Since being launched in March 2020, Solana (CRYPTO: SOL) has generated a monster return for investors, rising greater than 16,000%. That performance is actually impressive, despite the fact that the cryptocurrency is trading 44% below its all-time high today.
Nonetheless, the gains can draw attention away from the incontrovertible fact that this blockchain network is working on an revolutionary recent feature that appears promising. To be more specific, Solana is aiming to disrupt the payments space.
Can this cryptocurrency make some serious progress and develop into the subsequent PayPal (NASDAQ: PYPL)?
Trying to alter the payments landscape
Solana Labs, the corporate that essentially controls the decision-making and development efforts for Solana, is attempting to boost the blockchain’s long-term viability. It introduced the Solana Pay service in early 2022 to make inroads within the payments industry.
Solana Pay is an revolutionary payment mechanism that connects merchants and consumers directly via the blockchain. Transactions could be facilitated using the SOL token or a stablecoin and may settle almost immediately with fees which can be fractions of a penny.
For merchants that operate on razor-thin margins, using Solana Pay could lead on to higher profits, because there could be meaningful savings from the cash that does not receives a commission to traditional payment processors. Furthermore, exciting features, like non-fungible tokens, can replace receipts, allowing customers and businesses to develop deeper connections and to encourage future transactions to occur.
Solana says there are 280,000 energetic Solana Pay accounts. It’s unclear whether this specifies the variety of merchants which have signed up or the whole variety of merchants and potential shoppers. Nonetheless, it’s clear that this remains to be a really small user base within the grand scheme of things, as there are tens of tens of millions of retail merchants across the globe.
Solana stands out within the digital asset industry on account of its fast throughput. It might theoretically handle 50,000 transactions per second. This makes it a major candidate to be utilized in a payments setting.
It also helps that the industry may be very lucrative. PayPal executives imagine the business will generate $6 billion in free money flow (FCF) this yr. And the 2 card juggernauts, Visa and Mastercard, rake in tens of billions of dollars in FCF annually.
PayPal’s long-term success
As of this writing, Solana’s market cap of $68 billion is just barely lower than that of PayPal, which is price $75 billion. Subsequently, I can say that the previous has already develop into the latter when it comes to approximate valuation. But this says nothing of utility. I’d suspect Solana’s gain is due mainly to hype, speculative activity, and the extremely favorable market environment than anything having to do with fundamental developments.
To present it credit, Solana announced in August that it might integrate with the favored Shopify e-commerce platform. Since that time, the crypto is up 600%, a incredible gain in a yr’s time.
But in line with Cryptwerk, Solana’s token is simply accepted at 737 merchants worldwide. To say that Solana has an extended technique to go to achieve the adoption and usage PayPal has would probably be a significant understatement.
That is very true if you take a better have a look at PayPal, which is utilized in 200 countries. The business processed $1.7 trillion in annualized payment volume last quarter, and it has 429 million energetic users. Its status as a trusted and seamless technique to move money shines brightly compared to the various outages the Solana network has had. Consequently, I’m not confident the crypto can ever develop into the subsequent PayPal.
When you checked out PayPal’s stock chart, with shares trading 76% off their peak, you’d think the business was on the verge of bankruptcy. But that couldn’t be farther from the reality.
It’s true that PayPal is not putting up the monster growth numbers it did in years past, but that is not a deal-breaker. It’s still expanding, which is encouraging, and it’s a really profitable business.
Plus, PayPal’s stock is reasonable. It might be purchased at a forward price-to-earnings ratio of just 16.3. I view Solana as being severely overvalued, while PayPal looks drastically undervalued. It’s clear that the fintech enterprise is the significantly better investment to make immediately.
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Neil Patel and his clients haven’t any position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Mastercard, PayPal, Shopify, Solana, and Visa. The Motley Idiot recommends the next options: long January 2025 $370 calls on Mastercard, short January 2025 $380 calls on Mastercard, and short September 2024 $62.50 calls on PayPal. The Motley Idiot has a disclosure policy.
Is Solana the Next PayPal? was originally published by The Motley Idiot