Solana vs Ethereum: An In-Depth Blockchain Comparison | LiteFinance (2024)

The platform for developing decentralized applications, Solana, which emerged in the middle of 2020, was dubbed the "Ethereum killer" in the media. However, after over three years, the platform has not managed to surpass its competitor in popularity, despite its advantages in scalability and transaction processing speed. The Solana ecosystem is inferior to Ethereum both in terms of the number of projects deployed on its blockchain and in total value locked (TVL).

Read on to learn about the key differences between Ethereum and Solana, the two leading platforms for dApps. Why hasn't Solana surpassed its competitors despite all its advantages? Does it have prospects, and how attractive can the SOL coin be to investors? Answers to these and other questions can be found in this article.

Key Takeaways

What is Solana (SOL)

Solana is a blockchain protocol designed to provide high performance and scalability for decentralized applications and digital assets. Solana's team includes engineers and researchers, including former Qualcomm, Intel, and Dropbox employees.

Solana (SOL) overview

Quantitative parameters:

• Network launch: 2019. Listing: mid-2020.

• Capitalization: $78 billion at a price of 177.09 USD. The startup ranks 5th in the CoinMarketCap ranking. SOL emission is unlimited.

• TVL: about $4 billion.

Solana Key Features

Let's take a closer look at the main characteristics of the Solana blockchain protocol.

• High performance. Thanks to its architecture and unique consensus mechanisms, Solana can process 50 thousand transactions per second (TPS) with low latency. Ethereum's transaction speed before transitioning to the PoS algorithm was up to 30 thousand TPS. After the transition, Ethereum can process up to 100 thousand TPS. Compared to Ethereum, Solana is a faster and more technologically advanced blockchain.

  Today's actual performance is far from the maximum since both platforms have yet to be fully developed. Different approaches to comparing their indicators give different results.

Source: solana.com

• Proof-of-History consensus algorithm. An analog of PoS that allows for the chronological ordering of events in the blockchain, thereby increasing transaction speed. This unique algorithm was developed by Solana's creator, Anatoly Yakovenko.

• Rust programming language. A language similar to C/C++, which is popular not only in the cryptocurrency field. It enables developers to adapt their applications to the Solana blockchain without the need for transitional platforms.

• The number of validators is more than 1,700. Their number is growing, indicating investor interest in the platform. Validators are significant holders of SOL tokens and are responsible for the system's functionality. According to Etherscan, Ethereum has more than 8,821 validators.

• Low transaction fees (0.00064 SOL or about 0.11 USD). Ethereum's network fee has decreased by 5-10 times to 1-2 USD per transaction after transitioning to the new PoS algorithm.

• Scalability. This is one of the key problems with Ethereum. Due to the increase in the number of startups and users, the network speed is decreasing. Solana can address this issue through efficient scaling as the number of users and transactions grows.

• Support for decentralized applications of different segments. With high performance and scalability, Solana provides a platform for building and running a wide range of decentralized applications, including financial (DeFi and NFTs), gaming, and more.

The idea behind Solana was to surpass Ethereum as one of the best platforms for deploying standalone applications on its blockchain. The Ethereum network was one of the first such platforms, but with high fees and an unwieldy consensus algorithm.

In terms of scalability, Solana is a unique startup due to its blockchain technology based on the PoH algorithm. It is poised to become a platform for creating next-generation dApps.

What is Ethereum (ETH)

Ethereum is an open-source platform that utilizes blockchain technology to create and launch secure decentralized digital applications. Ethereum allows programmers to write smart contracts that automatically execute tasks when certain conditions are met.

Ethereum is a platform for launching digital tokens based on the ERC-20 standard, which allows developers to create and issue their own tokens based on the network's blockchain. This has made Ethereum the primary blockchain for conducting Initial Coin Offerings(ICOs), which allows startups to raise investment.

Ethereum (ETH) overview

Quantitative parameters:

• Network launch: late July 2015. Ethereum was a pioneer among platforms for developing decentralized applications.

• Capitalization: $404.36 billion at a price of 3,367 USD. Ranks 2nd in the CoinMarketCap ranking. ETH emission is limited after transitioning to the PoS algorithm.

