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Inside the Solana hype and why prices of Bonfida, Serum, and Raydium are surging

  • April 29, 2021
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  • Category: BitCoin, Blockchain, Cryptocurrency, Investments
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While the crypto market plunged by several percent last week, a sliver of coins running on the Solana ecosystem remained in the green, data from several sources shows.

The moves could be attributed partly to the blockchain’s low-fee, high throughput capabilities, and partly to one of the biggest public backers of the Solana project—FTX founder Sam Bankman-Fried.

Solana charms

Founded in 2017, Solana was created by ex-Dropbox engineer Anatoly Yakovenko and co-founders Eric Williams and Greg Fitzgerald to address the issues plaguing the top two crypto networks, Bitcoin and Ethereum.

The team used a unique “Proof of History” consensus design—spread over 200 physically distinct nodes—that relied on historical records that proved that an event (i.e. transactions) occurred during a specific moment in time.

All evaluated transactions are given a unique hash and count that can be publicly verified. The count allows network participants to verifiably determine each transaction has occurred, allowing the blockchain to function as intended.

Such fundamental metrics have played their role in the popularity of SOL, Solana’s native token. What attracts investors to the ecosystem are the low fees (a few cents) and speeds of over 65,000 transactions per second (tps), compared to Ethereum’s $50-$100 fees and 15 tps.

The Bankman-Fried effect

And there’s then Bankman-Fried. The young billionaire, known for his work with FTX and Alameda research, is heavily involved in supporting the Solana ecosystem by listing new projects on FTX and funding the development of applications building on Solana.

“The SOL rally is partially a delayed reaction to the work that’s been put into the ecosystem over the last year, and the need to find scalable solutions for DeFi as the ecosystem grows,” Bankman-Fried said in a recent statement to business outlet Bloomberg.

His association with and the performance of Solana, has, in recent times, led to Solana-based coins popping hundreds of percent in the past few weeks. 

“Sam is an extremely talented entrepreneur and has had staggering success with FTX, so it doesn’t surprise me that people are indirectly backing him by betting on his associated tokens,” explained Nic Carter, co-founder of researcher Coin Metrics.

Even billionaire crypto investor Mike Novogratz , the founder of Galaxy Digital, is betting on the so-termed “Sam coins,” a recent tweet showed.

Leading applications see token pumps

As per Solana COO Raj Gokal, over 150 different apps have been built for Solana already. And among the handful of Solana-based cryptocurrencies, some have stood out in the past few months.

Serum, a token used on the new decentralized derivatives exchange (DEX) created by FTX, has seen its market value jump to $494 million from $51 million this year. The DEX allows traders to punt on several cryptocurrency pairings with fees of a fraction of a cent within time periods comparable to centralized exchanges (CEXs) like FTX or Binance.

The SRM token gives holders up to 60% off fees, with 80% of DEX fees going to SRM “buy & burn” program. This creates a theoretically decreasing supply for SRM—aiding an increase in value.

Another Solana star is Raydium, an automated market maker (AMM) and liquidity provider built on the Solana blockchain for Serum. 

It enables faster transactions, significantly lower fees, and enhanced scalability for traders by Raydium provides on-chain liquidity to a central limit order book, meaning that Raydium traders and liquidity providers get access to the entire order flow and liquidity of Serum.

RAY are awarded to traders who provide liquidity to the network. They are worth over $14.35 at press time with a market cap of over $525 million.

The last among the top three Solana projects is Bonfida, an AMM, trading program, and API tool helpful to beginners and experienced users that integrates various handy features, such as trading charts and TradingView data in its interface.

As per its site, Bonfida’s daily volumes average around $65 million, with over $2.6 billion traded since inception. FIDA is the project’s native utility token, finding its use in paying for gas fees on the platform alongside features like VIP API access, bot payments, and “consulting” services.

Some caution

Apart from the above, there are upcoming projects like Step Finance and Mango Markets that are creating considerable hype among crypto circles with millions of dollars already vested or staked on the platform.

Meanwhile, despite the enthusiasm, some investors continue to express caution. “It’s been going up because it’s a good blockchain that seems to be gaining ground recently,” noted crypto investor Bloomberg Opinion writer Aaron Brown.

He added, “But there are lots of good blockchains and (as everyone knows) the sector is volatile and prone to short-term enthusiasm.”

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