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The DeFi sector saw a new wave of growth in the early days of 2021. However, the new surge in interest also brought a greater need for scalability and speed — something that Ethereum’s network cannot provide as of yet. In order to replace it, DeFi participants started turning to alternatives, with Solana (SOL) seemingly becoming the most popular one.
The DeFi rally leaves traders wishing for a better solution
The crypto industry has seen a massive boom over the past several months. Crypto prices have skyrocketed, and the recent month-long rally has already taken Bitcoin twice as high as the one from 2017.
The DeFi sector itself is progressing rather nicely, recently hitting a new ATH when it comes to total value locked (TVL) at $22.82 billion. However, with DeFi still mostly taking place on Ethereum (ETH), the project’s lack of scalability and speed are becoming a problem, particularly as these lacks tend to boost transaction fees’ prices.
Ethereum did start the roll-out of its Ethereum 2.0 on December 1st, 2020, but it will be a while before its blockchain starts to deliver on the promise of fast and cheap transactions.
Amid all that, the DeFi sector started turning to alternatives, and the most popular one in the last six months appears to be Solana (SOL).
Solana emerged at the right time to become a popular Ethereum alternative
Solana is a project founded by Anatoly Yakovenko, with a team consisting of former engineers from numerous well-known companies, including Qualcomm, Dropbox, and Intel. The project claims to be a censorship-resistant blockchain that can offer open infrastructure and help global adoption.
All of this made many start viewing it as a competitor to Ethereum, including FTX derivatives exchange’s CEO, Sam Bankman-Fried, who supported it by choosing this platform to host its DeFi project.
11) Serum is built on the @solana blockchain. Solana can process 10,000 times as much as Ethereum; and it's 1,000,000 times cheaper.
And unlike many side chains, Solana is a fully fledged, decentralized blockchain with over 100 validators.— SBF (@SBF_Alameda) July 27, 2020
Solana’s SOL token saw a major increase in volume and price after this, as many others rushed towards the project. Its volume went from $1 million to $41 million, while the price spiked from $0.9 to $4.89. Its price did drop to $1.21 when the DeFi surge ended, although it managed to climb back up to $3.1.