Solana (SOL) has risen decently in the last 24 hours and has had an incredible rally. On higher timeframes, the cryptocurrency has posted gains of 70% and 141% on the 7-day and monthly charts, respectively.
Solana, one of Ethereum's potential killer ecosystems, continues to grow and attract the attention of the crypto space. DeFi investor Daniel Cheung recently published a report on the fundamentals that support a further rise in the SOL price.
Cheung believes that this cryptocurrency offers one of the "best" risk-return scenarios for all crypto investments and predicted the arrival of the "Solana Summer". This project has an easy pitch due to its high scalability and low-cost smart contract platform.
In addition, Solana (here to our prediction) offers a high degree of scalability in an ecosystem without solutions such as sharding. Cheung believes that these features enable the application built on Solana to have "synchronous composability".
This is important because with a single shared state and synchronous composability, every application on Solana can communicate with each other atomically.
As Ethereum pushes its migration from a proof-of-work consensus algorithm to a proof-of-stake algorithm, the DeFi ecosystem could lose this feature. This in turn could lead to some applications being less interoperable or not working at all.
The bearish case for Solana: what could prevent further gains
The Solana Foundation introduced pools to increase the security of its network, make it more censorship-resistant and offer Solana holders more incentives to participate in the ecosystem.
The latter, along with the centralisation of the network, was one of the main points of criticism for many. Cheung believes that this is part of the pessimistic thesis for Solana. Which says: the network will never be decentralised enough in the future.
The second part that could prevent the ecosystem from gaining further traction is Ethereum itself. The competitor still supports the majority of DeFi projects, has a high number of developers working on dApps and the ecosystem or second-layer solutions.
According to Cheung, Solana "has an uphill battle ahead of him against Ethereum". However, DeFi is one of the sectors where it is more visible, as the crypto industry is still in its early stages and could inevitably be heading towards what Cheung calls a "multichain world". He adds:
"IT IS STILL UNCLEAR WHETHER SMART CONTRACTS WILL BE A WINNER-TAKE-ALL MARKET. WHILE ETHEREUM CURRENTLY LEADS THE WAY, THE DATA INCREASINGLY POINTS TO A MULTI-CHAIN FUTURE, AT LEAST FOR THE FORESEEABLE FUTURE AS THIS MARKET DEVELOPS."
On the issue of centralisation, the investor says there is much debate about when a blockchain has the right level of decentralisation. Cheung estimates that 1,000 or 10,000 nodes (nodes) could be enough to make the criticism of this network "moot".
Key figures involved
The data presented by the investor says: Development activities in the SOL ecosystem show "a very good trend" and go hand in hand with the rise in the share price. This trend looks set to continue in the coming months as key figures in the crypto space, such as FTX CEO Sam Bankman Fried, are "heavily involved" in Solana.
Cheung claims that Bankman Fried has made serious investments in this ecosystem. The exchange and its CEO have made outside investments in traditional finance, sports and consolidating partnerships with other investors, politicians, celebrities and others.
As a result, Wall Street institutions are eager to participate in Solana and its ecosystem. Cheung's conclusion:
"WITH THE BEAR ARGUMENTS MOOT, WE ARE LEFT WITH AN ASSET THAT OFFERS ONE OF THE BEST R/R RATIOS IN THE CRYPTO WORLD RIGHT NOW, AND ONE THAT OFFERS VIRTUALLY UNLIMITED UPSIDE POTENTIAL IN A BUBBLE, CONSIDERING IT IS BEING COMPARED TO ETH, WHICH IS BEING TRADED AS IF IT WILL BECOME THE RESERVE CURRENCY OF THE INTERNET."