July 27, 2023

$SOL Tokenomics. Good Buy?

GM DOers!

Ever since its inception, Solana has promised to be the Ethereum killer by providing superior speed and scalability through its blockchain. 🚀

But is that claim accurate? Can Solana actually become a solid network, and can its $SOL token reflect the potential adoption of the Solana blockchain? 🤔

Today, we’re diving into the world of tokenomics and using onchain data to chart the path for future exploration of a blockchain that technically has the potential to onboard the first billion people in web3. 🔢

Is $SOL a good investment and something to hold onto long-term? That’s what we are answering in today's PRO report.

Of course, for $SOL to be a legitimate investment, the Solana blockchain must be a long-term success in terms of its activity and use cases.

In case you missed our deep dive on Solanas Activity from a few weeks ago, check out the PRO report here. 👀

As for today, our mission is to leave you with a clear and comprehensive overview of $SOL. 💪

We’ll provide solid starting points regarding its utility, its impact on Solana's future growth, and the possible red flags 🚩, by covering: 

  • The supply and demand dynamics of $SOL

  • $SOL’s initial launch and future unlocks

  • $SOL’s price evolution 

And much more…

Yes, all those nerdy but crucial elements that can make the difference between a life-changing investment and a pocket-burning sh*tcoin. 🔥


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Tokenomics: What Does it Mean in Plain English? 🤷‍♂️

Before we do anything else, let’s remind ourselves what tokenomics are and why they’re important.

Token” + “economics” describes the supply and demand characteristics of a digital asset. 💱

Although Solana is a coin – native to its blockchain – we reserve the right not to butcher our tongues with the term coinenomics, which I might have just… coined. 🤷

By understanding tokenomics, we can understand who is buying and who is selling – which helps us more accurately predict the most likely trajectory of an asset, before aping into it.

And as a quick refresher, here’s what the law of supply and demand tells us:

Buyers > sellers, price ⏫

Buyers < sellers, price ⏬

Furthermore, researching a token’s tokenomics is particularly important to determine whether or not the token will capture the underlying growth of the protocol.

If we take Uniswap as an example, we can see that on the protocol level, it is doing very well – there are many users and the fees that Uniswap generates are only growing.

However, if we look at the $UNI token price, we see a very different picture:

But why is that happening? Because the revenue of Uniswap is not shared with $UNI holders. The tokenomics aren't designed to resemble the performance of the application (yet).

We wrote more about how that works here: How To Invest In Application Tokens Successfully.

Ideally, the tokens we invest in should reflect the performance of the underlying protocol/application. That way, we can simply analyze the product and invest based on that.

But it’s not that easy in crypto. And that’s why we can’t stress the importance of looking at tokenomics enough. 👀

Let’s do that for Solana today by starting to look at its supply. 👇

The Supply Dynamics of $SOL 💸

A key thing to note here is that Solana doesn’t have a capped supply, just like how Ethereum doesn’t either.

Solana issues new $SOL consistently (just like Ethereum) and that’s why its circulating supply is continuously inflating.

I’ll explain why it does this and if it’s sustainable below.

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Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤️

See you soon. ✌️