Solana (SOL 1.53%) may be down, but it's not out. For the year, Solana has fallen almost 85%, and recent network outages have many users concerned about the crypto's future. But Solana has a crazy, jaw-dropping strategy for the year ahead that could reverse its fortunes immediately.
At this year's big Tech Crunch Disrupt event in San Francisco, Solana doubled down on its mobile crypto strategy. This strategy includes the release of a full software mobile stack (SMS) for developers to make mobile apps and games, as well as the official launch of the Saga crypto phone in 2023's first quarter. Solana calls the crypto phone a "moonshot," but if your crypto is headed to the moon, isn't that exactly what you want to hear?
Just how crazy of an idea is a crypto phone?
Solana thinks this new phone could change everything. As Solana sees it, the future of crypto is mobile. As a result, the Saga is going to be optimized for all the decentralized apps and games on the Solana blockchain. Quite simply, Solana says the new phone will make everything that you love about crypto easier and more seamless. Solana Mobile will be "a premium mobile experience that enables you to trade tokens while waiting in line for coffee, mint NFTs on your morning commute..."
Image source: Getty Images.
If that sounds crazy, well, there are rivals working on much the same idea. Solana originally launched its concept in June, and Polygon (MATIC +0.00%) followed in July with a crypto phone concept of its own. In addition, tech company HTC has experimented with smartphones offering some crypto features. One feature that customers apparently want is a way to put a cold storage crypto wallet on a mobile phone.
There are obviously going to be hurdles to mass-scale adoption. Solana Labs co-founder Anatoly Yakovenko is projecting a $1,000 price tag for the phone and admits that there might only be enough initial demand for 25,000 to 50,000 units. By way of comparison, Apple (AAPL 0.04%) shipped 240 million iPhones in 2021. So, at the outset, this is not going to be some kind of money-making project. But it could lead to much broader, wide-scale adoption for Solana, as well as the attraction of more developers to the Solana ecosystem.
The new Web3 paradigm
What Solana has in mind is a new paradigm for crypto. You may have heard of Web3 by now, and this crypto phone is being positioned as part of the new Web3 paradigm. The Web2 paradigm was a centralized model in which a few Big Tech companies controlled everything (and made a lot of money doing so). In contrast, the Web3 paradigm is a decentralized model in which users and creators control everything. That's why the allure of Web3 is so great for many crypto enthusiasts: It's all about giving power back to the people. If you're a typical user or creator, this is wonderful. If you're an executive at a Big Tech company, it's time to start worrying.
CRYPTO: SOL
Key Data Points
For example, one bone of contention in the mobile world is how much of their profits app developers need to give tech companies. Instead of collecting 100% of their profits from in-app transactions, they must first give a 30% cut to Apple, for example. In May 2022, the ever-controversial Elon Musk weighed in on the matter via Twitter, calling this a "30% tax on the Internet." When you put it that way, it certainly suggests that some app developers might want to move to Solana if that "tax" can be lowered or even eliminated because most people don't enjoy paying taxes.
Does Solana deserve an innovation premium?
Solana has established itself as a leader in the blockchain industry thanks to the release of new innovations such as Solana Pay and Solana Mobile this year. The big question investors need to be asking themselves is whether Solana now deserves an innovation premium. Solana is down almost 85% for the year, which seems to suggest that this crypto has been dramatically oversold. By way of comparison, Ethereum (ETH 2.12%) is down about 65% for the year.
Taking crypto mobile is a really, really big idea. Most people are probably happy with their new Google Pixel or Apple iPhone, and it will be hard convincing them that they need another phone. That might be why Solana released the SMS in June: It is a way of ensuring that there are new apps and games ready to go once the Saga phone becomes available in Q1 2023.
Yes, this is a big, moonshot-type of bet for Solana. It could go disastrously wrong, but Solana's founding team seems confident that it is the type of high-risk bet that is worth taking. I can't wait to see where Solana is taking mobile crypto. And I also can't wait to see how quickly Solana might rebound next year. Getting Solana at a beaten-down valuation now seems like too much of a bargain to pass up. For that reason, I am bullish on Solana heading into 2023.
