Solana vs Ethereum: Who Holds the Crypto Power?
In blockchain and crypto, there's always a battle raging. So, lets look at Solana vs Ethereum. There has been competition between networks, and crypto coins, since the craze around decentralised applications (DApps) and non-fungible tokens (NFTs) in 2021.
While the 2020 DeFi summer depended on Ethereum as the primary driver, 2021 witnessed the peak of other crypto coins, like Solana, featuring higher trade speeds at reduced expenses. This was something that Ethereum aspires to accomplish using its Ethereum 2.0 upgrade.
While the two blockchains have their own particular fans and investors, Ethereum turns out to be leading as a blockchain that delivers a much more transparent and developed space for DApps. But, undoubtedly, the two have their own significance and differences that cannot be ignored.
This article examines the significant differences between the two blockchains. We explain the working model, each blockchain's core attributes, and the developing DApp ecosystem on each.
Let's proceed with the significant differences and attributes Solana and Ethereum offer.
One of the critical factors that differentiate Ethereum from Solana is the working model. Each has a distinct working technology operating at its core, and each has distinctive ways of solving the issues around scaling. This section of the article looks at the technology driving the two blockchains.
Ethereum operates on Proof of Work (PoW) mechanism, the same as used by Bitcoin's blockchain. The network is secured by hundreds of thousands of miners who partake in the operation of consensus by "risking" their computing power/hardware. This ensures that the network stays decentralised and that the barricade to enter the network is high. It also reduces network performance as it cannot process many transactions per second.
The next point separating Ethereum from Solana is its "stateful" nature. It implies that all the trades on the network are documented in one state, and if any new trade ensues, then the complete network (or all the miners) has to update its network document to reflect that new trade. This process is expensive, so Ethereum 1.0 is deemed slower than other 'stateless' blockchains like Solana.
Unlike Ethereum, Solana operates on the Proof of History (PoH) working model. The model needs a series of computational actions that cryptographically define the time course between two events. This is done by adding timestamps to all transactions and following each order. This type of order sequencing is significantly distinct from that in Bitcoin and Ethereum, where their transactions are not set in a timely order.
The other significant difference between Ethereum and Solana is that Solana has a 'stateless' design. As already mentioned, this enables a decrease in across-the-board memory consumption. Since the complete state of the network does not require an update for each transaction, they can be efficiently carried out sequentially. This makes Solana highly scalable.
Features and DeFi Ecosystem
Every blockchain has some outstanding features that set it apart. Decentralisation is undoubtedly something Ethereum has always focused on compared to Solana's focus and has driven to accomplish that through its operational technology. Talking about the DeFi ecosystem, Ethereum is much older than Solana in the market. Solana is constantly working on its marketing strategies to draw more investors towards its network, but Ethereum stays ahead because of its market hold and the trust gained over time.
Let's dive in to understand better the Solana and Ethereum features and the DeFi ecosystem.
Solana's critical selling point is its power to process a block every 400 milliseconds and document 60k transactions every second. These key features independently make it one of the speediest working layer-one blockchains. Further, it has numerous features that drive it to stand apart. Let's discuss some of them.
Enhanced Transaction Speeds
Solana operates on Tower Byzantine fault tolerance (BFT), an ad-lib version of pBFT (practical Byzantine fault tolerance). This terminates the requirement for nodes to communicate in real-time, enhancing overall efficiency. Additionally, Solana operates on Gulf Stream, a mempool-less transaction forwarding standard that pushes the transactions to the network's edge. This allows network validators to carry out transactions earlier than expected, encouraging the network to process over 50,000 transactions every second (TPS).
A critical element that drives Solana to stand apart from its opponents is that the blockchain is scalable at its ground level; it does not need layer-two solutions to boost scale. A vital blockchain component that assists in this scalability is the Turbine block propagation protocol. It enables splitting data into small fragments, making it manageable to share it across the network. Sealevel also helps in the processing of transactions across GPUs and SSDs.
Together, these features make for a positively scalable, efficient, and cost-effective blockchain.
Solana's DeFi ecosystem is still at its developing stage, with diverse DApps being launched on the platform. This results from comprehensive hackathons and other marketing techniques the network has utilised to draw a broad user base. The blockchain has more than $12B in total value locked (TVL) across all its DApps.
One of the significant DApps on Solana is Raydium, an on-chain ordering book AMM that enables users to conduct transactions. Since launching in April 2021, it has collected over $1.8B.
Ethereum's strong point is its decentralisation. However, it lacks the power to process a vast number of transactions per second. The barricade to enter and become a validator is not too high, creating a trustless, decentralised network. To reimburse for the scarcity of scaling attributes at the native blockchain, layer-two solutions deliver evolved scalability and throughput.
Turing-complete language is one of the critical elements of Ethereum, specifically at the time of its launch. This means that it can sustain a variation in programmability, enabling the creation of diverse smart contracts. Thus, it utilises Solidity as its ground programming language for coding smart contracts. Ethereum was one of the first blockchains in designing decentralised on-chain smart contracts.
Stablecoins are the drivers of decentralised finance (DeFi). See them as regular currencies like USD. The only distinction is that stablecoins are cryptocurrencies that designate one unit of standard fiat currency — a cryptocurrency secured to a fiat currency. Since all major cryptocurrencies are highly volatile, having a type that stays secured to one unit of a standard fiat currency makes sense. Stablecoins do a flawless job in accomplishing that.
Sushi was the first DApp on Ethereum. It is one of the largest order, bookless, peer-to-peer cryptocurrency trades that gives investors the power to buy/sell their desired tokens easily. It has seen a massive performance since its launch in September 2020.
Apart from Sushi, Compound was one of the primary DApps behind the DeFi summer of 2020. It is a lending medium on Ethereum that witnessed massive growth in its borrowing volume. Ethereum, older in the market than Solana, has a more extensive investor base which finds Ethereum a promising investment for funds.
Solana vs Ethereum. Who Holds the Crypto Power?
On one hand, the Ethereum network has over 7,000 nodes and 90,000 validators and has a market value of almost $400 billion. Yet, Ethereum 1.0 lacks scalability and is comparatively more expensive than its competitors, Cardano and Solana. However, the blockchain is ready to launch its upgraded version, Ethereum 2.0, which is anticipated to solve all the cryptocurrency problems, especially its scalability issues; the number of transactions per second.
Talking about Solana, it possesses 600 nodes and around 1,000 validators. According to the recent data available on Solana's website, it is presently hosting around 340 apps. Meanwhile, Ethereum has more than 3,000 Dapps operating on its network.
So, coming back to our question, who holds the crypto power, Solana or Ethereum? Solana has high scalability features and excellent marketing techniques to acquire investors. Ethereum has the first-mover benefit and enjoys the advantages of network effects.
Ultimately, Solana has room for development, but, certainly, Ethereum holds the crypto power. It has too much momentum, especially when it comes to DeFi Applications. Ethereum, though it lacks some cryptocurrency features, holds the second-largest cryptocurrency market cap and investors find the blockchain promising for their returns. However, Solana is expected to shine in the fast-growing NFTs market.
It is one of the best-designed cryptocurrencies, and it remarkably performed well when the significant cryptocurrencies fell 10-15%, which is outstanding for a crypto coin.
Author: Priya Kumari
Priya is a passionate content writer and the co-founder of Finendorse. She is an enthusiastic crypto investor and has a huge interest in the upcoming digitisation age.