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In the midst of a sea of blockchain assets now numbering over 14,000, it is difficult to find out which cryptocurrencies will be winners and which will be relegated to the digital garbage heap. However, Solana (CCC:LEFT USD) has shown quite an impressive performance that bodes well for its future development.
Seemingly out of nowhere, Solana is currently the fifth largest cryptocurrency by market capitalization at $ 67.7 billion. In the market valuation, SOL is on par with FedEx (NYSE:FDX) with a market cap of $ 67.3 billion.
Of course, many will find the comparison absurd. FedEx is an extremely valuable business as e-commerce is an increasingly important part of all retail transactions. It contributes to the economy by hiring people to manage and operate its huge fleet and by keeping the flow of goods around the world. It pays dividends to its shareholders.
Solana, on the other hand, is basically a digital commodity. It’s worth something because people have given it an arbitrary value. And that value can change quickly and make great movements in either direction.
To be fair, one could argue that Solana has at least one direct fundamental value. As the whitepaper explains, the blockchain arena lacks a trustworthy mechanism for the time being. Such a vulnerability opens the door to tampering and other threats.
With Solana’s proof-of-history protocol, time is another variable subject to a decentralized distributed review process. Long story short, Solana’s underlying technology could make blockchain networks much more secure.
The big dilemma behind this otherwise incredible benefit, however, is that it depends on other people to “submit” to a decentralized ecosystem, which has always been a problem for cryptos.
Solana cannot force you to comply
While I generally support the cryptocurrency case, I also get bored promoting the same ideas. In my opinion, life is a lot richer when you leave the echo chamber. Fortunately, I came across Jared A. Brock’s insightful article Bitcoin (CCC:BTC-USD) and it got me thinking about the whole blockchain complex.
In short, Brock notes that cryptocurrencies have become Ponzi schemes as they are currently being treated by the masses. Not tied to actual businesses, the only way to make money out of Bitcoin (or Solana or anything else) is to find someone (a victim) to outsource your holdings to.
Now Brock is hoping that Bitcoin – or a similar alternative – will become the currency of the internet because of its smooth, trustworthy model. But in their current form, he says cryptos are basically fraudulent investments.
While I’m not ready to go that far, I’ll say this much: Solana, like any other crypto, requires our participation and submission to its rules and protocols.
It is precisely in this sense that SOL is no different from a sovereign fiat currency. For example, if a country tries to trade commodities in currencies other than the US dollar, that country could face consequences. At least there can be sanctions. In the worst case, it could find itself at the wrong end of the American military-industrial complex.
Hell, you can even consider lower-level hypotheses. According to the Bureau of Engraving and Printing, the penalty for producing counterfeit dollars is up to 15 years in prison. To use Brocks’ language, fiat currencies are violence-based currencies. If you don’t do it, you will suffer.
But there is no imposed suffering with Solana or any other cryptocurrency. That’s the nice thing about them, but also the reason why they can’t stick.
The catalyst for centralization
While Americans take the greenback as a world reserve currency for granted, citizens from other parts of the world don’t exactly have the warm fuzzies. Without getting bogged down, it is widely criticized that the dollar imposes an unfair tax on the rest of the world.
From a geopolitical perspective, I can therefore understand why the concept of decentralized cryptocurrencies has spread like wildfire. For many people, turning the bird into American hegemony is a way.
The downside of this narrative is that decentralized currencies have no teeth. In other words, if you are rich in Solana, nobody will care if you are kidnapped. But if you are rich in dollars, the U.S. government will surely take care of it. It would be important to keep the system running.
Ultimately, I think most people value the security of centralized currencies more than decentralized ones. It’s like the overwhelming weight of US citizenship. Sure, the IRS will pursue you forever. But when things go down, the force of the dollar works in your favor. It is likely that only a minority of investors will disagree with this compromise, thereby limiting the true potential of the broader crypto complex.
At the time of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
As a former senior business analyst for Sony Electronics, Josh helped Enomoto broker key contracts with Fortune Global 500 companies. Over the past several years, he has provided unique, critical insights into the investment markets as well as various other industries including law, construction management, and healthcare.
Without Violence, Solana and Other Cryptos Can’t Stick first appeared on InvestorPlace.
The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.