Solana vs Ethereum: who will steer blockchain’s future?

Blockchain technology has evolved rapidly since its inception, with two major platforms, Ethereum and Solana, standing out as key players in the space. Each has its vision for the future, and as they continue to grow and innovate, the question remains: which of these blockchain networks will shape the future of decentralized technology? Understanding their origins, goals, and challenges is essential to exploring their potential to lead the blockchain revolution.

How they started

The story of Ethereum and its founder Vitalik is widespread in the crypto space. In 2013, at 19 years old, Vitalik, a Russian-Canadian programmer and co-founder of Bitcoin Magazine, proposed Ethereum—a blockchain designed with a built-in programming language capable of supporting smart contracts and decentralized applications (dApps). This vision extended the potential of blockchain beyond simple financial transactions.

To fund development, Ethereum held an initial coin offering (ICO) in July 2014, raising about USD 18 million . A year later, on July 30, 2015, the Ethereum blockchain went live, supported by a team of founders including Vitalik Buterin, Gavin Wood, and Joseph Lubin.

Today, Vitalik is considered one of the most influential figures in the blockchain space. His contributions go beyond Ethereum, as he advocates for decentralization, scalability, and the widespread adoption of blockchain technology to create open and transparent systems.

While Ethereum was designed to address the programmability limitations of Bitcoin, Solana was later introduced to tackle issues faced by blockchains like Ethereum, specifically focusing on speed and cost-efficiency.

In 2017, Anatoly Yakovenko, a former Qualcomm engineer, proposed Solana as a scalable blockchain solution to improve transaction throughput and reduce costs. He introduced Proof of History (PoH), a unique approach to adding timestamps to transactions, significantly enhancing the efficiency of the consensus process.

In 2018, Yakovenko teamed up with his Qualcomm colleague Greg Fitzgerald, and they, along with other early contributors, formed Solana Labs. After a series of testnets, Solana’s mainnet beta went live in March 2020.

Solana held several funding rounds, including a founding sale and a public sale on CoinList in 2020, raising substantial capital to grow the ecosystem. The Solana Foundation was also established to promote the development of the network.

Often called an “Ethereum killer”, Solana stands out for its high throughput and transactions per second (TPS), attracting attention for its rapid growth in just a few years. The comparison between Solana and Ethereum remains a popular topic of discussion in the blockchain community.

Tokenomics and price (As of November 27, 2024)

Data Source: CoinMarketCap

Since the beginning of this year, Ethereum's price has remained sluggish. Against Bitcoin, the ETH/BTC ratio hit a three-year low, while against Solana, the SOL/ETH ratio repeatedly reached all-time highs.

One major reason for this decline is the poor performance of Ethereum ETFs. While Bitcoin ETFs have seen net inflows of $30.28 billion, Ethereum ETFs have faced net inflows of only $109.63 million, with Grayscale continuing to sell off Ethereum. This has reduced institutional interest in ETH compared to BTC.

Additionally, Ethereum’s Layer 2 solutions, which improve scalability, have also reduced the burning of base layer fees. As a result, Ethereum is now in an inflationary state, weakening its role as a store of value. Meanwhile, Solana has thrived with the memecoin trend, particularly through Pump.fun, which generates around $1 million in daily revenue. Ethereum’s attempts to drive growth through new initiatives like restaking have struggled, with issues in top protocols further undermining confidence in the network.

In metrics of the blockchain trilemma

The blockchain trilemma posits that it's challenging for a blockchain to achieve all three critical properties — Security, Scalability, and Decentralization — simultaneously at an optimal level. Both Solana and Ethereum aim to provide secure and scalable decentralized networks, but they make different trade-offs in these areas.

1. Security

Security refers to the blockchain’s ability to resist attacks, ensure data integrity, and protect user assets. This includes preventing double-spending, safeguarding against 51% attacks, and ensuring that nodes and validators can’t be easily compromised.

Ethereum (ETH):

• Proof of Stake (PoS): Ethereum has transitioned from Proof of Work (PoW) to Proof of Stake (PoS) with Ethereum 2.0 ("The Merge"), which aims to increase security while reducing energy consumption. The PoS system secures the network by incentivizing validators to act honestly and slashing (penalizing) them if they act maliciously.
• Decentralization of Validators: Ethereum has a large and diverse validator set, which contributes to its high level of security.
• History: Ethereum has been operating since 2015 and has proven its robustness in maintaining security over time, despite some high-profile vulnerabilities in its early years (e.g., The DAO hack).

Solana (SOL)

• Proof of History (PoH) + Proof of Stake (PoS): Solana uses a unique hybrid consensus mechanism called Proof of History (PoH), combined with Proof of Stake (PoS). PoH introduces a timestamping mechanism that helps to order transactions before they are verified by PoS validators.
• Security Concerns: Solana has faced several high-profile network outages and downtimes due to issues with validator performance, spam attacks, and the rapid growth of the network. 