• TVL: $49.23 billion TVL of DeFi startups on the Ethereum platform: about $43 billion.

• Total ETH staked: 31.3 million.

• Total ETH volume locked in DeFi startups: $115.7 billion.

Ethereum has also been subjected to hacking incidents multiple times. In 2016, after the hacking of the DAO project, the Ethereum network hard-forked into two blockchains. The main network continued to operate under the name Ethereum Classic, while the fork was named Ethereum. Despite sharing the same parent network, Ethereum and Ethereum Classic use different networks after the split.

Ethereum Key Features

Let's look at the main characteristics of the Ethereum platform.

• Decentralization. Ethereum is an open network, not controlled by any central authority, which ensures resistance to censorship and interference. In other words, the platform does not have a single owner. All decisions are made by the community.

• Smart contracts. These are programs that automatically fulfill specified conditions without the need for verification or intervention by third parties.

• Ethereum Virtual Machine (EVM) executes the code of smart contracts and supports the operation of decentralized applications.

• Solidity programming language. It's an object-oriented, high-level programming language specifically designed for writing self-executing contracts on the Ethereum platform. Ethereum also supports other programming languages for interacting with the blockchain, such as JavaScript, Python, and Java.

Ethereum has a clear development roadmap and a strong community that is actively developing platforms, new protocols, tools, and libraries. Unlike Solana, Ethereum, as a startup, has technical drawbacks but fully justifies users' trust.

Solana vs Ethereum comparison table

Below, we have compared Solana and Ethereum.

Development History

Let's take a closer look at the development history of each platform.

Ethereum

The idea of ​​creating a more universal and flexible blockchain that would allow programmers to build decentralized applications laid the foundation for Ethereum. At that time, the Bitcoin network was arguably the only popular platform, but it served as an analog of a payment system. The Ethereum network was based on a radically different and unique idea.

• Early developments. The idea of Ethereum was first proposed by Vitalik Buterin at the end of 2013. Buterin, a co-founder and editor of Bitcoin Magazine, saw the potential for expanding the blockchain's capabilities to work with more complex smart contracts and contributed to the development of the ecosystem.

• Foundation. In early 2014, Buterin, along with Gavin Wood, Joseph Lubin and several other developers, announced the launch of the Ethereum project. At the end of July 2014, the founders raised more than $18 million in a token pre-sale, enabling funds for further development.

• Launch. Ethereum was launched after Vitalik Buterin and his colleagues mined the genesis block that could simultaneously live in all the nodes of a global network in July 2015. This was a significant event for those interested in creating decentralized applications.

In the following years, numerous events demonstrated the resilience and reliability of the Ethereum platform. The DAO hack in 2016 bankrupted the Mt.Gox exchange and nearly killed Ethereum, which was forced to undergo a fork. However, to this day, Ethereum remains the second flagship platform after Bitcoin.

Solana

Solana was launched two years later, in 2017, which is relatively long by cryptocurrency standards. The project was founded by Anatoly Yakovenko, Eric Williams and Greg Fitzgerald. It was Yakovenko who proposed using the unique Proof-of-History consensus algorithm that takes into account time sequences in the blockchain.

The project was originally called Loom Network. In March 2018, Yakovenko and Fitzgerald founded the company Solana Labs (Solana Foundation) to develop the blockchain of the same name and attract funding.

The first Solana testnet appeared in February 2019. The main network was launched in March 2020. Over the next two years, the platform's market capitalization rose from $500 million to $24 billion, and the number of validators increased to 1,300 nodes.

By 2024, the startup had become one of the most recognizable in the dApps platform segment, ranking fifth in terms of capitalization. This was facilitated by the relatively quick recovery of the FTX exchange after bankruptcy, which had indirect ties with the platform, as well as the sharp increase in the popularity of meme tokens during the bull run in early 2024.

Consensus Mechanisms

Consensus algorithms in cryptocurrencies are mechanisms that allow all network participants to agree on the distributed ledger state despite their mutual mistrust. In other words, consensus mechanisms determine the order of the relationship between blockchain network participants.

1. Proof-of-Work algorithm requires network participants to perform complex calculations to confirm transactions. Ethereum was originally developed using this algorithm. The algorithm has several drawbacks such as high energy consumption, low network throughput, low transaction speed, and high fees.

