Solana vs Ethereum: will SOL's growth threaten ETH dominance?

With teams debuting their shiny new crypto projects every other week, navigating the world of crypto can be overwhelming for newcomers to the space. As you start to build a long-term, high-conviction trading strategy, it's likely you'll be researching prolific projects at the forefront of blockchain technology.

Of today's crypto market leaders, two similar technologies that deserve exploring are major Layer 1 players Solana and Ethereum. As both Solana and Ethereum represent established Layer 1 blockchains backed by passionate communities and vibrant ecosystems, it can be difficult to separate the two given their strengths and unique selling points.

Eager for clarity? This guide aims to provide an objective comparison of Solana vs Ethereum as we demystify their technical attributes and explore what differentiates them. From exploring how each Layer 1 blockchain fares against the blockchain trilemma to understanding their future developments, here's everything you need to know when comparing Solana and Ethereum.

What is Ethereum?

Launched in 2015, Ethereum is the first blockchain platform to popularize smart contracts and self-executing programs that power decentralized applications (DApps). The leap forward with autonomous smart contracts sparked a wave of development in the decentralized space and established Ethereum as a DeFi pioneer, where users can borrow, lend, and trade crypto without relying on traditional financial institutions. Beyond DeFi, Ethereum's robust ecosystem encourages fresh innovation across various sectors, ranging from NFTs and GameFi to real-world asset (RWA) marketplaces and prediction markets. Overall, Ethereum's established developer community, strong security measures, and ever-evolving feature set solidify its position as a leading force in the blockchain world.

What is Solana?

A next-generation blockchain that improves upon the innovations of its predecessors, Solana debuted in 2017 amid scalability bottlenecks and rose to prominence because of its Proof of History (PoH) function. By timestamping transactions in a decentralized manner, Solana nodes can organize transactions more efficiently, leading to rapid confirmation times and affordable gas fees. This makes Solana a haven for fast-paced DApps that demand high transaction throughput. Beyond speed and affordability, Solana boasts a vibrant developer community drawn to its user-friendly programming languages and its potential for on-chain scaling solutions. This dev-first focus has fueled the creation of innovative projects within the Solana ecosystem, including play-to-earn games with immersive experiences and serialized NFT projects that allow ongoing content updates.

How Ethereum and Solana fare against the blockchain trilemma

Before diving into our Solana vs Ethereum comparison, it's important to first understand the concept of the blockchain trilemma. In short, the blockchain trilemma is a concept coined by Ethereum co-founder Vitalik Buterin that suggests developers for decentralized blockchains will encounter three main factors: security, decentralization, and scalability.

Despite their best efforts, developers will be forced to sacrifice one factor as a trade-off to meet the needs of the other two factors. One example of this would be Bitcoin. Known for its high level of security and decentralization, Bitcoin is often seen as the gold standard among decentralized networks. However, Bitcoin struggles with scalability, meaning it can only process a limited number of transactions per second. This is a major drawback for widespread Bitcoin mainstream adoption, as it can lead to slow transaction times and high fees.

Ultimately, understanding the blockchain trilemma is essential for evaluating different blockchain projects. Each project makes its own trade-offs between the three core principles mentioned above, and the ideal choice for you'll depend on your specific needs and priorities. Now that we have a clear understanding of the blockchain trilemma, let's dive into the security, decentralization, and scalability of Ethereum and Solana to see how these popular blockchains fare against such metrics.

Security

Both Ethereum and Solana prioritize security, employing robust mechanisms to safeguard user funds and network integrity. In both cases, validators stake their own tokens (ETH for Ethereum, SOL for Solana) to verify transactions. The potential loss of their staked tokens incentivizes validators to act honestly, as malicious behavior could result in penalties and loss of their stake. Ethereum's long history and battle-tested security measures inspire confidence in many users, but it's important to remember that security for any blockchain is an ongoing process, and vulnerabilities can still emerge. However, their approaches differ in their nuance of Proof of Stake (PoS) implementation. Ethereum's current PoS implementation is still under development compared to some established PoS blockchains, while Solana's PoS applies PoH alongside it.

