Since 2021, the craze around decentralized apps (DApps) and NFTs have intensified the battle among L1 blockchains. Ethereum has been named The Champion in this race for a long time. But Solana emerged as a Layer-1 top contender in 2021 with faster transaction speed and lower prices.
- Also learn about: How to Buy Ethereum (ETH)
Ethereum and Solana are two of the most widely used blockchain networks, each having distinctive significance. This article will discuss the difference between the two blockchains. We will pick apart the different mechanisms of the ecosystems to see who will win the L1 fight of Solana vs. Ethereum.
What is Ethereum?
Ethereum (natively referred to as ETH) is an open-source blockchain. Its main features are that it is completely decentralized, easily programmable, and it works to enable smart contract protocol.
Initially, it was created as a base layer for developing decentralized applications (DApps). Due to its decentralized nature, it also gained popularity for developing decentralized finance (DeFi) applications. Its primary use case was to remove banks and financial intermediaries between monetary transactions. It also allowed an easier exchange of cryptocurrencies.
Ethereum is also widely used for creating and exchanging Non-fungible tokens (NFTs). Based on Ethereum’s principle of immutability, it is incredibly safe to declare ownership of any digital asset without fraud.
Vitalik Buterin conceived Ethereum as an answer to . The Bitcoin system is rigid, and users cannot create non-financial applications. Ethereum has a broader range of real-world use cases and a better blockchain to support an ecosystem beyond finance.
To work on Ethereum, one must pay gas fees. As its demand is rising, the gas fees have also increased exuberantly. Also, its transaction rate is not high, with a lot of traffic making users wait a long time to complete their transactions on Ethereum. To counter these issues, Ethereum is transitioning to a proof-of-stake (POS) protocol.
What is Solana?
Solana (natively referred to as SOL) is a Layer 1 open-source blockchain. It was developed to solve the scaling problems of Ethereum. Anatoly Yakovenko proposed it in 2017. It works on the mixed consensus of the proof-of-stake and proof-of-history (POH) protocols.
Solana offers a faster transaction rate on its blockchain at a cheaper cost. Solana claims to process over 700,000 transitions per second (TPS). Like Ethereum, Solana can run smart contracts on its blockchain. Its most popular uses are providing platforms to develop DApps, DeFi platforms, and NFT marketplaces.
Solana vs. Ethereum: What are the differences?
Both the blockchains have their dedicated fan base. They are constantly improving their deficiencies and are already supporting many applications on their platform. Out of the two, Ethereum is becoming more popular due to its long history and transparent ecosystem.
In terms of differences, many features from both sides strike out. Let’s examine them.
Mechanism
Ethereum (the 1.0 version) runs on proof-of-work (POW) protocol, the same used by . Under the POW consensus mechanism, the blockchain miners have the final authority to update the blocks in the blockchain. To validate a transaction, miners need to solve a complex mathematical puzzle that is easily verifiable. This functionality increases the security of a network but results in a slow transaction rate.
Solana runs on a proof-of-history (POH) consensus mechanism. It is built on a permissionless architecture, which does not require timestamps to confirm transactions. Instead of adding timestamps to every block, this mechanism uses a series of steps to compute time between two blocks and prove one was created before another. This sequencing is helpful in faster data verification and does not require mining at a large scale. This protocol also helps in reducing the memory consumption of the network.
Decentralization
Decentralization is one of the core pillars of the blockchain ecosystem. It’s an ultimate idea where no individual or group has total control over a system. But complete decentralization can lead to multiple risks like security issues in the blockchain. A balance needs to be created between the two.
Ethereum works on POW protocol, where mining pools have much power over the blockchains. It plans to move to a Proof-of-Stake (POS) protocol system to reduce the influence of miners. But the POS protocol rewards high stakeholders. It will lead to more centralization of power among the top holders of ETH tokens in the system.
Solana is much more centralized as compared to Ethereum. Solana’s top 30 validators hold over 35% of the total stake. These top validators have a vast amount of SOL tokens and control a significant percentage of the network.
Downtimes
Ethereum is one of the first programmable blockchain networks. Since its inception, many bugs and flaws have been identified and dealt with. As one of the most popular and used blockchains, transactions often take a lot of time to complete. But the system is rarely down due to its decentralized nature.