2. Proof-of-Stake is a consensus algorithm that allows cryptocurrency holders to participate in confirming transactions and creating new blocks based on coin ownership rather than hashing power. It is one of the most popular consensus algorithms and optimally solves the problems of network scaling and speed. Ethereum switched to ETH 2.0 in September 2022.

Solana uses a unique Proof-of-History algorithm. It allows network participants to prove that certain events occurred in a certain time sequence. This is achieved using a sequential hash function that creates a record showing that an event occurred before or after other events without relying on external time synchronization systems.

PoH has much in common with PoS. Validators are network participants who are token holders responsible for confirming transactions. Anyone can become a validator; the question is the minimum amount of coins. For Ethereum, it is 32 ETH. Solana's requirements are more flexible. There is no minimum amount, but the more coins you stake, the better your chances of becoming a validator.

Unlike PoS, PoH has an internal clock that allows nodes (computers of network participants) to synchronize and track the time between transactions on the blockchain. Synchronization is automatic here, while in PoS, network participants should coordinate the time. The PoH network improves security and performance by saving time.

Thanks to its internal clock, PoH can increase network speed. However, due to the copyright of the PoH algorithm, PoS remains the more universal and widely used consensus algorithm.

Scalability

Scalability is the ability of a blockchain network to process an increasing number of transactions and maintain a high-performance level as the load increases. This is a key aspect for blockchains, as it determines their ability to scale and adapt to an increasing number of users and transactions.

Key scalability metrics:

• Transaction throughput is how many transactions a network can process in a given period.

• Transaction confirmation time is the speed at which a transaction is confirmed and recorded in the blockchain.

• Latency tolerance is the network’s ability to handle high loads without a significant increase in confirmation times.

• Node scalability is the ability of the network nodes to support an increase in the size of the blockchain without a decrease in performance.

• Transaction fee economics refers to the network's ability to maintain a reasonable level of transaction fees even under high load conditions.

Scalability refers to a chain of blocks that can achieve high TPS values. TPS stands for transactions per second.

Ethereum’s Scalability Issues

Imagine a big glass jar with two or three grasshoppers inside. There is enough room for them to quickly jump around inside the jar, not bothering each other. Gradually add new grasshoppers to the jar. The more there are, the more often they collide and move slower. And it becomes more and more difficult for them to jump between the walls of the jar as fast as they can.

Ethereum is the "jar" in which volume cannot be increased. The transition from Proof-of-Work to the PoS algorithm should partially solve the scalability problem. For now, other solutions are working. They are the same dApps that are used on the Ethereum blockchain.

• Sidechains are independent blockchains connected to the main blockchain network through a two-way bridge to transfer data between the main network and the sidechain. Sidechains can use their unique consensus algorithms and block parameters, giving them autonomy and the ability to adapt to specific tasks. They help increase the capacity of the mainnet and reduce its workload. They can be optimized for specific applications like fast microtransactions or sensitive transactions. Polygon (MATIC) represents a sidechain.

We take the second jar and allow the most active grasshoppers to move into it. As a result, tired grasshoppers (inactive blockchain users) remain in the first jar, and the active ones go to the second jar. As a rule, there are fewer such grasshoppers, and they can jump at high speed and with enthusiasm for fun. They can return to the first jar to rest when they get tired.

• Layer 2 (L2) solutions are blockchains designed to increase the throughput of main blockchain networks such as Ethereum and Bitcoin. They run on top of the main blockchain, allowing transactions to be processed faster and cheaper without affecting the main blockchain code. One of the main goals of L2's solutions is to improve the scalability of the blockchain, allowing the network to process a more significant number of transactions without compromising decentralization and security – examples: Optimism (OP) and Arbitrum (ARB).

From the grasshoppers' point of view, this is the same second jar but with different tasks and connection with the first main jar.

• Parachains are specialized blockchains that operate in parallel within the main network. They are designed to solve the limitations of traditional blockchains and provide the ability to scale and optimize performance. For example, Kusama parachain for Polkadot.

In other words, it is like an extra container for the second jar with grasshoppers.

