How Solana's SOL token is becoming popular as crypto booms

The cryptocurrency linked to the Solana network has jumped to the seventh spot among the world’s top 10 virtual coins amid optimism that the blockchain could be a long-term competitor to Ethereum.

Solana’s SOL token has tripled in about three weeks and now has a market value of more than $41 billion, according to CoinGecko. Proponents tout the claimed speed and lower cost of transactions on Solana for decentralised finance and digital collectibles, applications where Ethereum dominates.

“Solana has a growing ecosystem, projects are being built on it and it’s benefited hugely from the mania that’s taking place in NFTs,” Antoni Trenchev, co-founder at crypto lender Nexo, wrote in an email. NFTs are non-fungible tokens used to trade digital collectibles. He said the backing of crypto figure Sam Bankman-Fried — chief executive of crypto exchange FTX — was helping.

Solana bills itself as the world’s fastest blockchain and its website says the average cost per transaction is $0.00025. In June it announced that it had raised $314 million in a funding round with investors including Mr Bankman-Fried’s Alameda Research, venture capital firm Andreessen Horowitz, Polychain Capital and CoinShares.

“Major players in the space, such as FTX and Jump, are recognising its potential,” said Alexandra Clark, sales trader at UK-based digital asset broker GlobalBlock, in an email on Monday. “Not only that, but the network’s foray into NFTs with Solanart, the marketplace built on the SOL blockchain, has been instrumental in driving the altcoin’s price higher,” she said. “SOL’s current price rally is likely to continue.”

Late last month, Jump Trading-affiliated crypto market data provider Pyth Network went live on Solana’s mainnet, a development that’s expected to help bolster the world of decentralised finance. There are plans for it soon to be able to broadcast market data through the so-called Wormhole Network.

“It’s becoming too big to ignore and offers a different smart contract solution to Ethereum,” Jonathan Cheesman, head of over-the-counter and institutional sales at FTX, wrote in an email.

So-called alternative coins like Solana’s SOL, Cardano’s ADA and Binance Coin have surged in recent weeks, taking some of the limelight from top tokens Bitcoin and Ether in a broad crypto revival from a May rout. Bitcoin has also rallied and came close to $52,000 on Monday.

Sceptics argue the technological upgrades propelling some tokens may not justify the scale of the rallies.