Reddit co-founder Alexis Ohanian has teamed up with Solana Ventures to launch a new investment fund dedicated to Web3 and social projects, potentially setting the stage for the next wave of budding crypto startups.
Ohanian announced Tuesday at the Breakpoint conference in Lisbon, Portugal that his Seven Seven Six venture firm and Solana Ventures have allocated $100 million to Web3 and “decentralized social projects.” In an accompanying news release, the internet entrepreneur touted his venture firm’s expertise in “identifying and investing in early social and crypto trends,” which include Reddit, Patreon and Coinbase, among others.
Raj Gokal, the COO of Solana Labs, said “Web3 turns users and creators into owners and stakeholders, a change that can’t come soon enough to social media.”
Centralized social media platforms such as Facebook are said to generate hundreds of billions of dollars in annual revenue, mostly through advertising and without rewarding content creators for their contributions. While efforts to “decentralize” social media have been underway since at least 2017, no blockchain-based social project has reached mainstream adoption. Seven Seven Six and Solana Ventures said they will prioritize technologies and applications that [eliminate] value extraction from centralized intermediaries.”
Related: BREAKING: Facebook rebrands to Meta as focus expands beyond social media
Solana Ventures has been highly active on the investment front, having only recently spearheaded a $100 million fund dedicated to Web3 gaming, also known as GameFi. Similar funds were also launched by Sanctor Capital and Huobi Group. Over $17 billion in venture capital has flowed to crypto- and blockchain-focused startups so far in 2021.
Not many retail and institutional investors heard about Solana (SOL) before 2021. The cryptocurrency hardly saw any substantial gains during the second half of 2020. However, Solana’s popularity skyrocketed in 2021 as the digital asset saw immense demand from retail and institutional investors.
The latest data posted by Coinmarketcap shows that Solana gained nearly 10,500% in 2021, which makes it the best performing digital currency among the top 10. SOL started this year at a price level of just $1.5 and touched an all-time high of approximately $210 on 9 September 2021. Solana’s trading volume and the overall network activity have increased substantially in the last few months.
Coinmarketcap
The most surprising part of the latest rally in Solana is the interest of institutional investors in the world’s 7th largest cryptocurrency. Last week, SOL investment products attracted $50 million worth of institutional inflows, which is more than the combined weekly inflows of Bitcoin, Ethereum, Cardano, Polkadot and XRP investment products.
So, what is the main reason behind Solana’s enormous rally in 2021? Crypto analysts believe that the technology behind Solana is better than most of its competitors and that is why Solana’s adoption has increased significantly in the last few months. Secondly, the fear of missing out (FOMO) is playing a major role in the recent surge in SOL’s demand.
Solana’s Technical Advantages
Maria Stankevich, Chief Business Development Officer at EXMO UK, believes that Solana’s high speed and low cost of the transaction are playing an important role in its global adoption. “To be honest, before the Solana project, we heard many times about so-called ‘Ethereum killers’. Cardano, Polkadot: they all tried to solve challenges ETH faced. ETH is still the absolute champion in the Defi world. However, the Ethereum network is trying to solve massive problems of the network overload which makes it impossible to scale the network to millions of the users since the commissions are rocketing to the roof,” Stankevich said.
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“Solana claims that its blockchain can support more than 50 000 transactions per sec (TPS) which makes it the fastest blockchain ever. In comparison, it’s 3000 times faster than ETH (15 TPS). Also, the average time of the block is 400-800 msec, and the average commission for a transaction is 0.000005 SOL (less than a cent!). Another secret of Solana is a new protocol Proof-of-History, that allows the unprecedented traffic possibility,” she added.
“So, the main advantages that influenced the price surge are: the high speed and low cost of the transactions, a more eco-friendly blockchain, the possibility of scalability (without the sharding and 2 level solutions), numerous partner relations inside of the network, a focus on the dapps in the Defi system, the experienced team, listing on many exchanges, the possibility to earn with staking, and security,” Stankevich explained.
FOMO
Finance Magnates also asked Johnny McCamley, Founder of CryptoClear, about his views on the latest price movement of SOL and the key advantages of the Solana blockchain. McCamley mentioned that the strong fundamentals of Solana blockchain and FOMO among retail and institutional investors are driving its price rally.