Everyone and his brother criticize a startup for such a cumbersome system. Vitalik Buterin is doing everything to solve the problems of Ethereum scaling, low transaction throughput, and high fees.

Solana is more like a "rubber container" instead of a "glass jar." Its blockchain theoretically solves Ethereum's scalability problems. However, the platform suffers from constant outages: plummeting network throughput, hours-long shutdowns, blocks on Solana transactions, etc. Here are the most loud of them:

• On February 6, 2024, the platform was completely offline for over 5 hours. It was the 10th such failure.

• Similar outages occurred on February 25, 2023, and October 1, 2022.

• The platform was hacked on August 3, 2022, due to a central server vulnerability.

Startups with billions of dollars in capital work online 24 hours a day. Such outages can put an end to the platform's prospects.

Solana's inability to handle high transaction volumes often leads to network outages. Despite the theoretically declared unique technical parameters, the Solana blockchain is significantly inferior to Ethereum and its solutions.

Obtaining SOL and ETH

Ethereum vs Solana for speculative investments.

The chart shows that both coins are equally popular regarding investment attractiveness. ETH's drawdown was deeper at some points, but its growth was also more dynamic.

Cryptocurrencies are highly volatile assets. Therefore, short-term purchases have a high risk of capital loss, especially if you use leverage.

As a long-term investment, both coins are the best choice for the following reasons:

• Both coins are in the TOP 10 in terms of capitalization and are actively supported by developers.

• They are in the same segment, and the competition will drive their development.

• They are interesting for dApp developers; TVL is growing visibly. They are startups, each having necessary functionality and perspectives.

Therefore, buying both ETH and SOL makes sense to diversify risks.

Solana vs Ethereum - Speed vs Maturity Tradeoffs

Solana is superior to Vitalik Buterin's platform only on theoretical technical characteristics. Ethereum can give way to Solana only when both platforms are able to achieve their declared features.

Solana's transaction processing speed is 15-20 times lower than claimed. Although it is still inferior to Solana in the second indicator, the transition to Ethereum 2.0 has brought the platform even closer to solving the problem of scalability and transaction speed.

Solana vs Ethereum for users

These two screenshots demonstrate the change of TVL and total commissions.

• Ethereum. Compared to previous years, February TVL growth is not impressive during the market bull run. Neither is the growth in commission volume.

• Solana. Between November 2023 and April 2024, commissions on the Solana network increased by more than 2,800%. This was due to the following factors:

1. Solana has almost completely cut its ties with FTX/Alameda and regained the trust of its users.

2. Due to the increase in the number of transactions, the commission on the network increased by almost 30 times from $0.001 to $0.03.

3. Explosive boom of meme tokens, showing growth of more than 10 times.

In times of high market activity, a comparison of these parameters may favor Solana, which is more appealing to users. At the same time, this may also indicate risks. With hundreds of long-established startups, Ethereum has a reputation as a stable platform. For Solana, the increase in TVL and commissions is mainly due to periods of price spikes and temporary user activity in certain segments. These parameters are not stable.

In some short term periods, users prefer Solana due to its transaction speed. In the long run, they prefer the stability of Ethereum.

Introduction to Blockchain Concepts

Cryptocurrency and blockchain are technologies that create a continuous, sequential chain of cryptographically protected data blocks. Each block contains the previous block's hash, creating a chain that ensures data integrity and security.

The main characteristics that define the specifics and competitive advantages of a cryptocurrency startup compared to other blockchains are the following:

• Consensus algorithm.

• Scalability and throughput.

• Transaction processing speed.

• Commissions within the network.

According to its stated characteristics, Solana is a newer, more technologically advanced, and more convenient system than Ethereum. Solana allows you to deploy multi-level startups of the DEX class. However, it does not show the declared results, so developers prefer Ethereum and agree to a higher commission.

Importance of Comparing Solana and Ethereum

Solana and Ethereum are top platforms in their segment and partly compete. Comparing them is crucial for several reasons:

• Solana is praised for its high throughput, no scalability problem, and low fees. Theoretically, it can become the leading platform in its segment if it can reach the stated technical parameters. At the same time, Ethereum, although inferior in some areas, is also evolving.

