One gathers the collective enthusiasm for these… digital baubles has rather waned. From a peak of $4.4 trillion late last year—a figure one views with a certain detached amusement—the cryptocurrency market has descended to a mere $2.4 trillion. A decline of 45%, you understand. And the pace, shall we say, is accelerating. One observes that even those tokens boasting ‘genuine use cases’ – a phrase one now regards with profound skepticism – are not immune to the carnage.
Solana (SOL 0.39%), you see, is the native cryptocurrency of a network launched in 2020, with the rather ambitious aim of being a faster, cheaper, and generally more capable version of Ethereum (ETH +0.04%). Developers, apparently, are flocking to it to construct these ‘decentralized applications’ – mostly, one suspects, for gaming and financial speculation. The very notion.
Currently, Solana is down 67% from its recent high. The optimists suggest this presents a ‘buying opportunity.’ One prefers to view it as a particularly glaring warning.
A Modestly Efficient Alternative
Ethereum, of course, remains the leading platform for these… applications. These ‘smart contracts’ – slivers of code dictating the rules – are immutable, supposedly preventing anyone from seizing control. A charmingly naïve notion, considering human ingenuity. It runs on thousands of computers worldwide, maintaining copies of its blockchain. Apparently, this ensures 100% uptime. One assumes the electricity bill is astronomical.
Solana’s ecosystem is remarkably similar, but with a few ‘improvements.’ Ethereum utilizes a ‘proof-of-stake’ system, requiring participants to pledge coins as collateral. They earn interest, naturally, but risk losing it if they misbehave. Solana employs the same, but adds a ‘proof-of-history’ mechanism, encoding transactions with timestamps. This, they claim, speeds up verification. Ethereum, by comparison, can only handle 15 transactions at a time before fees become… burdensome. One suspects the entire system is built on sand.
As network activity increases, so does demand for Solana, because each activation of a smart contract triggers a fee payable in Solana coins. Fees are lower than Ethereum’s, thanks to this hybrid mechanism. This attracts developers, naturally. Though one wonders what, precisely, they are developing.
The Inevitable Dilution
The Solana network is programmed to constantly ‘mint’ new coins to reward validators. Without these rewards, the whole edifice would collapse. This, however, means the circulating supply of Solana is perpetually increasing, slowly eroding the holdings of existing investors. A rather transparent scheme, wouldn’t you agree?
They’ve programmed a mechanism to taper the rate of supply growth by 15% each year. Supply increased by 8% last year, will increase by 4% this year, and will continue to decline until it reaches 1.5%. Some tokens are ‘burned’ in each transaction, removing them from supply. In theory, this could lead to a shrinking supply if the network becomes popular enough. One remains unconvinced. One has rarely seen an asset grow in value if its supply endlessly increases.
Should One Risk a Few Shillings?
Decentralized applications are becoming more popular, though they haven’t achieved mainstream appeal. Jupiter and Magic Eden, apparently, are popular examples. One dares say most people outside the crypto community have never heard of them. And for good reason.
Network activity does seem to be increasing. Daily active wallet addresses soared to 9 million last year, though it has since declined to 6.5 million. Still higher than it was before 2024. A lumpy trend, certainly. But hardly a ringing endorsement.
Nevertheless, Solana’s 67% decline from its recent high is difficult to ignore, even in the face of this perceived increase in activity. Speculative investors still heavily influence the value of most cryptocurrencies. While Solana might be intriguing for those who believe in the future of decentralized applications, one strongly advises managing risk. Keep position sizing small. Very small, indeed. One wouldn’t want to be left holding the bag, would one?
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2026-02-22 15:13