Solana - $SOL, Asset Review
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Solana’s ecosystem has grown exponentially with a total value of $3.8 Billion locked at the time of writing according to DefiLlama. The ecosystem varies from Defi, Gaming, NFTs, Stablecoins, Wallets, and more. The consensus relies on a new clever mechanism known as Proof-of-History(PoH). Due to the structure of the blockchain, the developers believe the network may handle 40,000 - 65,000tps with ease.
Content:General Information-What is Solana
Solana Background
Solana Funding/Collaboration
Token Information-Tokenomics
Staking
Additional Information-
NFT Adoption
Technical Analysis
Conclusion
General Information-
1. What is Solana
Solana is an open-source blockchain that supports smart contracts known for their speed and efficiency. $SOL is a token that is the native cryptocurrency for the Solana network. The Solana network operates under a new mechanism called (PoH). Proof-of-History is a data structure that provides cryptographic proof in relative order and time of each message in the historical record. In lamens terms, if you were to handed five pictures of someone walking. You would be able to identify which order the pictures go in. Well, the same goes for Solana, because of the time each block is submitted in its historical records. This is how the Solana network achieves an incredible 400 millisecond block time making it a fast blockchain.
2. Solana Background
Solana is a project-based out of San Francisco and founded by Anatoly Yakovenko in 2017. Solana was built by Solana Labs an entity in the USA. Named after Solana beach in California, Anatoly felt like he found the solution to the Scalability Trilemma. However, it is important that while he has discovered a potential solution, Solana is still in a Mainnet Beta. Despite Solana shutting down a few times over the past 12 months, the validator count on the mainnet has been increasing in response. At the time of writing, there are 1,777 validators on the mainnet. The eventual goal that Anatoly has, is that Solana will become a decentralized, scalable, and cheap to transact on.
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3. Solana Funding/Collaboration
Solana has been through a few funding rounds with the following firms: Alameda Research, BlockTower Capital, CMS Holdings, CoinFund, Delphi Digital, Jump Capital, Multicoin Capital, ParaFi Capital, a16 Crypto, and more. Solana raised hundreds of millions through their initial coin offerings and post ICO rounds. Solana has had some substantial integrations throughout the crypto sphere. Circle, the issuer of USDC named Solana their primary chain for USDC payments which is not something to ignore. Additionally, dApps like Audius, Brave and even Marketplaces have found a purpose to build on the Solana network. Some dApps have abandoned the Ethereum blockchain due to high gas fees for a cheaper and friendlier experience on Solana.
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Token Information-
1. Tokenomics
$SOL(Solana) tokens total supply is 522 million tokens with a circulating supply of 340,435,113. 500 million $SOL were minted at release when the Solana mainnet beta went live. The network has both an inflationary and deflationary mechanism. (Deflation) 50% of all $SOL transactions fees are burned. (Inflation) An inflation schedule was approved for Solana to payout staking rewards. $SOL tokens are Solana’s native cryptocurrency coins used to pay network fees including transactions, staking, sending $SOL coins, and triggering smart contracts. The distribution of $SOL tokens are outlined per below.
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2. Staking
$SOL token holders may contribute to the network by staking. Staking rewards are 4.82% and have no minimum requirements of tokens. Validators may earn 5.34% rewards and have no minimum required tokens as well. The staking rewards will keep cutting until 1.5% is reached over 10 years. Both options have a lock-up period of 5 days to stake tokens. Currently, 73.77% of all circulating supply is staked and 512,116 unique addresses are staking their $SOL tokens.
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Additional Information-
1. NFT Adoption
Solana has surpassed 2.3 billion dollars in sales volume. That is pure insanity being how young the blockchain is. Additionally, this metric from CoinSlam shows the “TXNS” (transactions) which is the most impressive. Although Solana is $24 billion less in sales than Ethereum, it's only ~4 million less in transactions. This is mainly due to the average Ethereum NFT collections being more expensive than Solana’s. Additionally, in March Solana NFT sales generated more than Ethereum NFTs during 24 hours. Lastly, because Solana is gaining so much traction via NFTs, it’s safe to assume that NFTs might become the main source of adoption for the Solana blockchain.
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2. Technical Analysis
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$SOL has had an amazing run from $.50 to $260 yielding ~513x returns. Ever since $SOL hit all-time-highs, we have seen the price fall towards a high time frame demand zone (Blue box) which should act as a support region. Price is likely to consolidate in the blue box before making a new move. The way the correction subdivides will give hints on how the next move plays out. Bottom structures typically take a long time to form and reverse when the bears are exhausted, so it's best to stay patient for a clear pattern. It is possible to sweep lows at $22 for a capitulation wick. All in all, the price action of this chart is very bullish over the long term, and holding the support will be crucial.
Conclusion-
While I feel like there is so much more to share about Solana’s network, it’s no question that Solana has been growing. Despite the hiccups, it faces, like shutting down four times in six months. The shutdown periods have decreased each time and the number of validators is increasing to combat this issue. The community has responded with staking addresses hitting highs and more active participants on the network. I do have a few concerns with Solana mainly the centralization around tokenomics. Currently, there is no way to track how much $SOL an address holds. This lack of transparency makes me skeptical from a governance aspect, and a tokenomics standpoint. Lastly, it is important to note that I believe the network will grow but isn’t correlated to the value of the $SOL token.