Battle of the blockchains: Can SOL challenge ETH? – Digital Transformation News
By Rajagopal Menon
When David Hoffman, an ETH maximalist, narrated his experience of being at a Solana conference on Bankless, he casually emphasised that “Solana is not Ethereum, and it’s tiny”. Of course what he referred to was the market size of Solana vis a vis Ethereum, thus discounting the bullish narrative around SOL which according to him, is a community-built scenario on X(formerly Twitter). It sort of begs the response which was also a famous quote from the TV series Game of Thrones – “a very small man can cast a very large shadow.”
Bitcoin has minimalist functionality. It was designed for store of value and transfer of value. To overcome these limitations, a 19-year-old Russian developer Vitalik Buterin, wrote a new language and developed a new programmable blockchain called Ethereum. Blockchains become programmable when equipped with highly expressive programming languages that are nearly Turing-complete. Expressive languages facilitate the creation of code that is easily comprehensible. Turing completeness implies a system in which a program can be formulated to find solutions, allowing the program to execute a wide range of tasks using its codebase. Presently, Ethereum stands out as the most widely adopted programmable blockchain. With an early mover advantage, it was one of the first blockchains to facilitate and spread awareness of building applications and utility for crypto. It’s no surprise that Ethereum’s total value locked (TVL) has surpassed $20B at the moment.
As soon as applications started being built on blockchain, the Twitter community backing Vitalik’s visionary crypto project was present to remind anyone and everyone that Ethereum network was the place to be. Even today if a newbie considers building a product on blockchain, they would do their research on Ethereum before getting spooked by the high gas fees that have created hurdles for the network. This would then prompt them to look for more cheaper options, and the ever active messaging platform X, with Shib and Doge armies would make him/her consider Solana. It’s like your elders advising you to put your money in the same retirement fund that they invested in versus your peers encouraging you to go for low ticket investments which could bring high returns without putting a dent in the pocket.
Solana’s TVL of $600M seems miniscule compared to Ethereum and might not look like an apple to apple comparison. However, we must remember that Ethereum started out like Solana when Bitcoin was the OG Crypto and eventually made its way up to the top of the charts, second only to BTC. As of now, Solana has secured its position in the top 5 tokens by market capitalization. This is a more constructive insight compared to TVL since it indicates a steady interest in capital inflows on Solana network in the last three years. While most have been attributed to the success of memecoins, frequent airdrops, robust community building and engagement, its price movements have also shown signs of promise. It pierced the 2% dominance mark on the charts in December 2023, an indicator of a bullish phase according to historic patterns.
Solana seems to have cracked the code in terms of scalability and network efficiency with high TPS and low gas fees. This has largely contributed to building traction among developers who want Web3 to live up to its hype and produce dynamic results with exceptional capabilities, resulting in over 100 dApps being built on Solana. It could have been higher if the FTX fiasco didn’t occur at all. Solana is now boasting around 2500 active devs monthly, with a retention rate of 50%.
In 2023, Ethereum’s rollups saw success with the implementation of new frameworks by Layer 2 solutions like OP Stack, Arbitrum Orbit, and Polygon’s CDK. These helped the launch of new chains, functioning as either Layer 2s or Layer 3s. While Ethereum has more than 500 dApps running on its network, with over 5000 devs, it could see a contender emerge in Solana because of the new age DeFi apps being built, lucrative for crypto enthusiasts and their need for an instantaneous avenue for products they choose to engage with. Ethereum’s transaction fee of $1.149 is quite steep not just for developers but traders as well. Even though interest on the network continues to grow especially after the transition to Proof of Stake, it is slowly starting to look like a network for crypto veterans as compared to the new entrants.
The fact that Solana has reached the top 5 token list on the chart and also presents a potential for catching up with Ethereum’s market cap, indicates immense scope of its price increase in the next couple of years. But if Ethereum is too worried about Solana touching its tail, it has ETFs coming its way which could further boost its price and market cap, giving them some respite from all the buzz around SOL.
Vitalik has been the bigger person in blessing Solana with success in the past but it could also have been a gross underestimation of its potential which the industry couldn’t have foreseen. The colossal growth of Solana in 2023 has drawn developers en masse. With transaction fees as low as $0.00025 per transaction, it’s the go-to for launching fresh blockchain projects and DeFi apps. New devs with limited resources lean towards Solana for its enhanced transaction speed, lower gas fees, and superior scalability – the golden trio for any web3 dev. Solana is the ‘new age’ blockchain, offering amenities for NFTs, in-app transactions, and seamless payment settlements.
Ethereum, holding the second-largest market cap, often masks certain network drawbacks like gas fee and less scalability. Ethereum loyalists argue its matured ecosystem can weather volatility and security issues, making it the choice for stablecoins and real-world tokenized assets. Ethereum is quite omnipresent in the crypto ecosystem, especially for DeFi and metaverse stakeholders who somehow find themselves directly or indirectly in contact with ETH.
In the upcoming bull run, amid positive developments, both networks stand to gain. Solana could host new projects appealing to crypto newcomers, backed by solid sustainability plans and ample capital from improved VC funding sentiment. Institutional crypto investments, boosted by ETF launches, will see TradFi institutions building more use cases on blockchains. While Solana and Ripple have secured remarkable partnerships, Ethereum’s trust and credibility positions it as a major contender for the new wave of products in collaboration with traditional institutions. Solana isn’t poised to ‘kill’ Ethereum with the current state of events. But, never say never.
The author is vice-president, WazirX