Ethereum (CRYPTO:ETH) has been one of the strongest investments of 2021, its price soaring by more than 437% since the beginning of the year. It’s also one of the priciest cryptocurrencies, however, priced at just under $4,000 per token.
As Ethereum continues to grow, it will only become more expensive. If you’re looking for a more affordable investment that has similar growth potential, there’s another cryptocurrency to consider: Solana (CRYPTO:SOL).
Solana is one of the breakout stars of the crypto world, and while it does have its downsides, it could potentially be the Ethereum of 2022.
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Why invest in Solana right now?
Solana is currently the fifth most popular cryptocurrency, with a market cap of over $52 billion. (For reference, Ethereum currently has a market cap of more than $452 billion). This puts it in a good position, as it’s gained enough traction to compete with the biggest players in the crypto market, but it still has plenty of room for growth.
It also shares many similarities with Ethereum. Both networks are smart contract platforms that can host projects such as decentralized finance applications and non-fungible token (NFT) marketplaces.
However, Solana has one major advantage over Ethereum: speed. Ethereum can currently process around 15 transactions per second, while Solana can reportedly handle up to 65,000 transactions per second. Because of this speed, many developers have flocked to Solana’s network, causing it to become the fastest-growing blockchain ecosystem.
Risks to consider
While Solana may be one of the most promising cryptocurrencies to come out of 2021, it’s not without risks. Some critics argue that Solana has put more emphasis on speed than safety, and it’s experienced multiple attacks that have caused security concerns.
Most recently, the network was hit by a distributed denial-of-service (DDoS) attack. While Solana remained online, the attack shook investors’ confidence. Its price fell by more than 20% over the days following the incident, and it’s currently down nearly 30% from its peak in November. This isn’t the first time Solana has been hit by an attack, either, as the network went offline for around 17 hours back in September.
Some experts also worry that security concerns will remain an issue for Solana. According to a recent report from institutional investing firm Grayscale, Solana uses a consensus mechanism that is not widely used by other cryptocurrencies. It uses a proof of history protocol, which is more efficient than other systems but may not be as secure. This means Solana could be more vulnerable to attacks than other networks.
Is Solana a good investment?
Despite its recent volatility, Solana is still one of the most popular cryptocurrencies, and its price has soared by more than 11,600% since the beginning of the year.
Solana’s lightning-fast speed gives it a serious advantage over its competitors, and more developers are shifting from Ethereum to Solana as a result. However, its security concerns are worrisome. The network could become an even bigger target for attacks as it scales, so Solana will need to work hard to prevent further incidents.
Whether Solana will succeed over the long run is uncertain. So far, the cryptocurrency has managed to bounce back from hardships, which could make it a promising long-term investment. But safety concerns could put a damper on investor enthusiasm, so whether it continues growing over time is unclear.
If you choose to invest, make sure you’re willing to hold your investment for the long term. Like all cryptocurrencies, Solana will likely face even more volatility in 2022. If it manages to overcome its security issues, however, it could be a strong contender in the crypto market.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.