Should you forget Bitcoin and buy Solana instead?

Bitcoin‘s (Bitcoin 4.95%) The price reached an all-time high of $103,332 on December 4. Four major catalysts led him to that point: approvals of the first spot ETFs in January; Its latest halving took place in April, which halves its mining rewards every four years; interest rate cuts; And President-elect Trump’s cryptocurrency-friendly policies.

Bitcoin’s price has fallen to around $97,000 as of this writing, but has remained up more than 120% over the past 12 months. With a market capitalization of $1.93 trillion, it is the world’s largest cryptocurrency and the seventh most expensive asset.

Image source: Getty Images.

Bitcoin still plays a strong long-term role in the cryptocurrency market, but may have less upside potential than its smaller coins. Could it be one of those codes? Solana (Sol 3.84%)which is trading at around US$190 and has a market capitalization of US$90 billion?

What distinguishes Solana from Bitcoin?

Solana tokens are validated through Proof of Stake (Points of sale) which does not require any tokens to be extracted digitally. This approach is faster and more energy efficient than proof of work (Proof of work) Mining mechanism used by Bitcoin.

The PoW blockchain is only used to mine more tokens. Support blockchain PoS Smart contractswhich can be used to develop decentralized applications (Decentralized applications), Games, Non-Fungible Tokens (NFTs), and other crypto assets. PoS tokens can also be “staking” or closedon the blockchain for a period of time to earn interest-like rewards.

The value of Bitcoin is often determined by its scarcity. The maximum supply is 21 million tokens, of which nearly 20 million have already been mined. The last Bitcoin is expected to be mined in 2140, making it somewhat comparable to gold or silver.

Solana and other PoS tokens are typically valued by the speed of their blockchain and the growth of their developer ecosystems. Solana has a current supply of approximately 591 million tokens and no supply cap, but is willing to reduce the annual inflation rate, currently 4.83%, by 15% every “annual era,” which amounts to 450-630 days.

What sets Solana apart from other PoS tokens?

Solana is often overshadowed Ethereum (Ethereum 3.85%)the world’s second largest cryptocurrency and the best PoS blockchain. Ethereum has its own native token, Ether, but there are many other smaller PoS tokens, including… Shiba Inu, ribbedand makesrunning on its own blockchain. It is easier to launch a new token directly on Ethereum’s blockchain than to create one from scratch, but these tokens are ultimately limited by Ethereum’s speed limitations.

Solana is a newer Proof of Stake (PoS) blockchain that accelerates its transactions through its Proof of History (PoH) mechanism. This upgrade already enables Solana’s blockchain to process transactions about 46 times faster than Ethereum, but it has only achieved less than 2% of its theoretical maximum speed so far.

Solana’s high-speed blockchain technology has attracted a lot of developers and partners. It has been used for development Meme coins like Bonk and WIFIt supports decentralized exchanges including Jupiter and Orca. It supports stablecoin transactions Visa, PayPalAnd Circle, whose payment protocol Solana Pay has been integrated into Shopifyplatform.

Solana even launched its own Android smartphone Web applications 3Saga Phone, in 2023. It is still a niche tool, but has its own dApps store as an alternative to alphabetGoogle Play Store.

But over the past two years, Solana has dealt with problems with network congestion, spam transactions, and security failures. Another major investor was failed cryptocurrency exchange FTX, which hastily liquidated its tokens at a discount to pay off its creditors. All of these challenges, coupled with rising interest rates, pushed its price below $10 in December 2022.

What’s next for Solana?

Solana’s price is already up nearly 19 times from its all-time low, but it could rise further as its network issues are resolved, the big FTX sell-off comes to an end, and interest rates gradually decline. Several major cryptocurrency companies, including Grayscale, Bitwise, and VanEck, have also recently filed for approvals for Solana spot ETFs.

These ETF approvals could stabilize Solana’s price while attracting more individual and institutional investors. They are also likely to mark its transition from a smaller altcoin to a “premium” cryptocurrency like Bitcoin and Ether.

But is Solana a viable alternative to Bitcoin?

Solana is an interesting alternative to Ethereum, but not a viable alternative to Bitcoin yet. Solana may be a good investment if you think it can continue to increase its speed, expand its ecosystem, and gain new ETF approvals. However, it remains an inflationary token that is more difficult to value than Bitcoin.

It may be smart to invest in both Bitcoin and Solana, but investors should be aware of their differences. Bitcoin could be considered a digital alternative to gold, but Solana’s value will be determined by the speed of transactions and the attractiveness of developers.