Even though we’re just 10 days into 2023, its already shaping up to be a better year for the price of cryptocurrencies with Cardano (ADA) and Solana (SOL) leading crypto markets on a bear-defying rally. Bitcoin (BTC) has jumped above US$17,000 for the first time in nearly a month and Ethereum (ETH) has posted a very respectable 10% gain since the start of the year.
So why are cryptocurrencies rallying right now and what’s the driving force behind crypto’s newfound upward momentum?
To answer that we have to turn our heads to two altcoins: Solana and Cardano — both of which have been leading the charge in crypto markets, with SOL and ADA both up 43% and 23% respectively in the last week.
Why is Solana pumping?
Less than two weeks ago, the long-term outlook for Solana was undeniably quite grim, however after it was widely agreed that the blockchain network’s SOL token had been ‘oversold’ by investors, the price of SOL started to climb. Another major driving force behind SOL’s epic revival following the launch of a dog-themed memecoin called ‘BONK’.
The launch of BONK sent the Solana ecosystem into a frenzy and reignited interest in the blockchain at a time where many market participants were concerned that it may not actually survive into the distant future. Solana is currently changing hands for US$15 apiece.
Why is Cardano pumping?
The reason for Cardano’s upward price action is less obvious and seems to have something to do with the fact that ‘whales’ — investing parlance for holders with massive sums of cash — are accumulating enormous amounts of the token. According to the blockchain analytics firm Santiment, in the last two weeks the number of investors holding more than 1 million ADA (US$315,000) has grown by 28.
On top of this a number of positive developments are on the near-term horizon for the Cardano blockchain, which has long been criticised for its lack of real development activity.
The Cardano team is now reportedly taking the next step towards improving platform scalability (how many transactions a blockchain can handle at a given time). The most-awaited development of this year, dubbed ‘Hydra‘ will improve transaction speed while increasing the total volume of transactions without sacrificing low ‘gas’ fees (how much it costs to complete a transaction).
With Cardano witnessing an increase in the number of Decentralised Finance (DeFi) protocols on its network, the Hydra upgrade is a crucial development.
Solana & Cardano explained
Solana and Cardano are both programmable blockchain networks that operate in a very similar way to Ethereum (ETH). Programmable blockchains allow developers to build a number of things on top of them, like decentralised applications, smart contracts and DeFi (decentralised finance) apps. Programmable blockchains also let developers and everyday users create entirely new cryptocurrencies and mint non-fungible tokens (NFTs).
If all of those words felt like a lot to take in, you can think of programmable blockchains like Ethereum, Cardano and Solana as giant virtual computers that allow for the creation of all things crypto.
How does Solana compare to Ethereum?
Solana launched during the peak of the 2017 crypto bull run and was originally created as a solution to many of the problems that Ethereum faced. The biggest problem that Solana looked to solve was ‘scalability’ which refers to how many transactions and how much activity a blockchain network can handle at a given time.
In it’s heyday, it was often referred to as a potential ‘Ethereum-killer’, but recent events have made put that title under a fair bit of stress. Solana focuses heavily on speed and scalability whereas Ethereum focuses more specifically on decentralisation and security.
How does Cardano compare to Ethereum?
Cardano was first founded in 2015 by blockchain developer Charles Hoskinson. Like Solana it was launched in 2017 and positioned itself as a competitor to Ethereum, by solving problems that Ethereum couldn’t seem to overcome at the time. The biggest hurdle that Cardano seeks to solve is the problem of scalability without sacrificing on security or decentralisation.
Today, the Ethereum network is still far more popular than Cardano for building applications and smart contracts and handles approximately 1 million daily transactions versus the fewer than 100,000 transacted daily on Cardano. Technically Cardano, is capable of handling more transactions than Ethereum but developers and users still prefer Ethereum as their blockchain network of choice.