Solana Investing In 2022 And Beyond: 3 Pros And Cons

With growing technological developments in the fintech space emerged the development of decentralised digital currencies. Cryptocurrency is a digital currency that uses advanced cryptography for security. Moreover, cryptocurrency is run on a blockchain or publicly-shared ledger over a computer network that facilitates and verifies transactions. Additionally, cryptocurrency’s decentralisation protects assets from being affected by regulations and economic events. While cryptocurrency’s value isn’t affected by rules and the economy, it can still be a precarious investment as its value can be very speculative, depending on the crypto. 

You may be particularly interested in a relatively new cryptocurrency called Solana. The cryptocurrency SOL is run on the Solana blockchain, and it’s used to pay for smart contracts and transactions over the Solana blockchain. Investors hoping to earn through Solana may profit by buying and selling SOL or with proof of stake coins. Other cryptocurrencies use proof-of-work which involves miners competing to solve sophisticated cryptography puzzles to write nodes on the blockchain. Meanwhile, Solana uses proof-of-stake, which entails staking one’s crypto for a chance to write the next block and be rewarded.

That said, it’s worth noting that various cryptocurrencies are available on the market, and you may be wondering if this one is worth investing in. Before investing in Solana for the year 2022 and beyond, you may want to consider the following pros and cons:

Pros

The set of factors that you may first want to consider are the pros of investing in Solana in 2022 and the future:

1.Several Ways To Profit 

You may find that one of the reasons more are investing in Solana is because it offers several ways to profit using its blockchain now. Besides simply buying and selling tokens, it’s the most popular way to invest in cryptocurrency and blockchain technologies.

Firstly, you may also buy and sell NFTs at Solana’s marketplace, Solanart. This may be especially beneficial for you if you wish to invest in NFTs but find the network congestion of alternatives an issue. 

Next, you may also stake your Solana tokens to gain rewards. Specifically, you may stake your tokens to one or more validators in the blockchain and help secure the network. 

2.Fast And Cost Effective

Another pro of investing in Solana in 2022 is that it offers fast transactions over its network and has comparably lower fees. This makes buying and selling SOL over the Solana blockchain very convenient and cost-effective.  

This is with Solana being able to facilitate around 3,000 transactions per second. Meanwhile, its low transaction fees can be attributed to its choice of consensus mechanism, proof-of-stake, wherein the cost to verify transactions is cheaper than proof-of-work. 

3.More Sustainable 

One reason cryptocurrency and blockchain have been controversial is that they affect the environment. This is because mining often requires much computing power, with computers solving extremely sophisticated mathematical equations. As a result, plenty of electricity is consumed for blockchains to run. 

However, you’ll find that Solana is known to be more sustainable and has fewer negative impacts on the environment. Because of Solana’s consensus mechanism, mining is no longer necessary, and transaction verification can be done faster with less energy.

Cons

The next thing that you may want to consider are the following risks and disadvantages that come with investing in Solana in 2022 and the coming years:

1.Lacking Adequate Decentralization

One of the major advantages of blockchain technology is decentralisation. No single institution is responsible for facilitating transactions over the network. However, decentralisation does require a significant number of peers over a blockchain to verify transactions. 

Unfortunately, compared with more established blockchains, Solana has fewer validators. More specifically, the network only has around a thousand validators. This is one of the main complaints made about Solana. 

Solana will need more validators to join its blockchain to become more decentralised.

2.Instability

Another con of Solana is network instability, negatively affecting its value. This is because Solana and its community are relatively new and still require more development. Furthermore, it’s yet to establish better reliability, a factor that investors consider seriously for investment risk mitigation. Overall, this has others hesitant to invest in Solana over its competitors, such as Ethereum.

3.Inflation

The next disadvantage that investing in Solana has is inflation. One of the reasons that interest in cryptocurrency has grown is protection from inflation. This is because cryptocurrencies are known to have a permanently limited number of coins that will ever be distributed. However, the same can’t be said for Solana, with its developers increasing the yearly supply of tokens. Therefore, if you’re looking to invest in crypto that’s certain to avoid inflation, then this token may not be for you.

Conclusion

Any investment will often involve some level of risk in the face of possibly gaining profit, which is why research is a vital step every investor must take. This is especially true for individuals hoping to invest in cryptocurrency, as it can be a very volatile and speculative asset. Hopefully, with the pros and cons listed above, you’re better informed on whether you should invest in Solana in 2022 and beyond. Finally, you may consider investing in Solana if you think it’s a worthy investment or consider conducting further research to inform your future decision.