How Much Will Solana Be Worth In 2025 | Solana Tokenomics

If you don’t want to read the full article, the video below goes over everything written.

Solana Origins

Solana’s origins date back to late 2017 when founder Anatoly Yakovenko published a whitepaper draft detailing a new timekeeping technique for distributed systems called Proof of History. In blockchains like Bitcoin and Ethereum, one of the limitations to scalability is the time required to reach a consensus on the order of transactions. Anatoly believed his new technique could automate the transaction ordering process for blockchains, providing a key piece that would enable crypto networks to scale well-beyond their capabilities at the time. Solana launched on Mainnet Beta in Mar. 2020, shortly after raising $1.76 million in a public token auction hosted on CoinList. The project’s beta network featured basic transaction capabilities and smart contract support. But it did not include any staking rewards as Solana was still determining its ongoing issuance schedule. Solana has now grown to be the 9th biggest cryptocurrency in the world and I want to explore how this has happened.

Solana Pre-Allocation

The tokenomics behind Solana is very spread out in terms of launch allocation. The token allocation is shown here in this pie chart. The largest chuck being the seed sale at 25.6% which is the allocation towards the original investor in the coin. The second biggest chuck is 20.4% for the founding sale, this comes after the seed sale and is for the founders of the coin to buy in more. The third largest chunk is 20.2% which is allocated to the Solana foundation, the foundation aims to develop the network and drive adoption of the coin. Next is 20.2% again for the Solana team, so those who contributed to the coin and helped it grow. Then there’s the validator sale of 8.2% which goes to node validators on the network. Lastly we have the public sale and strategic sale, the public sale is 2.6% and strategic is 3%. Currently Solana has a market cap of around 11 billion dollars and a circulating supply of 350 million coins. There is a total supply of 500 million but some of it has been burned, we will touch upon that later. It had an all time high of $250 per coin back in 2021 and now sits at $32 per coin.

Solana Supply Schedule

As mentioned earlier there was a lot of pre-allocation of Solana but after this they started distributing to the public and this is what their supply schedule looks like so far. As you can see early on there was the initial allocations then in december of 2020 the staking rewards started to become available. As we can see the supply for founders, validators and the rest of the initial allocation will all be distributed around december 2022 to earlier january of 2023 and then after this the only way of creating new coins will be through staking.

Solana Staking

The staking yield is constantly changing as it’s based on a calculation that has many changing numbers, but right now the expected staking reward is around 5%-6%. This would be slightly higher but validators also take commission from staking. If you want to become a validator you can then claim all the rewards from staking. To become a validator you have to put up 25,000 Solana which will be locked up. From there you can earn both staking rewards and transaction fee rewards. Staking also helps to secure the network so by staking you are helping the whole Solana ecosystem. You can stake your Solana into multiple pools on exchanges such as Binance, Coinbase and FTX. All you have to do is buy Solana and then choose how long you want to stake it for. Staking rewards are calculated at every epoch. Which is a period of time on the blockchain, for Solana its roughly every 3 days so it will keep updating rewards every 3 days.

Solana Burning

Solana is not a fixed supply coin. More Solana tokens are released into circulation with time through the process of inflation. The number of tokens released will be reduced starting at an initial rate of 8% down to 1.5% over ten years. As more coins are introduced into circulation, there are also others that are being removed or burned. The way Solana has decided to combat the inflation is through burning of transaction fees. Half of every transaction fee is burned and the other half goes towards the validator of the transaction. This artificially gets rid of coins and sends them to a burn wallet where it cant be accessed by anyone, therefore cant be used. Also if private keys are lost or wallets cant be accessed then this also adds to the burning as these wallets cant be accessed. So far around 150 million Solana has been burned which is a considerable amount. This was probably due to the high transaction rate back in the 2021 crypto bull run, where we saw an explosion of price for Solana. Plus the transactions that came around due to Solana NFT’s.

Solana NFT’s

The NFT minting on the Solana network has been crucial to expanding the chain and establishing it. We all know Ethereum has the biggest market share of NFT’s but Solana is fast approaching them. Back in 2021 the all time high volume for Ethereum was at $30 billion and Solana was at $2.5 Billion. This means that Solana was around 10% the size of the Ethereum NFT Space. However Solana actually had more transactions in that period with 2.2 million transactions to Ethereum’s 900,000 transactions. Many creators actually started to migrate over to the Solana network as it was much cheaper to mint their NFT’s because Ethereum had very high gas fees of up to $80 per transaction. Opensea also added to this as they allowed the Solana chain to be supported on the marketplace, Opensea is the biggest NFT market place so this gave more exposure to the Solana network. The biggest collection on the Solana network is DeGods which has an overall value of $70 million over the whole collection.

Proof of History Explained

The main consensus is proof of stake which many cryptocurrencies use, however on top of this Solana has introduced proof of history. The biggest challenge in distributed networks is agreeing on the time and sequence in which events occurred as nodes within the network can’t trust the timestamp on messages received from other nodes. Solana attempts to solve this by creating a cryptographically secure source of time across the network. Proof of History is a high-frequency Verifiable Delay Function, which requires a specific number of sequential steps to evaluate but produces a unique output that can be publicly verified. This means that nodes can create the next block without having to coordinate with the entire network first because they can trust the timestamp and ordering of the messages that they’ve received. This then leads to a reduced consensus overhead and therefore the transactions on the network can be higher. There is also technology such as tower BFT and turbine which help to optimise on top of proof of history.

Solana Price Prediction

Solana’s price only started rising back in February 2021, when the whole crypto market was mooning. However, unlike other crypto giants, Solana didn’t feel the crash in the late spring of 2021 as strongly as Bitcoin or Ethereum. Yet, its price did decline. Right now the price for one coin is at around $32 which is very low compared to the highest of around $250 back in 2021. This sets a precedent that this coin has the potential to be that high in the future because it has happened before. Right now we are in a crypto winter which means the price of all coins are lower than they should be intrinsically. So now is a great opportunity to buy a lot of different coins because the next bull run is coming and many of these low priced coins will go up when that happens. I predict that it’s going to happen after the halving of Bitcoin in 2024, so probably early 2025 or late 2026 should in theory be the next bull run. Now when we think about predictions for the next two years it will probably be a steady price which will rise a little bit but until 2025 the price will probably go from $32 today up to $60 by 2024. Then looking past the bull run into 2025 we could see the price explode upwards above the all time highs of 2021. We will easily see $400 per coin if this bull run happens by 2025. The Solana network also needs to sort out the network outages because in this next run we will see a lot of transactions hit the network and it needs to be able to handle this rate of transactions. Looking onwards past the bull run we could see crypto start to stabilise in price around 2030 which I think Solana will stabilise out at $500 and then from there it will slowly rise if the network keeps improving and adding more features and dapps. The burning of Solana also will help increase the price when there are a lot of transactions on the network. I think Solana will still be in the shadow of Ethereum for a long time but will start to gain traction in it slowly.