Solana, a newer blockchain in the market, has been down more often since its inception. The first Solana outage occurred in December 2020, lasting for five hours. Investors lost no funds during this downtime. In September 2021, it went through its second major outage, which lasted for 17 hours. Developers found the cause of this outage to be a DDOS (Distributed Denial of Service) attack overwhelming the network. During the attack, no funds were lost, but many investors lost their trust in the blockchain and left.
In January 2022, the Solana network was down again. But this time, it wasn’t any external attack. Solana’s initial DEX Offering happened simultaneously, where bots swarmed and overloaded the network. Even though the network was down for several hours, it reached the peak performance of 400,000 Transactions per second (TPS), impressing investors and crypto enthusiasts worldwide.
Transaction cost
Transaction cost is the main factor on which any person decides to use the network. Ethereum being more used and congested, has higher fees than Solana.
As of August 2022, the average gas fee on the Ethereum network is 26 Gwei ($0.000066). Solana’s gas fee is meager at $0.00025 per transaction.
Transaction speed
Solana is one of the fastest blockchain networks in terms of transaction processing. This is due to the network architecture’s focus on throughput. At the same time, Ethereum focuses more on decentralization.
Ethereum (1.0 version) can handle up to 30 TPS, and its pending update should be able to handle up to 100,000 TPS. In contrast, Solana can ideally bear up to 50,000 TPS currently.
For context, VISA, a leading worldwide payment processor, can handle up to 65,000 TPS.
Network size
Ethereum has one of the largest blockchain networks which supports smart contracts. As per DeFiLlama, the Total Value Locked (TVL) under Ethereum is around $34.26 billion. In contrast, Solana TVL is worth approximately $1.4 billion.
Ethereum has a considerably higher amount locked (95% more). A Higher TVL amount means that the blockchain is more profitable, and there is a higher preference for financially stable applications. Since Solana has just started its operations, it will take time to reach the level of network size of Ethereum.
Market cap
ETH stands as the second largest cryptocurrency, only second to Bitcoin. As of August 2022, 1 ETH is valued at $1,559, and the current market cap stands at $190.44 billion. Currently, there are 122 million ETH coins in market circulation with no higher limit.
In comparison, 1 SOL is priced at around $31.35 with a market cap of $712.2 million. There are approximately 340 million SOL coins out in circulation.
DeFi and NFT ecosystem
As Ethereum is much older than Solana, its DeFi ecosystem is more diverse. Ethereum is one of the leading networks for DeFi applications like MakerDAO, Uniswap, and Aave. In 2021, the blockchain world entered the craze of NFT. Subsequently, Ethereum became one of the most popular blockchains for building NFT marketplaces.
Since its inception, Solana has been trying various marketing tactics like hackathons to attract developers. In terms of NFT, Solana’s low transaction fees are drawing traction on its network. There is a massive increase in daily Solana users. As the blockchain is new, the ecosystem is still developing.
| Feature | Ethereum | Solana |
|---|---|---|
| Year of Foundation | 2013 | 2017 |
| TPS (Transactions per second) | 13â30 | 50,000â65,000 |
| Transaction cost | 26 Gwei ($0.000066) | $0.00025 |
| Block Times | 15 seconds | 1 second |
| Consensus Mechanism | Proof-of-Work | Proof-of-History / Delegated Proof-of-Stake |
| Programming Language | Solidity | Rust, C, C++ |
| Architecture | Stateful architecture | Stateless architecture |
| Scalability | Limited Scalability | High-Performance protocol for scalability |
| Advantages | ⢠Established and proven ⢠Large developer community ⢠Huge DeFi and NFT ecosystem | ⢠Fast transactions and low fees ⢠High scalability ⢠Has a low environmental impact |
| Disadvantages | ⢠High transaction costs ⢠Slow transactions ⢠New programming language | ⢠Fewer projects ⢠More centralized ⢠Lack of transparency |
Conclusion
While comparing Ethereum and Solana, we should always focus on the requirement to use a blockchain.
As a developer, one must focus on the underlying technology of the two networks. But as an investor, the business side and growth prospects are more important.
As the decentralized world grows, these networks will grow along with it. It is difficult to say how much.