Ethereum's security

Ethereum's current security relies on PoS, a consensus mechanism where validators stake their own ETH tokens to verify transactions. The potential loss of their staked tokens incentivizes validators to act honestly, as malicious behavior could result in penalties and loss of their stake. While the PoS implementation is a recent development, Ethereum's history with its previous Proof of Work (PoW) system and the ongoing security audits and improvements during its transition to PoS inspire confidence in its ability to protect user funds and network integrity. This established track record is a major advantage for users who prioritize a security model that's been thoroughly tested and refined over time.

Solana's security

Solana leverages a unique combination of PoH and delegated PoS (DPos) for security. PoH creates a verifiable record of time between transactions, preventing issues like replay attacks due to streamlined transaction ordering. Delegated PoS requires validators to stake not only SOL tokens but also Solana hardware, raising the potential cost of malicious activity. While Solana's security architecture is innovative and shows promise, its relative novelty compared to Ethereum's PoS system might lead some users to favor Ethereum's established track record.

Overall, both Ethereum and Solana prioritize security with strong mechanisms to protect user funds. Ethereum's established track record with PoS inspires confidence in many users. However, Solana's innovative approach with PoH and bonded PoS offers additional security features and a potentially higher barrier to malicious actors. While Ethereum's PoS is well-understood, Solana's complex architecture with PoH may be less battle-tested, introducing the possibility of unforeseen vulnerabilities. Ultimately, the choice between these two platforms from a security standpoint depends on your individual risk tolerance and how you weigh a proven track record against advanced and disruptive features.

Decentralization

Decentralization is a core principle of blockchain technology. It refers to the distribution of power and control across a network, eliminating the need for a central authority. Both Ethereum and Solana aim for decentralization by applying the PoS consensus mechanisms. With PoS, validators who stake their own cryptocurrency tokens are responsible for verifying transactions. This economic incentive aligns validator interests with the health of the network, as malicious behavior could result in slashing and the loss of their stake. Additionally, both platforms aim to achieve a degree of resistance to censorship by distributing the validation process across a global network. This means no single entity can control or block transactions on the network.

Ethereum's decentralization

The Ethereum network is arguably one of the most decentralized in the world. With an estimated validator pool exceeding one million, Ethereum's validator base is constantly expanding, with plans to become even more distributed in the future. However, concerns remain about the potential influence of large staking pools that could hold a significant portion of the total staked ETH. As of writing, Lido dominates the staking landscape on Ethereum, controlling over 30% of staked ETH at one point. This concentration raises concerns about potential centralization, as Lido could potentially influence the network if it wanted to. Thankfully, the Ethereum team is actively working to mitigate this risk. The upcoming sharding upgrades as part of the Ethereum roadmap aim to further decentralize the network by increasing the number of validators required per shard. Overall, this will make it more difficult for any single entity to gain control, since the implemented upgrade will increase the number of validators required and lower the barrier to entry for individual stakers.

Solana's decentralization

Although Solana has been praised for its impressive throughput, its string of outages expose a potential vulnerability in this methodology. Solana adopts a different approach to decentralization and applies a DPoS system where validators are chosen based on factors like stake size and network performance. While this approach allows for faster transaction speeds, it also raises concerns about centralization as the validation power is concentrated among a smaller set of chosen validators.

Additionally, Solana's validator set is currently permissioned and employs a validator selection process with delegated PoS, meaning new validators need approval from the network to join. While this allows for faster transaction speeds, Solana's reliance on a specific set of validators for its PoH system raises questions about its true level of decentralization and reliability. This is especially true when compared to Ethereum's more geographically distributed validator network.

The perceived lack of reliability has also been underlined by Solana's network disruptions. To tackle this, Solana is working towards a permissionless validator set through its hotly anticipated validator client software, Firedancer. Firedancer implements Solana's version of PoS and aims to address some of the platform's current centralization concerns. By enabling anyone to run a validator node without prior approval from the network, Firedancer has the potential to significantly distribute validation power more evenly and greatly improve network decentralization in the long run.

Ultimately, the choice between Ethereum and Solana regarding decentralization depends on your priorities. If complete openness and permissionless participation are paramount, Ethereum might be the better choice despite its current scalability limitations. If faster transaction speeds are a priority, you might be willing to accept some centralization trade-offs with Solana, keeping in mind its ongoing efforts to become more decentralized in the future. However, if a technical issue or malicious attack disrupts the validator network, the entire Solana network can grind to a halt. This undermines the security and reliability of the platform, especially compared to more decentralized blockchains like Ethereum.