Winner (Security): Ethereum is generally considered to have a higher level of security due to its more established consensus mechanisms, larger and more decentralized validator set, and longer operational history.

2. Scalability

Scalability refers to a blockchain's ability to handle a large number of transactions per second (TPS) while maintaining low costs and a fast user experience.

Ethereum (ETH):

• Challenges: Ethereum's scalability has been a limitation, especially during periods of high demand. The network can handle around 15-30 transactions per second (TPS) on the base layer. This low throughput causes high transaction fees and congestion during peak times (e.g., DeFi booms, NFT mints).
• Layer 2 Solutions: Ethereum is actively addressing scalability issues through Layer 2 solutions like Optimistic Rollups and ZK-Rollups, which offload transactions from the main chain and process them off-chain, before settling the final results on Ethereum.
• Ethereum 2.0 Shard Chains: Ethereum 2.0’s future scalability upgrades, including sharding, will divide the Ethereum network into multiple shards, each capable of processing transactions in parallel, significantly increasing throughput.

Solana (SOL):

• High Throughput: Solana has been designed to be highly scalable from the start. Thanks to its PoH combined with PoS, Solana achieves a high throughput of around 4,000 TPS under normal conditions. This makes it one of the fastest blockchains in the space.
• Low Latency and Transaction Fees: Solana's architecture enables fast transaction finality (around 400 milliseconds) and very low transaction fees (usually less than $0.01 per transaction).

Winner (Scalability): Solana excels in scalability, offering a much higher throughput and lower fees compared to Ethereum. 

3. Decentralization

Decentralization refers to the distribution of control across multiple nodes or validators, to reduce the risk of censorship, manipulation, and centralization of power.

Ethereum (ETH):

• Highly Decentralized Validator Set: Ethereum’s large validator set, with over 1 million participants worldwide, ensures a high level of decentralization. 
• Proof of Stake: With the transition to PoS, Ethereum incentivizes a diverse group of validators to participate in network consensus. 
• Ethereum’s Governance: Ethereum's decentralized governance model also involves a large number of contributors, developers, and stakeholders in decisions about protocol upgrades (via Ethereum Improvement Proposals or EIPs).

Solana (SOL):

• Validator Requirements: Solana’s high scalability is partially due to its reliance on high-performance hardware to run validator nodes. This limits the number of validators who can participate in the network to around 1,000 to 2,000 validators, which could lead to centralization.
• Solana Foundation Influence: The Solana Foundation has significant influence over the network, which could contribute to centralization concerns, as many decisions are made by a centralized team.

Winner (Decentralization): Ethereum is more decentralized than Solana, owing to its large validator set, accessible staking, and the broader ecosystem of dApps and participants.

Adoptions

As one of the most established blockchains, Ethereum has a solid foundation in both developer numbers and application development. According to Electric Capital’s report, as of July 2024, Ethereum is home to 8,865 active developers. Ethereum’s early success was largely driven by the explosive growth of decentralized finance (DeFi) and non-fungible tokens (NFTs), both of which gained significant momentum within its ecosystem.

By 2024, Real World Assets (RWA) have emerged as a key focus for Ethereum, with institutional participation from major players like BlackRock helping to accelerate adoption and push the narrative forward.

Solana, the “Ethereum killer”, also followed pace. The Solana ecosystem has attracted 2,856 developers, driven by a variety of new narratives, including memecoins, PayFi (payments and finance on blockchain), and decentralized physical infrastructure networks (DePIN).

Apart from the strength of Bitcoin, memecoin hype has become one of the most popular narratives in this bull cycle. A prime example of this is Pump.fun, a memecoin launchpad built on Solana. The platform has achieved remarkable success, with average daily fees reaching $525,000 in May, outpacing Uniswap Labs in monthly revenue generation. Moreover, memecoin trading has significantly driven DEX activity, with WIF, MEW, POPCAT, and GME ranking among the top 10 tokens by Q2 trading volume.

Looking ahead: The future of ETH and SOL

Both Ethereum and Solana have carved out their places in the blockchain space, each with its strengths and challenges. Ethereum remains a leader in DeFi, NFTs, and institutional adoption, but struggles with scalability and inflationary pressures, which have hurt its market performance. Solana, with its faster transaction speeds and growing developer base, has gained attention through innovations like memecoins and PayFi, though it still faces concerns around decentralization and security.

As the blockchain space continues to evolve, both platforms will compete for dominance. Ethereum's established ecosystem provides a strong foundation, while Solana’s rapid growth and emerging narratives make it a strong challenger. The future of both blockchains will depend on their ability to scale, innovate, and attract new use cases, shaping the next phase of the blockchain revolution.

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