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Shiba Inu (CRYPTO:SHIB) is the latest cryptocurrency to go viral, skyrocketing over 77,000,000% in the past year. At that pace, you would be a millionaire today if you had invested just $1.30 in Shiba Inu last November. Unfortunately, a repeat performance is highly unlikely, so if you want to invest in cryptocurrency, the best course of action is to pick one with real potential.

For instance, Solana (CRYPTO:SOL) was built with a purpose, and it offers far greater functionality than Shiba Inu. Here's what you should know.

Image source: Getty Images.

Solana was created by Anatoly Yakovenko, a former lead developer of operating systems for the chipmaker Qualcomm. Drawing on that engineering expertise, Yakovenko designed Solana as a developer platform for fast, scalable applications.

Specifically, Solana is a programmable blockchain, meaning it supports smart contracts. That's a fancy term for self-executing computer programs that allow transactions to take place without third-party oversight. To that end, smart contracts form the core of decentralized finance (DeFi) applications, tools that allow consumers to lend, borrow, or trade cryptocurrency without going through a bank. And by eliminating the intermediary, DeFi applications promise to cut costs and improve access to financial services.

Currently, the value of Solana that is locked in DeFi applications sits at $14.2 billion, making it the third largest DeFi ecosystem behind Ethereum and Binance. However, Solana has an edge that could eventually propel it to the top of the list. Specifically, it's currently the best performing blockchain in the world, offering throughput of 50,000 transactions per second (TPS) and near-instant finalization times.To put that in perspective, Ethereum currently handles just 30 TPS, and it takes five minutesfor those transactions to be finalized (i.e. permanently incorporated into the blockchain).

More importantly, even if Solana never surpasses Ethereum, its position as the third largest DeFi ecosystem is still an advantage. DeFi services aren't free. Users must pay transaction fees in the form of cryptocurrency to access those services. So if Solana's DeFi ecosystem continues to grow, Solana's price should continue to climb. That's why this cryptocurrency looks like a smart long-term investment.

In August 2020, Shiba Inu made its debut, featuring the canine mascot popularized by Dogecoin. That was no accident. The project's mysterious creator, known as Ryoshi, has promoted the cryptocurrency as the "Dogecoin killer," highlighting its greater publicity and (more importantly) its greater utility. And that's true, in theory.

Shiba Inu is an ERC-20 token, a smart contract built on the Ethereum blockchain. That means it's compatible with the entire Ethereum ecosystem, including a robust array of DeFi applications. However, that compatibility remains theoretical. At this point, Shiba Inu has not been widely integrated into DeFi products, and its utility is still quite limited.

More importantly, Shiba Inu is hardly unique. Hundreds of other ERC-20 tokens exist, and many have far greater functionality. For instance, Tether is designed to track the U.S. dollar, allowing investors to keep money in the cryptocurrency markets while avoiding volatility. And Chainlink is designed to feed real-world data to smart contracts on the blockchain, making it possible to tokenize physical assets (e.g. artwork, real estate).

In short, Shiba Inu's soaring price has been driven by popularity and nothing else. And popularity alone is not a good investment thesis, as it can evaporate overnight. That doesn't mean Shiba Inu's price won't go up from here. It could double tomorrow. But over the long term, Solana looks like the better investment.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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