Solana’s Evolution: Has It Become the Ultimate “Ethereum-Killer”?

The 2021 bull market allowed Solana to shine as one of the top-performing layer-1 tokens in the industry. It managed to outperform rivals like Avalanche, Algorand, and Polkadot by a large margin and reached an eye-watering all-time high of $260 per SOL token.

Moreover, due to its sudden success, Solana managed to onboard very strong developer teams that deployed industry-leading applications. The blockchain thrived with DeFi, NFTs, and games. However, the success dwindled as network outages became more frequent. In addition, following the collapse of the ill-fated FTX exchange, the SOL token plummeted in value.

Despite all of this, Solana is once again picking up the pace as a new bullish cycle seems to be lurking around the corner. Since October 2023, the token’s value increased 5x and seems to have some rocket fuel left in the tank. In this article, we analyze whether Solana can surpass Ethereum’s traction or if you should just buy ETH instead.

Solana: A Detailed Analysis of Its Blockchain Technology

Solana’s creators Anatoly Yakovenko and Raj Gokal launched the project with a simple premise — providing unparalleled scalability to blockchain technology. At a time when Ethereum was struggling with network congestion and network fees, Solana came as the savior of DeFi.

To achieve this, Solana became a smart contract-capable network that uses the novel Proof of History consensus mechanism. This allows it to reach incredibly fast transaction speeds and block finality, with a theoretical throughput of 710,000 tps. At the same time, transaction costs remain negligible, which makes it a perfect platform for deploying DeFi applications.

Proof of History bases itself on the assumption that the order of the events on a blockchain is as important as the blocks. As such, the protocol generates time markers for every block, which validators can use to verify the veracity of the data on the network.

Since validators need just a small amount of data, the validation process is significantly more cost-effective than on other chains. This narrative allowed Solana to become a major competitor to Ethereum. It also primed it as one of the best cryptocurrencies to invest in during the Layer-1 boom of 2021.

With that in mind, we should note that this high scalability comes at a certain cost. It requires a certain degree of centralization regarding validator consensus.

Solana’s Unique Features

Solana has managed to place itself as a premium blockchain, with strong developer teams and industry-leading applications in DeFi. Below, we analyze some major features that allowed the project to succeed and reach the top 5 by market cap.

Innovative Consensus Mechanism and Scalability

Many blockchain enthusiasts consider the PoH consensus to be the most groundbreaking technology in cryptography in the last decade. This scalability feature retains the blockchain architecture of cryptographically chained blocks in a decentralized ledger.

This is in contrast to networks like Avalanche, which uses a triumvirate of chains for scalability. Or to Algorand and similar networks that prefer to rely on directed acyclic graph technology instead of a blockchain.

Many investors and developers are ready to sacrifice some of their decentralization to benefit from the superior scalability Solana proposes.

Cross-Chain Interoperability and Fast Confirmation Times

Thanks to the Wormhole technology, Solana benefits from asset composability across different chains. Users can easily wrap and send tokens on Solana to and from other blockchains within minutes, at very low costs.

This improves the interoperability of the Solana network but doesn’t propose EVM compatibility like the majority of other blockchains. However, many developers have expressed their preference for the Rust programming language on Solana over Solidity on Ethereum.

Comparing SOL vs. ETH: Project Stats and Market Performance Insights (2024)

To continue our analysis, let’s have a closer look at both Solana’s and Ethereum’s project statistics and market performance.

Market Capitalization, Dominance, and Trading Volume

Solana’s market cap has recently increased by 5x, following the general bullish wave in the cryptocurrency market. At its current valuation of $94 per SOL, the project records a market cap of $40 billion.

Trading volume has equally skyrocketed, coming from $150 million daily volume in September 2023 to $2.5 billion in January 2024.

Ethereum doubled its market cap in 2023, currently reaching $296 billion and a price of $2,240 per ETH. The trading volume is much steadier, with an average of $10 billion per day over the last six months.

Price Trends and Historical Performance

As we mentioned in the introduction, the bear market was quite harsh to the SOL price action. Coming from an all-time high of $260, the token fell as low as $11 in December 2022. For many, this was the end of the Solana blockchain. The majority of the crypto community didn’t expect SOL to recover from such a drastic fall.

However, since October 2023, Solana has surpassed all expectations. It has become the best-performing top 50 cryptocurrency, increasing 500% in price in just over two months. This sudden surge came after the success of Solana-native memecoin BONK and the success of similar projects on the network.

Ethereum, on the other hand, has enjoyed much more conservative price action in the past year. Although the price action remains very bullish, the growth hasn’t been as critical as on Solana. Since Jan 2023, the ETH cryptocurrency has increased 200% in value, firmly holding the #2 spot in crypto.

Conclusion on

In the last quarter of 2023, Solana surprised everyone but the most firm believers in that project. With its staggering growth, it brought a glimmer of hope in crypto, improving the general sentiment in the market. Although some naysayers believe that it might have reached most of its potential, trading volumes tell a different story.

Conversely, Ethereum is still waiting on a genuine market rally. This might come from the emergence and popularity of Layer 2 solutions such as Optimism, Arbitrum, and Polygon. Note that Ethereum also remains on top of the DeFi industry, with the most active developers on payroll. Solana still has a ways to go before reaching the widespread adoption of EVM networks.