Scalability

Scalability refers to a blockchain's ability to handle a growing number of transactions without compromising processing speed or incurring high fees. This is a critical factor for the widespread adoption of blockchain technology, as expensive gas fees are often a deterring factor when it comes to regular usage and transactions. Scalability presents a contrast between Ethereum and Solana as each network has its own way of dealing with high transaction volume.

Ethereum's scalability

Although it's established with a robust ecosystem, Ethereum has historically struggled with scalability due to its previous PoW consensus mechanism. This resulted in numerous scalability bottlenecks such as high transaction fees and slow processing times, which were major pain points for users looking to actively interact with Ethereum's ecosystem. In fact, it's this bottleneck that inspired many developers to strike out on their own and create their own scalability-focused Layer 1 blockchain, leading to the innovations in blockchain scalability that we see today.

Fortunately, the Ethereum Foundation has been hard at work upgrading the network with improved scalability in mind. From its PoS transition to numerous network upgrades like Dencun, the developments aim to significantly improve scalability by distributing the workload across multiple shards, potentially handling thousands of transactions per second. With the execution of its roadmap, we could see Ethereum reach a single block finality of 12 seconds. This is a fraction of its current 30-minute duration, and achieving this will dramatically improve the user experience and network efficiency.

Solana's scalability

Meanwhile, Solana is a high-performance blockchain that prioritizes scalability from its core design. Since its inception, Solana has had a laser-like focus on speed. Thanks to the network's introduction of innovations like PoH and tower byzantine fault tolerance (BFT), Solana is theoretically able to achieve a blistering throughput of up to 65,000 transactions per second. On top of this, Solana also boasts gas fees that are mere fractions of a penny, making it significantly cheaper to interact with the network compared to Ethereum's historically high gas fees.

The combination of blazing-fast transaction speeds and negligible fees puts Solana's scalability in a league of its own compared to Ethereum's current state, as Solana is becoming the platform of choice for a wide range of DApps, particularly those requiring high throughput and cost-effectiveness. While Solana has yet to achieve its theoretical maximum throughput, it's certainly on its way to hitting this thanks to progress made with Firedancer. With its ability to process 600,000 transactions per second in test environments, Firedancer could be influential in markedly improving Solana’s overall scalability.

When considering scalability between Ethereum and Solana, both networks offer compelling options for developers and users seeking a scalable blockchain platform. While Ethereum focuses on a robust ecosystem and future scalability improvements with a strong emphasis on decentralization, Solana prioritizes raw speed and boasts impressive transaction processing capabilities at a fraction of the cost. Ultimately, the choice between these platforms depends on the specific needs of the project or user, with factors like transaction speed, cost, desired level of decentralization, and application type playing a key role in the decision-making process.

Solana's potential threat to ETH dominance

For those unaware, ETH dominance refers to the ratio between the market cap of Ether to the total market cap of the entire cryptocurrency market. Like with Bitcoin dominance, ETH dominance is often used to track Ether's value relative to other big-name cryptocurrencies. This is used to signify how ETH fares against the competition.

ETH dominance 2024
A chart showing ETH dominance (source: tradingview.com)

A chart showing ETH dominance (Source: tradingview.com)

Referencing the chart above, we can see that ETH dominance is currently on a downward trend. This is based on how a recent death cross was formed on the daily time frame as the 50-day moving average recently crossed under the 200-day moving average. Additionally, the relative strength index shows that ETH dominance is declining from its current value of 44.1. With these indicators in mind, we can conclude that ETH dominance could decrease in the near future, hinting that there might be a relative increase in the value of altcoins as traders rotate out of ETH into promising crypto projects and altcoins like SOL. This trend has also been a huge reason why crypto traders have been speculating that Solana might threaten ETH dominance over time as it offers a faster, more scalable alternative with significantly lower transaction fees. This speculation is further fueled by the ongoing developments of Solana's Firedancer validator client software, which aims to address concerns about decentralization and news of how Solana recently overtook Ethereum in terms of DEX trading volume.

