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New Pick: The De-Risked Ethereum Competitor Your Crypto Portfolio Needs

New Pick: The De-Risked Ethereum Competitor Your Crypto Portfolio Needs
By Vin Narayanan
Date April 28, 2022

Most of you know that I’m an Ethereum bull. I believe that Ethereum is one of the most important networks in the crypto space. It’s the backbone for much of crypto’s decentralized finance (DeFi) system. Most NFTs trade on the Ethereum network. And trading volume for NFTs alone last year was $17.6 billion. Ethereum is by far the most popular network for decentralized apps. And all of this happened despite the fact that Ethereum as it’s currently constructed can’t really scale. 

Right now, ethereum is trading at around $2,900. Can you imagine what the network will do when it solves its scaling issues? 

But as much as I believe in Ethereum, I’m not an Ethereum maximalist. The smart contract market alone is expected to be worth $770 million by 2028. The decentralized app market will likely be worth at least $154 billion in the future. (That’s about how much the mobile app market is worth now.) Right now, DeFi is a roughly $80 billion market. And it could quickly grow to $800 billion.

Those are massive markets that Ethereum is playing in. And they’re just the tip of the iceberg. Ethereum likes to describe itself as the “internet of assets” and “new frontier for development.” That’s a lot of ground to cover. The market potential is huge. And more importantly, these spaces are not winner-take-all markets. There’s room for multiple big winners, especially as chain interoperability improves. (I talked a lot about chain interoperability recently with Allison Brickell in this video. But you’ll have to sign up for Crypto Asset Strategies to watch it.)

That means any crypto portfolio needs to include viable Ethereum competitors.

There’s no shortage of Ethereum competitors. High gas (transaction) fees, slow transaction rates and the difficulties in running nodes have frustrated founders, developers and users alike. Ethereum needs to do something to scale.

That’s why Ethereum is trying to switch from a proof of work (PoW) protocol to a proof of stake (PoS) protocol. But “the Merge,” as the shift is called in crypto land, has been beset by delay after delay after delay. Nobody can reliably tell you when the switch will happen. But the hope is that it will happen sometime this year. 

It’s also why crypto developers have been feverishly working on credible Ethereum alternatives.

Solana, the project I’m recommending to you today, is one of those alternatives.

Much like Ethereum, Solana is a decentralized blockchain network that can be used for a variety of purposes: decentralized apps, smart contracts, DeFi, Web3 projects and much more.

Unlike Ethereum, Solana is fast. Ethereum can process 15 transactions a second. Approving an ethereum transaction on Uniswap (as of this writing) costs around $18. Meanwhile Solana processes 1,165 transactions per second. And the average cost per solana transaction is $0.00025.

Solana does this by using novel technology. It combines PoS (what Ethereum is switching to) with proof of history (PoH). PoH timestamps every transaction and makes sure that each transaction is processed in the order it came, rather than miners prioritizing the big ones first. That combined with PoS dramatically speeds up Solana’s inner workings.

Buying solana now is an opportunistic play.

Solana has grown rapidly since the token launched in March 2020. It’s now one of the 10 largest tokens by market capitalization. And earlier this month, OpenSea began supporting Solana NFTs.

This is a big development for both Solana and OpenSea. OpenSea is the largest NFT marketplace. And up until the beginning of April, OpenSea had supported mostly Ethereum-based NFTs.

According to The Block, OpenSea had $3.4 billion in NFT trading volume in March. NFT trading volume on Solana was $173 million in March.

Solana is trading for $96.94 as I write this. That’s significantly lower than the $172 solana was trading for to start the year. In fact, for almost the first three months of the year, solana looked like a falling knife, hitting the $82 mark a few times. Solana bounced back nicely toward the end of March and cracked $120 before dipping back down to today’s $96 price. So this feels like a good price to hop in on and get some exposure to a potential Ethereum competitor.

We’re not catching a falling knife here. But we are adding exposure to a project that is gaining users and traction. 

There are certainly risks associated with investing in solana. It’s a relatively young token that’s had some outages. And crypto purists would argue that the token is too centralized, with venture capitalists and other insiders controlling almost half of Solana’s supply.

But I see the presence of Andreessen Horowitz, CMS Holdings and other big investors as a positive signal. Solana will have the resources it needs to both grow AND weather down cycles in the crypto market. That takes some of the risk out of play. And reducing risk is a critical part of crypto investing.

Overall, I believe that this is the right time to invest in Solana. And that the overall upside gives Solana an attractive risk-reward ratio.

How to Invest

Solana (SOL) can be bought and traded on Coinbase, Gemini and other major crypto exchanges.

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