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Dubbed the fastest blockchain in the world, is Solana the project that will finally topple Ethereum’s dominance and emerge as the top platform for the burgeoning DeFi industry?
Anyone watching the cryptocurrency market lately can hardly have failed to have noticed the meteoric rise of Solana since the start of 2021. But as this latest so-called Ethereum Killer continues to grab headlines, investors are wondering: how sustainable is its value?
Ethereum has long been hot on Bitcoin’s heels as the number two blockchain in the world and it is still the go-to platform for many major DeFi projects, but Vitalik Buterin’s brainchild is not without its problems and has recently been dogged by issues of scalability and congestion.
Enter Solana. Launched in 2019, Solana is a programmable blockchain with serious potential. It can support smart applications, such as DeFi projects and NFTs and has naturally been touted as a rival to Ethereum. However, Solana is said to be substantially faster than its predecessor.
So does Solana pose a genuine threat to Ethereum’s dominance? In the following Solana vs Ethereum review, we’ll consider the case for each project and take a look at future predictions from top analytical platforms.
Solana vs Ethereum - The Fundamentals
Whereas many blockchains have differing objectives and can theoretically co-exist without having a significant effect on each other's token value, smart chains like Solana and Ethereum are effectively in competition with one another.
When two cryptocurrency projects are going head to head, it's important for investors to consider each one’s technical credentials, to better decide which of them is likely to be the most successful over the long term. With this in mind, let's take a look at the key features of both Solana and Ethereum.
Ethereum vs. Solana - Key Differences
Solana was actually founded in 2017 by software engineer Anatoly Yakovenko but launched a couple of years later in 2020. In a nutshell, the platform provides a platform for fast, scalable and secure dApps and marketplaces.
Amongst the claims made by Solana’s developers is that the platform is “the fastest blockchain in the world” and “censorship-resistant”, making it the perfect environment for supporting smart contract-based projects, including NFTs and the ever-growing DeFi scene.
Solana’s major selling point is its proprietary proof-of-history consensus mechanism, which was actually developed by Yakovenko himself, which is combined with a proof-of-stake that enables the platform to process transactions at unprecedented rates.
The inner workings of the Solana consensus mechanism are hugely complex and detailing them is far beyond the scope of this article, but it seems that developers in the industry have been seduced by Solana’s promises, with over 400 projects running in the ecosystem and the projects native token, SOL, seeing around 1,000 transactions per second.
Launched in 2015, Ethereum was the first in a new wave of smart networks which was dubbed the second generation of cryptocurrencies. The project was quickly established as one of the most versatile in the space and has been to world’s number two cryptocurrency behind Bitcoin for most of its existence.
Ethereum offered developers a platform wherein they could use smart contracts to build more complex blockchain projects. Whilst the early cryptocurrencies were more or less limited to a means of value exchange, Ethereum opened up a world of possibilities and effectively set the stage for the DeFi boom.
At the time of writing, hundreds of leading DeFi projects are built on Ethereum, including the likes of SushiSwap, Compound and Maker. However, this surging demand has come at a cost and Ethereum has struggled with scalability and transaction speeds, resulting in periods of widespread congestion on the network.
Ethereum developers are hoping the Ethereum 2.0 - which is currently ongoing - will fix its existing issues and re-establish the platform as the leading smart chain.
Transactions and Speed
When it comes to transaction speeds, the Solana developers have made some pretty bold claims. Its unique hybrid consensus mechanism is said to allow for up to 50,000 transactions per second - which puts Ethereum’s current rate of 30 transactions to shame and even beats VISA, which is said to be able to handle 24,000 but in reality processes around 1700 TPS.
If Solana is able to deliver these speeds, then it stands to reason that it could pose a serious threat to Ethereum as the premier platform for DeFi projects - which demand an ecosystem that handles high volumes of transactions without suffering from slowdown and congestion.
It isn’t just Solana’s speed that’s impressive either - the cost of transactions on the network have been averaging just $0.00025, which will of course be hugely appealing to developers looking for a platform to build their projects.
Upon its launch, Ethereum was noted for its comparatively fast transaction speeds - whereas existing blockchains like Bitcoin took ten minutes to finalise a new block, Ethereum could bash them out in under 20 seconds.
However, the industry has moved on a great deal since then and Ethereum’s ability to process around 30 transactions per second is no longer sufficient. As part of efforts to upgrade the system, Ethereum 2.0 will move to a proof-of-stake consensus protocol which is predicted to massively increase the amount of transactions the network can process per second.
Given the rate at which DeFi is growing, performance is likely to be a significant factor in the success of any blockchains. Potential Ethereum investors will therefore need to keep a close eye on what happens regarding the upgrades.
Supply and Demand
SOL is the Solana platform’s native token. According to the Solana Foundation, there will be a supply cap of 489 million SOL - of which an estimated 314 million are already in circulation.
Solana has an in-built deflationary mechanism. As part of its delegated-proof-of-stake algorithm, token holders are incentivised to validate transactions. All fees that are paid in SOL are also burnt, which means the total supply is gradually reduced.