The future of Solana vs Ethereum: can both Layer 1 powerhouses coexist?

The competition between two leading Layer 1 blockchains like Solana and Ethereum is fierce. While Ethereum boasts a robust and established ecosystem with a strong focus on decentralization, Solana offers blazing-fast transaction speeds ideal for high-throughput applications.

As both platforms continue to evolve, one important question emerges: can both Layer 1 powerhouses coexist in the future blockchain landscape? The answer might lie in specialization. Ethereum's upcoming sharding upgrades could address its scalability issues while maintaining its focus on security and decentralization. This would solidify Ethereum's strong positioning for complex financial applications and trading TradFi instruments like RWAs. Conversely, Solana's speed advantage could make it the go-to platform for applications requiring real-time transactions, such as DeFi markets with frequent trading or high-traffic GameFi titles.

Beyond competition, we've seen a rise in cooperation between Solana and Ethereum. Thanks to the rise of decentralized interoperability bridging services like OKX Swap, both Layer 1 blockchains can seamlessly communicate with one another and enable asset transfers. We've even seen the emergence of shared developer tools and cross-chain projects fostering a more collaborative environment. Ultimately, the future might see a scenario where both Ethereum and Solana thrive, catering to different user needs and fostering innovation within the broader, interconnected blockchain space.

Final words on Solana vs Ethereum

Many would agree that Solana may be the best option if speed, scalability, and low fees are important to you. This will likely be the case if you're interacting with high-frequency DeFi applications where every millisecond counts, or if you frequently trade Solana memecoins. However, if a robust and battle-tested ecosystem with a strong focus on decentralization is your priority, Ethereum might be the better fit. This could be ideal for DApps requiring greater security for valuable assets or projects seeking a more established user base and compatibility with existing Ethereum-based DApps.

Ultimately, the best approach might not be a "which is better" scenario. As the industry continues to develop, we might see increased interoperability between blockchains like Ethereum and Solana. This would allow users to leverage the strengths of each platform seamlessly. For instance, imagine seamlessly transferring assets between Ethereum and Solana for lower transaction fees while maintaining the security of the Ethereum network. The future of blockchain development is bright, with both Layer 1 blockchains like Ethereum and Solana leading the charge. By staying informed about their ongoing advancements, you'll be well-positioned to make informed choices as the blockchain landscape continues to evolve.

Keen to trade either Solana or Ether? Check out our spot trading pairs for SOL and ETH to get started with your crypto trading journey today.

FAQs about Solana vs Ethereum

Is Solana faster than Ethereum?

Yes, Solana is significantly faster than Ethereum in its current state. Solana boasts theoretical transaction speeds exceeding 65,000 transactions per second, compared to Ethereum's current average of 15 to 45 transactions per second. This difference is due to Solana's unique architecture designed for scalability, while Ethereum is still undergoing upgrades to improve its speed.

Is Solana cheaper than Ethereum?

Yes, Solana transactions typically incur significantly lower fees compared to Ethereum. Solana gas fees are a fraction of a penny, while Ethereum gas fees can fluctuate and sometimes reach high levels depending on network congestion.

Is Solana more secure than Ethereum?

With its established and battle-tested network and a larger validator base that offers greater decentralization, Ethereum is generally considered more secure than Solana. This can also be seen in how often Solana faces network outages compared to Ethereum.

Why does Ethereum have higher TVL (total value locked) than Solana?

TVL refers to the total value of cryptocurrency locked within DeFi protocols on a specific blockchain. Ethereum has a significantly higher TVL compared to Solana. This can be attributed to factors like Ethereum's first mover advantage that led to it having a more mature and established ecosystem. Specifically, Ethereum supports a wider range of DeFi applications and protocols, while the network effect could have caused the existing user base on Ethereum to attract further projects and users that reinforce its dominance in the DeFi space.

Can Solana overtake Ethereum?

The future is, of course, uncertain. While Solana offers superior speed and lower fees as of writing, Ethereum is actively working on scalability improvements. Additionally, Ethereum's established ecosystem and user base are significant advantages. It's more likely that both platforms will coexist, with users choosing based on their specific needs. The rise of interoperability bridges could further enhance this coexistence by allowing users to leverage the strengths of each platform seamlessly.

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