Bitcoin (CRYPTO: BTC) has increased by about 60% in the past 12 months and is trading approximately 7% lower than its all-time high. This rally was driven by the influx of money into spot price ETFs, which began trading last year; more purchases by companies and institutions, and the Trump administration's crypto-friendly stance along with the establishment of the Strategic Bitcoin Reserve Fund. Bitcoin may also be attracting more attention as a hedge against inflation, geopolitical conflicts, and other adverse macro factors, while expectations of lower interest rates are encouraging investors to return to the crypto market.
However, many smaller cryptocurrencies have been left behind and are performing worse than Bitcoin. One of those tokens is Solana (CRYPTO: SOL), which has only increased by about 7% in the past 12 months and is still down 50% from its all-time high. Let's take a look at why Solana is sliding -- and whether it could be a better long-term investment than Bitcoin at this level.
The difference between Solana and Bitcoin
Solana, like Ether (CRYPTO: ETH), is staked on its blockchain (locked to earn rewards similar to interest) instead of being mined. The proof-of-stake ( PoS ) mechanism consumes much less energy compared to the proof-of-work ( PoW ) mechanism used to mine Bitcoin. The PoS blockchain also supports smart contracts, which are used to develop decentralized applications (dApp), games, non-fungible tokens (NFT), and other crypto assets. The PoW blockchain is only used for mining tokens and does not support those developer-focused features.
As a result, Solana and other PoS tokens are often priced according to transaction speed and developer ecosystem growth rather than token scarcity. Furthermore, Solana is an inflation token that does not have a maximum supply. Nearly 528 million Solana tokens are currently in circulation, but it is reducing its annual inflation rate (hiện at 4.5%) to 15% every (450-day "epoch year" to 630 ngày) until it reaches an annual inflation rate of 1.5%. Bitcoin is a deflationary cryptocurrency with a maximum supply of 21 million tokens, of which 19.9 million tokens have been mined. That scarcity makes Bitcoin more on a par with gold, silver, and other physical goods.
The difference between Solana and other PoS tokens
Many PoS tokens are built on the Ethereum blockchain, but Solana has its own native PoS blockchain. Solana also upgrades that PoS blockchain with its proprietary Proof of History (PoH) mechanism, allowing it to process transactions faster than Ethereum.
Solana has a theoretical maximum speed of 65,000 transactions per second (TPS), compared to a theoretical maximum speed of 30 TPS for Ethereum's main Level 1 transactions. But for real-world transactions, which face network congestion and other limitations, Solana has an average daily speed of 600 to 1,500 TPS, while Ethereum has an average Level 1 speed of 15 TPS. However, other Tier 2 solutions built on Ethereum and processing off-chain transactions can achieve a much higher real-world rate of 1,000 to 4,000 TPS. Rollups, which combine multiple off-chain transactions to be processed together, are the most popular type of Tier 2 solution on Ethereum.
Therefore, although Solana is the fastest PoS blockchain, it is still less popular than Ethereum due to its smaller ecosystem, lack of cross-compatibility with other blockchains, and its main development languages (Rust and C) having a steeper learning curve compared to Ethereum's Solidity. Solana also faces more network congestion and disconnection issues than Ethereum.
What is the main catalyst of Solana?
These challenges have caused Solana to perform worse than Bitcoin over the past year. But looking ahead, a few catalysts could enhance its profile and push its price higher. Visa, Shopify, and other companies have integrated Solana Pay into their platforms to handle instant and nearly free stablecoin transactions. Meanwhile, many developers are launching games on Solana that use in-game NFTs, tokens, and other crypto collectibles.
Some developers are also deploying new decentralized projects -- such as wireless networks, GPU sharing, and decentralized real-world mapping -- on the Solana blockchain. The new network upgrades will reduce congestion and improve its scalability.
Last but not least, some crypto companies have recently applied for a Solana ETF. It is unclear whether the SEC will actually approve these new funds, but they could help Solana attract more attention from institutional investors.
But is Solana a viable alternative to Bitcoin?
But is Solana a viable alternative to Bitcoin?
The speed and growth potential of Solana makes it a much more promising investment than many other "meme coins". However, I don't think it is a better cryptocurrency investment than Bitcoin for three simple reasons: It has inflation, faces a lot of competition from Ethereum's L2 solutions, and is not cross-compatible with other blockchains like Ethereum.