According to figures from the site, around 16% of SOL tokens went into the initial seed sale, just under 13% were allotted to a founding sale, 12.7% were awarded to the development team and 10.46% were put back into the Solana Foundation. The outstanding tokens are either yet to be released or in open circulation.
Regardless of technical credentials, supply and demand is always going to be a major driver of token price. However, it should be noted that Ethereum is not intended primarily as a means of payment, as is the case with Bitcoin or Dogecoin, as such, there is not an in-built means of creating scarcity over time.
However, whilst there is no cap on the total supply of Ether, there is a limit on the number of tokens released into the system each year - which is said to be 18 million. This means there is always enough ETH to support operations on the network, without creating an abundance that would negatively affect token value.
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Solana vs Ethereum: Which Is The Better Investment?
At this stage, it is difficult to ascertain which project is likely to be the better investment. Assuming claims made by the Solana team about the network’s speed are true, then it is certainly a potential rival to Ethereum.
However, it’s also true that Ethereum has already established itself as a leading name - if not the leading name - in the world of DeFi, so Solana will have to close the gap. Even so, it could be argued that, from an investment perspective, Solana has more room to grow whereas Ethereum offers more stability.
To try and build a better idea of how each project would fit into an investment strategy, we need to consider previous price movement, as well as future predictions from leading analysts.
Solana Vs Ethereum: Price History
Most predictions and forecasts are based around analysis of previous price data, so before we consider looking ahead, we should take a look at the historic price performance of both Solana and Ethereum.
Being a fairly new token - having only launched proper in 2020 - there isn’t a long history of price data for Solana. However, as we shall see, SOL has had some pretty impressive price runs and has been on a more-or-less upward trend since it was first listed on major exchanges.
For the first couple of months, SOL changed hands at anywhere between $0.60 and $0.90 before hitting parity with the US dollar in July 2020. A month later, SOL had reached $3.73, marking growth of over 270% in just one month. Prices then cooled slightly but remained above $2.00 for much of the latter half of 2020.
Solana held steady just above $3 for most of January 2021, before a February price hike sent its value up to $17f.47 - an increase of almost 500% from one month to the next. March saw a slight downturn before SOL started to rise at an impressive rate, reaching $56.20 in May.
A market downturn followed and SOL dropped to $24 before May was out, but the token recovered quickly and started gaining ground in June. However, in August things really started to move. An initial price run saw SOL reach $78.45 before tapering off slightly. Then September hit.
Solana hit the headlines the world over when its price skyrocketed to a then all-time high of $213.47 on 09 September - growth of over 12,000% for the year. Naturally, all eyes sharply turned to Solana and it has become one of the hottest cryptocurrencies of 2021. Since then SOL hit a new high of $260 on 6th November 2021.
At the time of writing, the price of SOL was $95.85 following a general market downturn.
Ethereum has had a fairly long journey to the top, with its token price almost non-existent for the first few weeks of its existence. However, it had reached parity with the US dollar before 2015 was out and went as high as $1.80 within its first year.
Things were then fairly uneventful for the then-revolutionary cryptocurrency. It wasn’t until 2017 that anything noteworthy occurred when Ether soared from around the $10-mark in January to $390 in June. Ethereum continued to rise throughout the year and went past $1,410 in the first few weeks of 2018.
The 2018 crypto bubble then burst and prices plunged across the board. By December, ETH had dropped significantly, bottoming out just under $90 in December. It took a while for things to turn around and it wasn’t until January 2020 that Ethereum went back past $200.
As was the case with most cryptocurrencies, Ethereum saw its token value soar in the opening months of 2021, reaching $1,941 in February before the May bull market sent ETH to its all-time high of $4,356. This was followed by a sharp downturn that sent it back to around $1,824 in July but things picked up again in September, with Ethereum getting back to $3,894. Ethereum hit its new all-time high on November 16th 2021, trading at $4,891.
ETH’s price at the time of writing was $2,500.
Ethereum vs Solana: Future Predictions
Comparing the price history of Ethereum vs Solana shows that both tokens have experienced significant price runs and are now holding a token price significantly higher than they were at any point in 2020. But what can we expect going forward?
Following Solana’s remarkable growth in 2021, it seems that many analysts are starting to consider the project as a genuine rival to Ethereum.
Having analysed previous price data, DigitalCoinPrice predicts that Solana will continue to grow at an impressive rate going into 2022. It is expected that SOL will be up by almost 50% by the end of the year, reaching a potential token price of $143.28. Looking further ahead, DigitalCoinPrice expects Solana to be worth an impressive $231 by the end of 2024.
Elsewhere, TradingBeasts is also expecting Solana to grow in value, albeit slow in the first half of 2022. According to its analysis of previous price data, SOL will grow by about 42% by the end of 2022, before the token starts a protracted upwards trend, reaching a potential high of $154.17 by the end of 2023.
Another platform predicting significant growth for Solana in the coming years is WalletInvestor. Its technical analysis has the token potentially regaining $356.61 by the end of 2022, before growing throughout 2023 and 2024. Going into 2025, the platform expects that Solana will be worth a potential high of $1,282.97.