• Compared to Ethereum's PoS algorithm, Solana's architecture facilitates faster transaction processing. Therefore, the platform is more attractive for new applications in the developing DeFi segment. However, Ethereum has a reputation as a stable and mature startup. Solana lacks such a reputation.

• Ethereum has a well-developed ecosystem with various dApps. Solana is a new and technically more advanced startup.

• Security and decentralization are key parameters in the comparison. Hackers are improving their tools, and no blockchain is immune to hacking. No startup has yet been able to solve the blockchain trilemma. But so far, Solana suffers from it more often than Ethereum.

• Another important consideration is regulatory issues. Several cryptocurrency exchanges are signing up to documents that regulate transparency and market regulation, delisting coins that do not meet the regulatory criteria. Regulators consider ETH a real asset, so it has a higher chance of being legalized.

Users and developers can make informed decisions by comparing their strengths and weaknesses.

Gas Fees and Transaction Speed on Ethereum

Gas fees on the Ethereum network are fees that users pay to complete transactions. Gas measures the computational resources used by the operations performed on the Ethereum network.

The Ethereum network has relatively high fees due to scalability issues. When the network becomes congested, the cost can increase dramatically. Solana has the same problem. However, its fees are considerably less than Ethereum's, even if multiplied by ten times.

Solana’s Consensus and Scalability Innovations

Solana's Proof-of-History consensus algorithm is unique. It is the brainchild of Anatoly Yakovenko used exclusively on Solana. According to the platform's white paper, it is not exactly an algorithm, but a timing mechanism added to the classic Proof-of-Stake algorithm.

The key differentiator of the technology is Tower BFT. It reduces bandwidth loss and data transfer latency by using the Proof-of-History as a clock.

With PoS, validators are forced to "talk" to each other and agree on when to confirm and in what order to confirm transactions. In PoH, time is automatically taken into account. This eliminates unnecessary information exchange that stresses the network and increases its scalability. As a result, the speed increases to 50 thousand transactions per second and the transaction confirmation time to 400 ms.

Developer Adoption and Ecosystem Growth

Third party dAaps developers prefer Ethereum because it has strong support from its own developers and credibility. The platform has a competitive advantage as many DeFi and GameFi projects are deployed on Ethereum.

The Solana ecosystem is seen as an innovative startup that could meet the growing needs of developers of metaverses, next generation DeFi, and DEX platforms. Its competitive advantage is its low commission. However, as long as its technical problems are not solved, it will be inferior to Ethereum.

Transition to Ethereum 2.0 Faces Challenges

The original Proof-of-Work consensus algorithm that Ethereum ran on is obsolete. Without going into details, it only benefited miners, for whom ETH mining was profitable.

In September 2022, Ethereum switched to the Proof-of-Stake consensus algorithm. The community expected an increase in throughput and transaction processing speed from this transition. However, some opponents pointed out the transition risks, such as network congestion, blockchain errors, and other difficulties.

Switching to the new consensus algorithm has brought many positive aspects:

• Unlike BTC, Ethereum has become deflationary. With a limited emission, the gradual burning of ETH makes the coin more expensive. The new algorithm burned more than 300,000 ETH in the first year.

• Mining costs were reduced. With the PoW consensus algorithm, mining involved costs for electricity and mining farms. With the PoS algorithm, mining was excluded. There is staking, which is similar to deposits. Ethereum has become greener.

• The platform has become more convenient for deploying dApps on the blockchain.

However, Ethereum's transition to a new algorithm has not solved the main problem of reducing the cost of transactions on the network and increasing transaction speed.

Among the other difficulties:

• Centralization of validators. The transition from mining to staking increased the degree of centralization of the platform. To participate in staking, you need 32 ETH. This means that the platform's governance is in the hands of large validators.

• Centralization of pools. Lido, Coinbase, Kraken, and Binance control over 50% of all staked coins.

• Security issues. As large holders can join forces, the platform has become more vulnerable to a 51% attack.

In 2023, compared to its main competitors – Solana and Avalanche – the blockchain of the second largest cryptocurrency by capitalization showed lower performance. In theory, the Dencun hard fork, which took place in March 2024, should reduce the fees for L2 solutions. However, only time will tell how effective this and the subsequent updates will be.