“Solana is an excellent investment for the long term- 1 of the 15 projects that we, at CryptoClear, include in our Dollar Cost Averaging plan (DCA Plan) for the long term due to the team, tech maturity and real-life use case. Solana ensures composability between ecosystem projects by maintaining a single international state as the network scales. Never deal with fragmented Layer 2 systems or sharded chains. Low cost, forever-Solana’s scalability ensures transactions remain less than $0.01 for both developers and users. Fast, forever-Solana is all about speed, with 400 millisecond block times. And as hardware gets faster, so does the network,” McCamley mentioned.
“One of the major reasons behind its recent price surge is FOMO (Fear of Missing Out). Those who do not own SOL and other crypto assets will have the fear that they have ‘missed the boat’ and start investing as soon as they can,” he added.
Up almost 20% in the past 24 hours, Solana (SOL) has been on an incredible rally across the board. In higher timeframes, the cryptocurrency records a 70% and 141% profit in the 7 day and monthly chart.
SOL on a rally in the daily chart. Source: SOLUSDT Tradingview
Perceived as one of Ethereum’s potential killer ecosystems, Solana continues to grow and attract attention from the crypto space. DeFi investor Daniel Cheung recently published a report on the fundamentals that support further appreciation for SOL’s price.
Cheung believes this cryptocurrency offers one of the “best” reward/risk scenarios for any crypto investments and predicted the arrival of the “Solana Summer”. This project has a straightforward pitch due to its high scalability and low-cost smart contract platform.
In addition, it provides a high level of scalability in an ecosystem without solutions such as sharding. Cheung believes that these features allow the application build on Solana to have “synchronous composability”.
This matters because with a single shared state and synchronous composability every application on Solana can communicate with each other atomically.
As Ethereum moves forwards with its migration from a Proof-of-Work consensus algorithm to Proof-of-Stake, its DeFi ecosystem could lose this property. Thus, some applications could become less interoperable with each other or stop working altogether.
The Bearish Case For Solana, What Could Prevent More Gains
As NewsBTC reported, the Solana Foundation launched stake pools with the purpose of increasing the security of its network, make it more censorship-resistant, and provide SOL holders with more incentives to participate in the ecosystem.
The latter has been one of the heaviest criticisms made by the project’s detractors in addition to the network’s level of centralization. Cheung believes this is part of the bearish thesis for Solana claiming the network “may never decentralize enough in the future”.
The second part that could prevent this ecosystem to gain further traction is Ethereum itself. This competitor still supports the majority of DeFi projects, has a high number of developers working on dApps and the development of the ecosystem, second layer solutions, and more.
Source: Daniel Cheung via Twitter
Cheung claimed Solana “faces a steep uphill battle vs Ethereum”. However, DeFi is one of the sectors where it’s more visible than the crypto industry is still in its early phase and could inevitably be heading towards a “multichain world”, as Cheung called it while he added the following:
It is still unclear whether smart contracts will be a winner-take-all market. While Ethereum is currently in the lead, data points increasingly point towards a multi-chain future, at the very least for the foreseeable future as this market plays out.
Moreover, on the centralization issue, the investor said that there is a lot of debate around when a blockchain has the right balance of decentralization. Cheung estimates that 1,000 or 10,000 nodes could be sufficient, this would make the criticism towards this network “invalid”.
Data presented by the investor claim that development activity in the SOL ecosystem are “trending very well” and has accompanied its price appreciation. The trend seems poised to continue in the coming months, as relevant figures in the crypto space, such as FTX CEO Sam Bankman Fried, are “heavily involved” with Solana.
Cheung claims that Bankman Fried has been making serious investments into this ecosystem. The exchange and its CEO have been making external investments in traditional finances, sports, and consolidating partnerships with other investors, politicians, celebrities, and others.
Thus, institutions from Wall Street are keener to jump into Solana and its ecosystem. Cheung concluded:
So with the bear arguments nullified, you are left with an asset that offers one of the best R/R in crypto right now, and one that offers practically unlimited upside in a bubble given its comped to $ETH which trades like its running to become the internet’s reserve currency.
