By James Hendy
Solana ( SOL ) was one of the biggest cryptocurrency success stories of 2021.With enhanced smart contract functionality, the project’s native decentralized finance (DeFi) and non-fungible token (NFT) ecosystems flourished as blockchain developers were drawn to the network.
As a result of the burgeoning ecosystem, the blockchain’s native cryptocurrency, SOL, enjoyed a meteoric rise of over 6,000%.After starting the year at $1.80, the coin posted an all-time high of $260 in November 2021.
However, after a whirlwind year in 2021, the price of SOL has experienced a relatively subdued first quarter in 2022.Dragged down by technical difficulties experienced on the blockchain and an overall bearish sentiment surrounding the cryptocurrency markets, it has left many experts questioning if Solana still has the potential to push on to new heights.
Why has Solana’s price fallen? Solana is an open-source blockchain developed for the deployment of smart contracts and decentralized applications (dapps).Built as a direct competitor to Ethereum ( ETH ), the blockchain enjoyed increased adoption throughout 2021 as a result of its extremely high throughput, quick transaction times and cheap transaction fees.
Instead of employing a proof-of-work consensus mechanism similar to Ethereum, Solana achieves consensus using a combination of proof of history and proof of stake.It is thanks to this combination that the blockchain can offer superior functionality when compared to Ethereum.
However, in September 2021 , the first cracks began to appear in Solana’s otherwise superior credentials.The network went offline for 17 hours after experiencing a distributed denial of service (DDoS) attack.As a result of automated bot transactions associated with an initial DEX offering, a memory overflow caused many validators within the network to shut down.
As validators crashed, the network became unresponsive, and a hard fork was required to get the network operational once again.
Since September, the blockchain has suffered two more DDoS attacks that have rendered the blockchain unusable for short periods.Although no funds were lost during any of the attacks, it has left members of the Solana community frustrated.As a result, the price of SOL has dropped by 70%, falling to a low of $79 in March 2022.
Experts offer predictions for Solana in 2022 To help predict the future price movements of this young layer-1 blockchain, global fintech platform, Finder , interviewed a panel of 18 fintech, crypto and NFT specialists and asked their opinion on what 2022 could hold for Solana.
By taking an average of all price predictions from the 18 panelists, Finder calculated that the price of SOL is expected to reach $222 throughout 2022.To reach this prediction, the price of Solana needs to increase by 125% from current values.
Although the average price for 2022 was estimated at $222, predications ranged from tens to hundreds of dollars.Out of the 18 predictions, Vanessa Harris, chief product officer at Permission offered one of the most bullish short-term estimates, predicting that SOL could reach $500 in 2022.Interestingly, although Harris believes the blockchain has great short-term potential, over the next 10 years she believes the blockchain may struggle to compete.
“Downtime and DDoS attacks could point to potentially fatal flaws in its proof-of-history model, and already high requirements for validators could further skyrocket as transactions grow, making it increasingly more centralized,” Harris said.“I don’t believe Solana has the technology, adoption or level of decentralization to compete over the next 10 years.
Finder’s founder, Fred Schebesta, sees a more positive future for Solana and alongside a $200 price prediction for 2022, offered long-term price expectations of $750 for 2025, and $3,500 for 2030.Schebesta believes that multiple layer-1 blockchains, including Solana, will be around for at least a decade.
“While there are some concerns around downtime resulting from central points of weakness, solutions to this will no doubt see Solana become a primary destination for the Metaverse, NFTs, decentralized finance (DeFi) and applications more broadly,” Schebesta said.
“It’s likely that multiple smart contract blockchains are here for the better part of a decade – in fact, this is desirable due to the competition and safeguarding required to drive the ecosystem forward.”
Alongside decentralization, one of the most significant stumbling blocks that the panelists see as a problem for Solana is Ethereum’s upcoming proof-of-stake upgrade.Even for those with bullish predictions, competing with Ethereum was seen as key to the blockchain’s survival.
Veronica Mihai, a founding partner of Bloomwater Capital, shared this view: “Long term, when ETH moves to PoS, it may make Solana and other PoS coins less attractive.” Mihai expects Solana to reach and maintain a price of $100 for much of 2022 before modestly increasing to $120 by 2025.
Will Solana’s price recover to all-time highs in 2022? For the price of SOL to reach $222, and potentially reclaim all-time highs, there are some clear hurdles that the project needs to overcome.
Firstly, Solana developers need to continually ensure that the blockchain remains operational.Outages caused by DDoS attacks will likely lead to frustration among both developers and end-users, which could result in the blockchain losing adoption to competitors.
Fortunately, the issues experienced during the final quarter of 2021 and the first quarter of 2022 are being actively addressed by members of the Solana team.Many within the Solana community understand that “teething” issues are to be expected by younger blockchains – especially ones that have developed as quickly as Solana – however, the future price of SOL will rest on the blockchain’s dependability.
As previously discussed, many experts believe that this dependability needs to come before the Ethereum blockchain fully transitions to proof of stake.
Ethereum continues to dominate the cryptocurrency industry and is seen as Solana’s greatest competitor.Although ranked as the number two blockchain by market capitalization, Ethereum has been hindered by slow transaction times and high fees; hindrances that are expected to be rectified with Ethereum’s upcoming Merge .
Although the Merge was expected in Q2 2022, luckily for Solana, Ethereum recently postponed the transition to Q3/Q4 of 2022.The Solana blockchain needs to dominate the next six months to ensure that its DeFi and NFT ecosystems are fully integrated within the wider cryptocurrency industry.It is now crucial that the blockchain captures as much market share as possible before the industry witnesses the capabilities of an updated Ethereum.
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