Centralization Risks on Solana

The centralization risks on the Solana blockchain are associated with the following:

• Proof of History (PoH) mechanism. While the algorithm improves transaction efficiency and speed, it may encourage centralization because validators with more resources may have an advantage in confirming transactions.

• Choosing a Network Leader. In Solana, the network leader is elected based on PoS voting and is responsible for counting hashes and validating transactions. This position is rotating, but the system may favor the concentration of power among certain participants. The influence of whales can pose security risks to applications based on the platform.

• Attacks and hacks. Solana has been attacked and hacked, indicating potential security vulnerabilities and centralization risks. Solana validators continue to prefer cloud infrastructure. As a result, in November 2022, one of the users shut down 1,000 nodes simultaneously, comparable to a 20% attack on the network.

• Focus on DeFi. Most of the dApps on Solana fall into the DeFi (decentralized finance) category. This could make Solana vulnerable to fluctuations in the cryptocurrency market.

• Uneven distribution of SOL, most of which went to developers and early investors.

The system should be resilient to such risks and include mechanisms to prevent the concentration of power among a few participants to preserve decentralization. So far, it lacks any of the above.

Solana's ties with the FTX exchange exemplify a centralization problem. FTX and its venture capital firm, Alameda Research, have been key supporting partners in the Solana ecosystem and invested heavily in it. The Solana Foundation admitted to holding approximately $1 million in fiat and equivalents on FTX along with the locked FTX (FTT) and Serum (SRM) tokens.

Therefore, when the FTX exchange went bankrupt, fears arose that Solana would also have problems. Developers began shutting down applications and withdrawing assets from the platform, followed by massive SOL sales. There were also concerns that Alameda Research would be forced to sell its SOL tokens to cover its obligations, causing the price to drop nearly threefold.

Crypto Regulatory Landscape Poses Uncertainty

The regulatory framework is one of the factors in favor of Ethereum. The problem with cryptocurrencies as a financial instrument is the lack of complex legislation that would regulate their circulation on an equal basis with or instead of fiat money.

• Lack of a unified approach. Developed countries have different stances on cryptocurrencies. Some countries have allowed the use of cryptocurrencies as money, while others are pursuing a global ban on crypto.

• The problem of centralization. Money is an economic management tool managed by central banks. Cryptocurrencies are either decentralized or under the control of private individuals, which does not suit central banks. Other problems follow from tax issues, confidentiality, and protection of consumer and investor rights.

• Focus on CBDC. Some countries have made a radical decision. They are not ready to recognize existing cryptocurrencies and are developing their own Central Bank Digital Currency instead.

The prospects of ETH and SOL becoming full-fledged financial instruments are still being determined under these conditions. The status of cryptocurrencies still needs to be defined, the issue of central bank participation in cryptocurrency turnover is unresolved, and there is no unanimity among regulators.

Nevertheless, ETH is more likely to become a full-fledged financial instrument. Ethereum is one of the oldest cryptocurrency platforms with a high level of trust, backed by famous Vitalik Buterin. The community perceives it as BTC's younger brother; cryptocurrencies are often mentioned together in the media.

A favorable SEC decision on spot Ethereum ETFs could be a key factor. This will attract additional funds from institutional investors, as was the case with Bitcoin in January-March 2024. In this regard, ETH looks like a more promising asset for investors than SOL.

Comparing DeFi Use Cases on Solana and Ethereum

Historically, Ethereum has been a universal platform for decentralized applications. It was one of the first to come out, and it was easy for startups to develop using it. Solana emerged as DeFi and GameFi started to popularize. The platform became one of the most popular among startups because it could show higher performance at that time.

Here is some important terms for you:

• DeFi stands for decentralized finance. It represents a blockchain-based alternative to traditional banking services, such as lending, digital asset exchange, insurance, deposits, etc., without the involvement of traditional intermediaries such as banks or brokers. Examples of decentralized financial protocols are Avalanche, Compound, Aave, and MakerDAO. This category also includes decentralized exchanges (DEX), one of the main representatives of which is Uniswap.

• NFTs are non-fungible tokens. It is a type of digital asset on the blockchain that represents a unique element and cannot be replaced by another identical asset. Each NFT has a unique identifier that distinguishes it from other tokens and confirms its authenticity and originality. It can be used to denote ownership of digital art, collectibles, and in-game assets that can be exchanged for real money.

