The past few months have been tough for crypto investors. Rising inflation and geopolitical strife led to a stock market correction, and this caution extended to cryptocurrencies. In fact, after peaking in November, the crypto market has since fallen over 40%, losing around $1 trillion in value.
However, unless this is your first rodeo, you know that this kind of thing happens quite frequently when it comes to digital assets. In fact, the crypto market actually lost 50% of its value between May 2021 and July 2021. But every time the market crashed, it eventually bounced back and hit new highs. For this reason, now is a good time to put some money to work. And Solana ( GROUND -0.92% ) and Earth (MOON -3.99% ) look like smart buys.
Here’s what you need to know.
Solana is a programmable blockchain designed for scalable decentralized applications (dApps) and decentralized finance (DeFi) products. The project was started by former Qualcomm software engineer Anatoly Yakovenko, and his technical expertise shines through in Solana’s architecture. Specifically, Solana combines proof-of-story with proof-of-stake (PoS) to achieve consensus, enabling the platform to reach blazing speeds.
Generally speaking, PoS protocols require each validator to reach an agreement with all other validators in the network before a transaction can be confirmed. To speed up this time-consuming process, Solana timestamps incoming transactions to create a verifiable order of events. This means that each node (computer) can commit transactions independently, rather than waiting for consensus from all other nodes. As a result, Solana can theoretically handle 50,000 transactions per second (TPS) and reaches finality in 13 seconds, which means transactions are quickly integrated into the blockchain.
So why invest in Solana? DeFi apps allow borrowing, lending, earning interest, and more, all without the help of traditional financial institutions. By eliminating these intermediaries, DeFi can make financial services cheaper, more efficient, and more accessible. And Solana’s scalability makes it uniquely suited to achieve this goal.
On that note, Solana is currently the fifth most popular DeFi ecosystem, with $6.7 billion invested on the platform. Assuming its popularity continues to rise, the demand for the SOL coin – the native cryptocurrency of the blockchain – will also increase, causing its price to rise. That’s why this cryptocurrency looks like a smart buy.
Terra is a programmable blockchain designed to make financial services and payments more efficient. It is built on the Cosmos Hub, a protocol that aims to connect thousands of interoperable blockchains. This is especially important because Cosmos (and therefore Terra) relies on the PoS consensus mechanism known as Tendermint, which is capable of processing 10,000 TPS and finalizing these transactions in just six seconds.
Unlike most blockchains, Terra is built around two cryptocurrencies. The first is the stablecoin Terra, which tracks the price of fiat currencies – for example, TerraUSD is pegged to the price of the US dollar. The second is Luna, an altcoin designed to absorb volatility and keep coins stable at the desired price. For example, if a surge in demand pushes the price of TerraUSD above $1, the network tricks investors into converting Luna into TerraUSD, which increases its supply and brings its price down to $1. The system works the same way in reverse.
In other words, the increased use of Terra stablecoins leads to increased demand for Luna, which theoretically makes the altcoin worth more. For this reason, the Terra blockchain offers a range of dApps and DeFi products that aim to drive demand for Terra stablecoins. PaywithTerra is a great example. The platform allows merchants to accept Terra stablecoins at checkout, and because it’s based on blockchain technology – which means no bank or credit card network is needed – merchants won’t pay only $0.05 per transaction. Similarly, Anchor is a lending protocol that currently pays 19.5% APY when you deposit TerraUSD, a much better interest rate than you would get from a traditional savings account.
Here’s the big picture: Terra is the second most popular DeFi ecosystem in the blockchain industry, with $25 billion invested on the platform. That’s more than double the $12 billion invested in early December, a testament to its rapid adoption. In the future, as products like PaywithTerra and Anchor become more popular, the demand for Terra stablecoins will increase. And because Luna is designed to absorb price volatility, demand for Terra stablecoins should create demand for Luna, pushing its price up. This is why this cryptocurrency could make you richer in the long run.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.