Apollo’s Moonshots: Solana now has a π hundred million dollar war chest to take on Ethereum
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Henrik Andersson, the chief investment officer with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares his weekly take on what’s happening in the fast-changing and volatile cryptocurrency space.
Apollo Capital is not taking anything off the table when it comes to Solana, even with the high-performance blockchain up 2,472 per cent so far in 2021 – the sixth-best performance among the top 100 coins.
Built by engineers who are veterans of Big Tech companies like Apple, Google, Microsoft, Qualcomm and Intel, Solana is the No. 13 cryptocurrency despite only launching in March 2020.
“It’s been in our portfolio for some time now,” Andersson said.
Solana Labs last week raised US$314,159,265.359 in a token sale to private equity groups. The amount raised is π multiplied by US$100 million, in a nod to the project founders’ engineering roots.
“They will have a massive war chest where they can incentivise projects to build on top of the Solana blockchain, so that’s pretty exciting,” Andersson said.
“Solana is one of the fastest blockchains around, and they’re doing 50,000-plus transactions per second, on the base blockchain, without any sharding or layer twos or anything like that,” Andersson said.
(For those new to crypto: Ethereum is the clear frontrunner in the smart contract space, but it has become quite clogged. Sharding and layer two protocols are two solutions being explored to scale that network).
With such high performance, Solana can run decentralised finance applications like Serum — a decentralised exchange (DEX) with an on-chain orderbook — on its base blockchain, Andersson said. “So that’s really cool.”
“And this capital raise was supported by some of the biggest funds in the world like Andreessen Horowitz and Polychain Capital,” Andersson said.
Solana achieves its high performance compared to Ethereum in part because there are more requirements to participate in the network as a validator node.
“That’s the concept, there are tradeoffs, right? There are Ethereum people, especially, who are negative on Solana. The argument is that it’s not as decentralised as for example, Ethereum. Ethereum has slower throughput, maybe 50 transactions per second. So 1000x is what Solana can do.
“The tradeoff there is that it’s very expensive hardware that you need to purchase to be able to run a Solana full node. And that means there will be less validators, much less nodes, a bit more centralised.
“And the whole point with blockchain is to build a decentralised ecosystem, right? So you have to find that sweet spot, where it’s cheap enough to run one of these full nodes. And it’s questionable with Solana.
“But they’ve got strong supporters like these crypto funds; FTX is a strong supporter, one of the biggest crypto exchanges — and now they have a massive war chest as well.”
So Andersson expects to see more projects building on Solana as it tries to create an ecosystem to rival that of Ethereum.
It’s not there yet. Most of the locked value on the network is held in just two projects, Serum and its liquidity provider/automated market maker, Raydium. (The tokens of those protocols are the No. 159 and 187 coins, respectively.)
“We have it in our portfolios as promising, solving the scaling problem. But there is definitely some tradeoffs when it comes to decentralisation.”
Andersson says he was among the 20,000 people watching on Twitter Spaces last week as El Salvador’s national assembly debated a law making Bitcoin legal tender in that country.
“I think it’s pretty big. Obviously, it’s a small country, it’s not a major economy or anything like that — but as someone who’s been following this Bitcoin community for a very long time, this is something that we have been looking for and it’s a huge step.”
When the vote was held and the bill passed, it felt like a historical moment, Andersson said.
El Salvadoran president Nayib Bukele later came on Twitter Spaces and celebrated with all the Bitcoiners. Someone in the forum suggested to him that maybe El Salvador could use its natural resources to mine Bitcoin, and the next day the country began exploring ways to use geothermal energy from the country’s many volcanoes to do so.
It will be interesting to see if any other Latin American countries follow suit, Andersson said. Some politicians in neighbouring countries have been adding the Bitcoin “laser eyes” meme to their Twitter profiles.
“I think it’s a chance for a small country like this to embrace something new — and, you know, I wouldn’t be surprised if we are seeing many Bitcoin businesses move to a country like El Salvador, if they are friendly to crypto assets. So probably good for their economy overall, entrepreneurs and businesses moving there.
“So that’s exciting for sure.”