Crypto investors are buzzing about Solana
Investors are talking about Solana once again, and for good reasons. The value of SOL has increased by over 350% in the past year. It has the potential to be a good investment because it’s a real project, with actual users and generating revenue. But is it a good long-term investment? At Bitcoin Market Journal, we’re focused on the long term. Personally, I think Solana is a long shot in the long term. Here’s why.
There Can Be Only One (or Two)
Our first investing thesis is that while lots of experiments happen in the early stages of a new technology, ultimately only one or sometimes two platforms survive in the long run. In the traditional tech world, big players get bigger through network effects. In the emerging world of blockchain technology, we are only starting to understand what the categories are. One category is definitely smart contract platforms, and Ethereum is the 800-pound gorilla in this space. For a competing Layer-1 like Solana, Ethereum is the one to beat.
For all the hype, let’s look at how Solana stacks up:
| Ethereum | Solana | |
|---|---|---|
| Daily Active Users | 300,000 | 100,000 |
| Daily Fees | $5,000,000 | $50,000 |
| Active Developers | 200 | 75 |
This is not to say that Solana must beat Ethereum in order to survive, but it still has a way to go.
It’s Not the Technology, It’s the Users
The market does not care about technology, it cares about the users. Companies will generally go with bigger tech platforms because they’re a safer bet. Investors also do not really care about the technology, they care about whether they can make money. In blockchain, the tech is only relevant if it leads to more users.
Where are the Killer Apps?
Layer 1s are like operating systems, and to grab critical users, you need killer apps. Solana has a few dapps that take advantage of its technology, and if more of these specific dapps launch, Solana could carve out a profitable niche.
Investor Takeaway: So Long, Solana
While the recent price gains are likely due to excitement, it’s unlikely that Solana will unseat Ethereum anytime soon. It’s not a bandwagon worth jumping on, especially when prices are triple what they were just a month ago. But at the moment, Ethereum is still the one to beat. So for now, it’s so long, Solana. But we’ll keep an eye on you.
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