Solana
Is Solana the next PayPal?
Investors would be hard pressed to find a better performing asset than Solana (CRYPTO: SOL), whose price has climbed 1,500% since the start of 2023. Despite this monumental gain, this innovative cryptocurrency is still trading 39% below its all-time high (as of May 16).
While speculating on Solana has been a good idea in the recent past, these price dynamics could distract you from the true potential of this blockchain network, especially when it comes to the payments landscape. Solana is doing some interesting things in space that can’t be ignored.
But can he become the next PayPal (NASDAQ:PYPL)?
Disrupt payments
I believe that the ultimate survival of a crypto project rests solely on its ability to generate a real use case. Solana Labs, the governing body of Solana, is trying to make progress in this regard.
In early 2022, Solana Pay was launched. It is a payment system that uses blockchain, resulting in instant settlement and almost no fees. Merchants and consumers can transact with each other directly through the Solana network, using the native SOL token or a stable coin.
One of the reasons this concept is a game-changer is the savings merchants can achieve. A typical retailer probably already operates on low margins. Keeping around 2% of sales going to payment processors could lead to improved profitability.
Additionally, Solana Pay enables innovative ways for merchants and consumers to interact. For example, a consumer who purchases shoes at a sneaker store could obtain a non-fungible token (NFT) that serves as their receipt. The retailer could notify the buyer when a sale takes place, with the NFT acting as a coupon that can be used in the future.
Given that Solana can theoretically handle 50,000 transactions per second, it is a prime candidate that can help disrupt today’s payments industry. And it’s a lucrative area to focus on. After raking in $4.2 billion in free cash flow in 2023, PayPal executives estimate they can generate $5 billion in 2024.
Already the dominant player
Can Solana become the next PayPal? Well, from the perspective of market participants, the $71 billion value of the crypto network already exceeds the $67 billion value of the digital payment company. I would attribute this more to hype and speculative behavior than anything to do with fundamentals. In fact, most of the credit probably goes to the favorable market backdrop that propelled the entire crypto and stock markets higher.
Perhaps the news of the integration of Solana Pay into the e-commerce platform Shopify This is what got investors excited, as the crypto has soared nearly 700% since this announcement last August. But according to cryptwerk.com, Solana is only available as a payment method at 696 merchants, a drop in the bucket compared to the widespread adoption of PayPal.
The story continues
This means that from a purely usage-based perspective, Solana isn’t even close to PayPal. To give you an idea of PayPal’s scale, the company currently has 427 million active accounts and processed $404 billion in total payment volume in the first three months of 2024. This makes it a leader in electronic payments , a position that stems from his greatest success. more than two decades of history leading the industry.
Users trust PayPal because of its strong brand, security, and reliability. Solana falls short in this area, despite its fast speed and low fees, as the network has experienced several outages in the past.
Solana could be one of the most interesting cryptocurrencies on the market. But I don’t think it will come close to PayPal in the payments business anytime soon. Nonetheless, investors should closely monitor any new developments.
Should you invest $1,000 in PayPal right now?
Before buying stock on PayPal, consider this:
The Motley Fool Stock Advisor analyst team has just identified what they believe to be the 10 best stocks for investors to buy now…and PayPal wasn’t one of them. The 10 selected stocks could produce monster returns in the years to come.
Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $580,722!*
Stock Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns May 13, 2024
Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool ranks and recommends PayPal, Shopify, and Solana. The Motley Fool recommends the following options: Short June 2024 calls at $67.50 on PayPal. The Motley Fool has a disclosure policy.
Is Solana the next PayPal? was originally published by The Motley Fool