1 Important Tailwind That Could Send SOL's Stock Skyrocketing

Solana (CRYPTO: SOL) is now the sixth-largest cryptocurrency in the world, with a market cap of over $100 billion as of this writing, on October 31. And while there are plenty of meme tokens out there, this isn't one of them.

Solana has immense potential because of the scalability of its network, which in theory could enable it to process tens, if not hundreds, of thousands of transactions per second (TPS).

Similar to Ethereum (CRYPTO: ETH), Solana's blockchain network operates under the energy-efficient proof-of-stake governing mechanism, in which investors stake tokens for an opportunity to validate transactions, create new blocks, and reap rewards from the process.

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But Solana's network even goes one step further and leverages a proof-of-history mechanism, which integrates time stamps for each transaction, so validators can immediately see the proper order of transactions. Previously, it would take additional time for nodes to be able to identify time stamps.

The potential of Solana's network is often discussed in terms of massive performance, with some surmising it could process 710,000 TPS.

Achieving higher TPS

Now, theory is quite different than reality. Currently, various sources estimate that Solana's network is processing about 1,000 TPS or more, which is still quite high compared to most blockchain networks.

However, during a recent stress test, Solana reportedly had a single block transact over 107,000 TPS on its main network. Now, most of those transactions were referred to as "noop" transactions for no-operations, which are not necessarily as difficult to process as a normal transaction.

Still, this shows the network's massive potential, which already has significant use cases. For instance, one of the oldest international payment transfer companies, Western Union, recently tapped Solana as the network it plans to use for its new U.S. dollar stablecoin.

Given Solana's potential, developers are likely to keep pushing for higher TPS with more upgrades. One of these, called Alpenglow, will supposedly be "the largest upgrade to Solana's consensus in its history," according to VanEck's digital asset research team. The upgrade will include a slew of changes including off-chain voting, which many blockchains have used to speed up transaction times, less complex validator costs, and bigger blocks, among others.

While it's always difficult to know the exact dates of implementation, some of these changes are expected to go into effect later this year. Solana is a very compelling token because I think investors actually value it based on the network's capabilities, so I'd expect it to benefit as TPS increases.

Investors should still understand that all cryptocurrencies are inherently risky and volatile, so they may not want to invest too heavily into any cryptocurrencies just yet. But I certainly think Solana merits a look and at the very least is worth a small, speculative position.

Bram Berkowitz has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.