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Should You Forget Bitcoin and Buy Solana?
Bitcoin (CRYPTO: BTC) has increased by about 60% in the past 12 months and is trading approximately 7% lower than its all-time high. This rally was driven by the influx of money into spot price ETFs, which began trading last year; more purchases by companies and institutions, and the Trump administration's crypto-friendly stance along with the establishment of the Strategic Bitcoin Reserve Fund. Bitcoin may also be attracting more attention as a hedge against inflation, geopolitical conflicts, and other adverse macro factors, while expectations of lower interest rates are encouraging investors to return to the crypto market. However, many smaller cryptocurrencies have been left behind and are performing worse than Bitcoin. One of those tokens is Solana (CRYPTO: SOL), which has only increased by about 7% in the past 12 months and is still down 50% from its all-time high. Let's take a look at why Solana is sliding -- and whether it could be a better long-term investment than Bitcoin at this level. The difference between Solana and Bitcoin Solana, like Ether (CRYPTO: ETH), is staked on its blockchain (locked to earn rewards similar to interest) instead of being mined. The proof-of-stake ( PoS ) mechanism consumes much less energy compared to the proof-of-work ( PoW ) mechanism used to mine Bitcoin. The PoS blockchain also supports smart contracts, which are used to develop decentralized applications (dApp), games, non-fungible tokens (NFT), and other crypto assets. The PoW blockchain is only used for mining tokens and does not support those developer-focused features. As a result, Solana and other PoS tokens are often priced according to transaction speed and developer ecosystem growth rather than token scarcity. Furthermore, Solana is an inflation token that does not have a maximum supply. Nearly 528 million Solana tokens are currently in circulation, but it is reducing its annual inflation rate (hiện at 4.5%) to 15% every (450-day "epoch year" to 630 ngày) until it reaches an annual inflation rate of 1.5%. Bitcoin is a deflationary cryptocurrency with a maximum supply of 21 million tokens, of which 19.9 million tokens have been mined. That scarcity makes Bitcoin more on a par with gold, silver, and other physical goods. The difference between Solana and other PoS tokens Many PoS tokens are built on the Ethereum blockchain, but Solana has its own native PoS blockchain. Solana also upgrades that PoS blockchain with its proprietary Proof of History (PoH) mechanism, allowing it to process transactions faster than Ethereum. Solana has a theoretical maximum speed of 65,000 transactions per second (TPS), compared to a theoretical maximum speed of 30 TPS for Ethereum's main Level 1 transactions. But for real-world transactions, which face network congestion and other limitations, Solana has an average daily speed of 600 to 1,500 TPS, while Ethereum has an average Level 1 speed of 15 TPS. However, other Tier 2 solutions built on Ethereum and processing off-chain transactions can achieve a much higher real-world rate of 1,000 to 4,000 TPS. Rollups, which combine multiple off-chain transactions to be processed together, are the most popular type of Tier 2 solution on Ethereum. Therefore, although Solana is the fastest PoS blockchain, it is still less popular than Ethereum due to its smaller ecosystem, lack of cross-compatibility with other blockchains, and its main development languages (Rust and C) having a steeper learning curve compared to Ethereum's Solidity. Solana also faces more network congestion and disconnection issues than Ethereum. What is the main catalyst of Solana? These challenges have caused Solana to perform worse than Bitcoin over the past year. But looking ahead, a few catalysts could enhance its profile and push its price higher. Visa, Shopify, and other companies have integrated Solana Pay into their platforms to handle instant and nearly free stablecoin transactions. Meanwhile, many developers are launching games on Solana that use in-game NFTs, tokens, and other crypto collectibles. Some developers are also deploying new decentralized projects -- such as wireless networks, GPU sharing, and decentralized real-world mapping -- on the Solana blockchain. The new network upgrades will reduce congestion and improve its scalability. Last but not least, some crypto companies have recently applied for a Solana ETF. It is unclear whether the SEC will actually approve these new funds, but they could help Solana attract more attention from institutional investors. But is Solana a viable alternative to Bitcoin? But is Solana a viable alternative to Bitcoin? The speed and growth potential of Solana makes it a much more promising investment than many other "meme coins". However, I don't think it is a better cryptocurrency investment than Bitcoin for three simple reasons: It has inflation, faces a lot of competition from Ethereum's L2 solutions, and is not cross-compatible with other blockchains like Ethereum.