How two ex-Qualcomm employees and one Ph.D. created Solana, the cryptocurrency they call the “ether killer”
At the beginning of June 2022, the Solana (SOL) cryptocurrency experienced another shock: its blockchain stopped working for four hours due to a bug, as a result, the price of the cryptocurrency fell by 11% during the day. According to preliminary data, the failure occurred due to an error in the mechanism for assigning one-time numbers to transactions, so the developers had to restart the blockchain. This is not the first time that Solana has stopped working. In September 2021, the blockchain was down for almost 18 hours due to transaction overload, and in April 2021, it was down for seven hours.
Until recently, no one knew about the Solana (SOL) cryptocurrency, and the loud title of the next “ether killer” sounded too pathetic. But it was Solana, having added 24% in price only at the beginning of November 2021, that suddenly broke into the leaders of the cryptocurrency rating. At the end of 2021, SOL was in fourth place by market capitalization, overtaking Cardano and XRP, and now holds on to ninth. We tell in our material the history of the creation of Solana, and also give a forecast for the SOL price for 2022.
The history of the creation of Solana
Solana was created in 2017 by former Qualcomm employees Anatoly Yakovenko and Greg Fitzgerald, as well as Eric Williams, Ph.D. and data scientist. The beta version of the system appeared in 2020.
In the white paper (white paper, or project manifesto), Yakovenko described the main goal of Solana – reducing the amount of time it takes for blockchain nodes to synchronize, or reach consensus. High speed should help developers scale their decentralized applications (Decentralized applications, or dApps) and ensure that their user base grows quickly.
To speed up the system, Solana, in particular, uses the proprietary Proof of History (PoH) algorithm along with the Proof of Stake (PoS) algorithm.
PoH allows you to record an event that occurred even before the information about the transaction is added to the blockchain. Thus, nodes on the Solana blockchain can create blocks without having to “coordinate” their actions with the entire network. This reduces the amount of transaction time.
By the way, Yakovenko already had experience in creating algorithms that increase work efficiency when he was an employee of the DropBox cloud service.
Solana uses several other technologies that are designed to increase the speed of the blockchain. Among them is, for example, the Turbine protocol, which breaks all information into smaller “pieces”.
According to Yakovenko, their blockchain is capable of operating “at the speed of light.”
What is Solana cryptocurrency?
The Solana cryptocurrency, which is used on the blockchain of the same name, can be obtained by confirming transactions or using programs in this ecosystem.
The user can also “passively” earn tokens thanks to the PoS algorithm, which distributes the reward among users. It will depend on the amount of cryptocurrency they have accumulated – this process is called staking. It is based on the principle of operation of the new version of the ether blockchain – Ethereum 2.0.
The emission of SOL is finite, as is the case with bitcoin. It is limited to 489 million coins.
As for the title of “ether killer”, it’s too early to talk about it. So, only a few dozen decentralized applications (dapps) are still working on the Solan blockchain, while Ethereum already has several thousand of them. However, this is easily explained by the fact that the broadcast was launched in 2015.
In addition, serious investors believe in Solana’s prospects. At the beginning of June 2021, the startup was able to raise more than $314 million. A significant part of the amount was invested by one of the main investment firms in Silicon Valley, Andreessen Horowitz. Andreessen Horowitz was one of the first investors in Skype, Facebook, Twitter, the Coinbase crypto exchange and other successful companies.
Fun fact: the exact amount Solana raised in the investment round was $314,159,265.359 million, which is pi times 100 million.
Apparently, the developers of Solana do not seek to make their blockchain a “killer” of the ether. So, Yakovenko in an interview with TechCrunch said that he “does not get sick against Ethereum.”
Solana Price Predictions
In November 2021, the Solana exchange rate was $250. Even the most daring forecasts did not assume such a growth of the coin. With a market capitalization of $75 billion (according to CoinMarketCap data for November 2021), it has broken into fourth place in the global cryptocurrency rankings. In May 2022, the cryptocurrency is in seventh place in terms of capitalization.
Experts believe that a combination of factors led to the explosive growth of the Solana price. Let’s name the main ones:
General growth of the cryptocurrency market. Following bitcoin, other coins often rise in price – this is called the season of altcoins;
Many people really see Solana as a good alternative to Ethereum, especially from a technical point of view;
Large-scale conferences like Breakpoint, where the cream of the crypto community gathers, always stir up interest in the coin they are organized around.
The price of the cryptocurrency reached its peak in November 2021. In 2022, SOL was still unable to overcome it. In March, the cryptocurrency fell below $79 at the moment. At the moment, the highest price for 2022 is $140. Then the cost of Solana rose sharply from late March to early April.
At the beginning of May 2022, the price of SOL began to fall. Altcoin cost $93 on May 5, then this mark dropped to $73 on May 10, and two days later – to $43. Solana’s price hit $27 on June 13th.
The collapse of the cryptocurrency is associated with failures and stopping of its network. The Solana blockchain was down for over 4 hours on June 1st. Stopping the network means that no new blocks are produced. Accordingly, this affects transactions with SOL. The validators restarted the network after 4 hours.
Solana co-founder Anatoly Yakovlenko said that the problems will be fixed in the next update.
However, the cryptocurrency has already experienced 12 crashes in 2022. The previous power outage happened not so long ago – on April 30th. The SOL blockchain could not withstand the pressure from the mining bots that help launch new NFT projects. They reported that the network is more than 6 million transactions.
Now more and more projects on the Solana blockchain are appearing on the NFT market. As a result, the number of malware has increased. SOL developers are trying to combat this. For example, they introduced a penalty for those bots that report non-existent transactions.
According to Trading beasts, the average price of SOL in 2022 will be $36.5. By the end of summer, the cryptocurrency may reach $33 to $49. Crowd Wisdom estimates that the average value of a cryptocurrency will be approximately $52 in 2022. Analysts emphasize that the developers of Solana still need to convince investors that there will be no more hacks in the network and its suspension.
Recall that in February 2022 there was a hacker attack on the Wormhole Bridge – a bridge that allows users to transfer their tokens from the Solana system to Ethereum and vice versa. The total amount of stolen funds amounted to $320 million.
Analysts at CoinPedia are sticking to a more optimistic scenario. In their opinion, the minimum cost of SOL in 2022 will be $75, the maximum – $106.
Disclaimer: The information provided in this article is solely the author’s opinion and not investment advice – it is provided for educational purposes only. By using this, you agree that the information does not constitute any investment or financial instructions. Do conduct your own research and reach out to financial advisors before making any investment decisions.