• GameFi, or game finance, combines blockchain-based games with elements of decentralized finance (DeFi ecosystem). Players can earn cryptocurrency and NFTs for completing tasks, upgrading avatars, and completing levels. Earned cryptocurrency assets can be exchanged for real money on NFT marketplaces or crypto exchanges.

• Total Value Locked (TVL) is a decentralized finance (DeFi) metric reflecting the total value of all assets locked into smart contracts on a blockchain project or platform.

TVL changes and the number of deployed startups show the level of interest in the dApps platform among startup developers.

According to cryptocurrency ranking website CoinGecko, Ethereum is the leader in the number of startups in the DeFi segment. The platform has attracted 971 startups with a total TVL of more than $43 billion. Tron ranks second. Solana is not only behind Ethereum, but also behind other networks, taking the 5th place with TVL 20 times less than $2 billion. As of mid-July 2023, TVL of all dApps on the Ethereum network was $26.77 billion. This is about 60% of the total dApp market at that time. The Cryptorank portal provides similar data, but in a narrower context of the segment.

Meme tokens have become perhaps the fastest growing segment in 2024. The BONK token alone, which is actively involved in promoting the Solana network, has grown more than 10 times since November 2023.

According to the Cryptorank portal, in March 2024, in terms of total capitalization and daily turnover, Ethereum surpassed Solana by several times.

This comparison shows that the competition between Ethereum and Solana has a marketing goal. This competition is actively promoted in the media, taking place for more than 3 years. However, Solana has not even come close to Ethereum during this time with all the advantages of scaling, data transfer speed, and a unique consensus algorithm.

Let's highlight a couple of Solana’s bright sides. According to Cryptorank, in February 2024, Solana became the leader in the number of transactions on the blockchain. Analysts attribute this to the BTC bull run and increased user activity in the DeFi segment in particular. Therefore, the picture may change dramatically in the coming months.

Future Relationship Between Solana and Ethereum

Ethereum and Solana use different promotional approaches and marketing policies, so SOL is perceived as a speculative asset and Ethereum as a more trusted and long-term investment instrument.

Ethereum is focused on technological change. The media delivers only about upcoming forks, hard forks, and network improvements. For Ethereum, additional sidechains and L2 solutions are auxiliary platforms focused on Ethereum's scalability and compatibility with other related blockchain networks.

Solana adheres to active marketing. For example, the recently released Solana Chapter 2 phone became very popular due to the free BONK tokens in it. In addition, airdrops of various DeFi startups deployed on the Solana blockchain are also actively promoted.

These different approaches affect coins’ volatility.

This screenshot was taken on March 19, 2024. It was preceded by a long bull run, with the BTC updating all-time highs, after which a sharp correction occurred. This screenshot shows that the leading coins reversed to the downside while SOL maintained upward momentum. ETH posted a weekly loss of 18.87%. Meanwhile, SOL gained 18.86%.

However, ETH's daily losses began to decline, with a drawdown of 6.32% over 24 hours. SOL's daily drop was twice as large at 11.94%. This indicates a possible high speculative component in SOL and a lagged correlation with ETH. In other words, the pace of the market is currently set by BTC and ETH, although competition between Ethereum and Solana remains.

Finally:

Solana can hardly claim to have such statistics.

Conclusion

Which coin should you choose, Ethereum or Solana? Each has its own advantages and disadvantages. If you are a developer ready to sacrifice money and speed in favor of stability, choose Ethereum. If you are an investor or a trader, diversify your risks by adding both coins to your portfolio.

• Solana vs. Ethereum - both startups belong to the segment of platforms for developing independent decentralized applications.

• In theory, Solana has a more advanced consensus algorithm that allows it to more effectively solve problems of scaling, high commissions, and transaction processing speed. In practice, both platforms fall far short of their stated maximum parameters.

• The Ethereum ecosystem is several times larger than that of its competitor.

• Ethereum is more expensive and slower than its competitor. Solana is less stable and less secure due to its higher centralization.

• Ethereum has strong community support, while Solana is largely considered a highly volatile speculative asset.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.