling their holdings in bitcoin and reinvesting them in other cryptocurrencies. In the week ended August 20, Solana saw investment growth by $7 million compared to a $2.8 million loss for Bitcoin.
On August 31, Solana launched a five-week Ignition Hackathon that will focus on DeFi, Gaming, NFT, and Web 3.0. Analysts say that with all these efforts and fundamentals, it should not take long for Solana to soar past the 7th largest coin, Doge. Currently, Doge is a meme coin and valued at $39.5 billion.
What does the future hold?
Solana has benefited from the increasing popularity of DeFi, and NFT and the competition in this space are heating up.
Cardano, which has shot to the 3rd spot in the crypto ranking in the ongoing bullish run, is planning to implement smart contracts later this month. Ethereum, which leads DeFi and NFT projects by miles, is implementing necessary upgrades to take on the competition from new blockchain networks.
The growing business volume of DeFi has made the regulators’ voice concerns, and they are gearing up to regulate this space. Recently, SEC Commissioner Chair Gary Gensler has said that DeFi is not immune to regulation. The agency has taken onboard AnChain.AI, a blockchain analytics firm, to help investigate DeFi transactions.
The latest developments demonstrate two things: increased use cases of a blockchain network and growing regulatory scrutiny of what’s happening in this space. Given the current scenario, both these developments are set to support the evolution of cryptocurrencies as an asset or currency. It may also accelerate the growth of the technologies that their platforms promote.
(Edited by : Yashi Gupta)
First Published: IST