However, they’re both blockchain architect frameworks that enable the building of blockchain projects.
There seems to be a pseudo war between both networks on who will truly take over the space. The Ethereum network is not a new player unlike Solana and houses many DAPPs and premium NFTs such as the Bored Ape Yacht Club.
Ethereum isn’t a newbie in the space having been launched in 2014. Solana on the other hand was launched in 2020. While Ethereum seems to offer a matured and decentralized network, Solana focuses on swift and low-cost transactions.
In this article, we will take a look at their unique functionalities and their distinctive features.
When you place an order to buy or sell a token, you are doing so at the same time as many other people, and the cumulative activity shifts the price very quickly. This can have big implications for people buying in large quantities from one exchange to sell at another exchange at a higher price, and solutions to reflect these quick changes are not available.
Solana however tries to solve this problem, hence their favourite phrase: crypto at NASDAQ speeds. So they are a very niche-focused blockchain, solving for a particular use-case: price discovery. Making use of fibre-optic cables with data moving at the speed of light, Solana has built great central computers that enable tens of thousands of transactions per second (Ethereum performs 15-30 transactions per second), and they are optimising it for higher speeds.
Ethereum on the other hand has not been focused on a specific niche, but on putting everything on the blockchain; to extend the working infrastructure of the blockchain beyond payments, to include every other area of life, and make it easy for everyone to join; to provide the platform for developers to build unstoppable apps of all kinds. Ethereum has managed to maintain a high degree of decentralization over the years. Solana’s central machinery does not tend toward decentralization as much.
Speed and Transaction Fees
The high Ethereum gas fees would be the biggest joke on the blockchain network as it can cost a fortune to make transactions on the network. This is one of the reasons why Solana is dominating the NFT space more in recent times as JP Morgan signals this a major challenge for Ethereum.
At the moment, Solana can process over 50k transactions per second at a very cheap rate, unlike Ethereum which can only do 13-1000 transactions per second leading to high fees to fast track the process.
Market Cap Size
As of today, the market size of the Ethereum network is well over $490 Bn when compared to Solana which is about $50 Bn in market cap.
Well, everyone has begun to join, and now the trouble is that there are too many transaction requests at the same time. This is driving up transaction fees on Ethereum and other blockchains. When there is a rush to buy into a project transaction fees can be as high as $150 or more. Even when there is no rush transaction fees are up to $10, which just makes no sense if you are moving small amounts of money. It gets more problematic when you talk about enabling access for more people who are not yet onto crypto: the problem is only going to get worse as more and more people get on. The blockchain was supposed to be cheaper than banks charging you for every transaction.
This problem has been around since the 2017 ICOs, and many blockchains have sprung up as “Ethereum killers” with the promise of low fees, and solutions that allow billions of users to transact on the network at once without the system becoming too clogged up.
Solana is one such that has taken the engineering route. Anatoly Yakovenko, Solana co-founder and CEO does envision a future where everyone has a Solana box beside a CISCO box with setup wires for the Solana blockchain, but as optic fibre cables.
With this basically, there is no layer 2 and transaction fees are between $0.00025 and $0.05! It is no surprise that the volume of DeFi activity has been increasing rapidly on Solana, and NFT minting and sales have shot to the skies. There is a minting going on virtually every day. There used to be a time when people would be on a project’s discord, counting down the days to the mint. Now you can hardly keep track.
Community of Developers
Developers love to build and have to move tools around. Nobody also wants to do that in an environment that is restricted by being costly or slow. The developers are the ones who solve the real-world problems that people are willing to pay for; the real solutions that drive influx into space. We saw it in Lending and Borrowing with Aave and Compound in the DeFi summer of 2020, and there is a reason for it. People will come onboard the apps that make life easy for them in the metaverse, and the blockchain hosting those apps will enjoy the adoption benefits of having that community.
Anatoly said in a recent interview that they are not trying to attract users, but developers, to build on Solana. Solana announced in 2021 for developers willing to build with them, and by the end of the year, they had a 307% growth in their number of full-time developers. Solana is built on the Rust programming language, which is a better language than Ethereum’s Solidity. Yet Ethereum still has the highest number of developers, about 1,300 compared to Solana’s 228. Statistically, one out of every four developers who joined the blockchain space in 2021 went to code on Ethereum.
Anatoly likes to say, “the media loves the game of one crypto versus another or tropes like ‘Ethereum killer’, so I’m happy to play along”, but he has made it clear that Solana is focused on solving a very particular problem in the niche of price discovery, and it is not really a competition with Ethereum.
By all indications, there will be many chains surviving over the years, especially those solving a hair-on-fire problem, and with the higher concentration of programmers and ease-of-use.
In all, as Naval concluded in the recent Twitter L1 Wars saying, “we are really early”. There is a lot we don’t know; a lot of games are left to be played, and the future could be a future of multiple solutions.
The Way Forward
However, Solana is still in the beta stage, this is more like the testing season, and there is no telling what will happen to the gas fees and transaction finality when mass adoption kicks in. The system already saw some downtime in 2021.
The Ethereum protocol layer or Layer 1 was not built for scaling. It parses that off to chains on the application layer or layer 2 such as Polygon, Optimism and Arbitrum. These layer 2s use the security of the Ethereum blockchain and are freed up to handle a lot of user transactions at a lower cost. The practice these days is to mint NFTs on the Polygon network and then sell on Ethereum.
The model is similar to that of your mobile phone internet activity. There is a ton of information your little mobile needs to present you with all the information you are surfing on the net. Having all that information on your phone would make it large, slow, and just useless to access information with. So instead, those operations are run on the server and your mobile gets them through the TCP/IP protocol when it needs them. Ethereum serves as the protocol layer and the layer 2s make things faster and cheaper for everybody.
So Ethereum took the software approach, in contrast with Solana taking the hardware approach to scaling. In 2022, we will see roll-ups come in for scaling, not just on Ethereum but other blockchains as well, including Solana.