Key Points
Solana runs on a proof-of-stake network that is one of the fastest in the crypto world.
The network is already processing thousands of transactions per second.
The technical strength of the network has made it a home run for investors.
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Only launched about 5.5 years ago, Solana (CRYPTO: SOL) is now the sixth-largest cryptocurrency in the world with a market cap of over $96 billion as of July 30.
Many investors see immense potential in Solana’s network. It’s one of the few cryptocurrencies to operate on a proof-of-stake (PoS) mechanism to govern the network. After realizing how energy-intensive the traditional crypto-mining, proof-of-work (PoW) system had become on Bitcoin, the world’s largest cryptocurrency, several crypto networks transitioned to PoS.
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Instead of using high computing power to solve a puzzle like with PoW, PoS has investors stake their tokens to the network, and then assigns them at random to validate transactions and mint new tokens. The more tokens one stakes, the higher the chance they have of being selected and also earning rewards. Even more unique, Solana’s network also has a proof-of-history mechanism that essentially creates a sequential record of transactions, enabling even faster transactions on the network.
As a result, Solana’s network can process thousands of transactions per second (TPS), but it has the theoretical potential to process up to 65,000 TPS, if not more. This gives Solana and its network immense potential to disrupt the global payments system.
Investors have done well
While volatile like most cryptocurrencies, Solana has been a huge winner for investors that bought the token five years ago. The technical strength of its network has made Solana one of the few altcoins that investors see a strong use case for.
Roughly five years ago, Solana traded for just $1.73. Today, it trades for over $179. That’s a gain of roughly 10,264%. So, if you invested $1,000 in Solana five years ago, you now have $103,636! That’s simply incredible. Investors aren’t likely to find too many investments like that in their lifetime.
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Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Solana. The Motley Fool has a disclosure policy.