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Ethereum is arguably now ‘too big to fail’ as far as the blockchain world is concerned and most platforms expect the value of ETH to grow over the coming years. DigitalCoinPrice, for example, believes Ether will be chasing the $4k-mark in 2022 and trading above $5k in 2023.
Similarly, WalletInvestor has Ethereum approaching $5,569.55 in 2022 and potentially even going past $8,862.25 in December 2023. WalletInvestor expects Ethereum to be worth more than $16,404.70 by the end of 2025.
Amongst the more conservative Ethereum price predictions was that of TradingBeasts, which has ETH only creeping up to $3,163.44 by the end of 2022.
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Ethereum vs Solana: What the Experts Say
The cryptocurrency market changes quickly and there are always new projects emerging that make claims to having revolutionised some aspect of the industry. Often, developers make bold claims about their own projects, so it’s important to take note of what other industry experts have to say to get a more objective opinion.
Inevitably, following Solana’s impressive gains in 2021, many experts have looked to have their say. Founder of Synthetix, Kain Warwick and managing partner at Multicoin Capital, Kyle Samani have both expressed support for Solana, emphasising that Ethereum competitors have serious potential. “I think that ETH-community can’t just be oblivious to this,” commented Warwick.
He added that Solana could be a bigger threat to Ethereum over the long term. “You can lose market share. Leaders fall behind all the time, especially in nascent phases of tech revolutions” he stated.
Of course, Ethereum has plenty of supporters. Recently, Galaxy Digital’s Mike Novogratz described Ether as the “currency of culture” and predicted that NFTs are likely to continue to boost Ethereum’s appeal amongst developers.
Meanwhile, Ryan Selkis of Messari is a long-term Ethereum supporter, describing it as “crypto’s most important platform” and “one that could power an entirely new financial system, and a more open, resilient internet.”
Does Solana Really Address Ethereum’s Weaknesses?
Ultimately, whether Solana can really topple Ethereum or not depends on whether it really does have the ability to address the shortcomings of Buterin’s smart chain - the shortcomings being scalability and transaction costs, in particular.
One of the things holding many older smart chains back is the way in which transactions are validated. Interactions between miners or validators on chains like Ethereum can be cumbersome and prevent transactions from going through in the high volumes required by most DeFi projects.
Solana advanced consensus mechanism, with its cryptographic time-stamping, may well have solved this issue and, if it really can hit 65,000 transactions a second, it would not only be faster than any other blockchain but also faster than most traditional finance platforms - including VISA.
Many investors are clearly on board and Solana is certainly an advanced blockchain. It seems that there is now increased pressure on Ethereum and its ongoing upgrades, as the reality is that the platform could simply become unfit for purpose if it is unable to keep up with the faster networks to meet the ever-growing demands of the latest DeFi projects.
Solana Vs Ethereum: Conclusion
Many smart chains have been dubbed Ethereum Killers in recent years, but it seems that Solana is one of the few that actually has the credentials to deserve the moniker. As DeFi continues to dominate the blockchain space, speed could well be the deciding factor in the race for smart chain supremacy.
From an investment perspective, Solana has also outperformed both Ethereum and Bitcoin for much of 2021 - which in itself is no mean feat, given that both have attained record highs this year. Being something of an outsider at the beginning of the year, Solana has surged to a market cap of $30 billion and taken the number 7 spot ahead of Dogecoin and Polkadot.
However, whilst many investors might be tempted to jump ship from Ethereum to Solana, it should be remembered that Ethereum is still firmly entrenched as the number 2 cryptocurrency and has much wider support than Solana. There is also the ongoing protocol upgrades that could make Solana’s speed advantages negligible.
As of today, Solana and Ethereum present solid investment opportunities and it might be worth hedging your bets by adding both to your portfolio, rather than trying to choose between them.
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Solana Vs Ethereum - FAQ
Solana vs Ethereum - which one should I buy?
Solana exploded in value in 2021 and is being seen by many cryptocurrency investors as the biggest rival to Ethereum. It is certainly true that Solana boasts vaster transactions times, but Ethereum still has plenty of support and is by far the more established of the two. Choosing which one to buy is a tough call and, at this stage, both are worthy of consideration.
Can Solana double my investment in one year?
Solana saw price growth of thousands of per cent in 2021, which inevitably poses the question as to whether it still has room to grow. Most platforms seem to think so, and several have predicted that SOL could see 100% growth by the end of 2022.
Where can I buy Ethereum?
Ethereum is one of the most widely listed cryptocurrencies on the market and you’re likely to find that you can buy it on just about every major exchange. However, if you’re new to the cryptocurrency market then we’d recommend checking out eToro, as it has plenty of learning materials as well as a user-friendly trading platform.
Is Solana faster than Ethereum?
Solana’s developers claim that the network can handle 65,000 transactions per second, making it the fastest blockchain out there and certainly quicker than the current iteration of Ethereum. However, it should be remembered that Ethereum is undergoing a major overhaul - including a move to proof-of-stake - which promises to boost its speed exponentially.
Can Solana support NFTs?
NFTs have been one of the breakthrough trends of 2021 and Solana is perfectly placed to support NFT-based projects. In fact, at the time of writing the Solana ecosystem is said to be seeing the creation of two NFT projects every day.