Those familiar with the crypto sector know that everyone’s talking about Solana these days. Even if it doesn’t have such a large market capitalization as Bitcoin and Ethereum, it has gained the public’s attention over the years because it has valuable utilities. Ethereum has been the altcoin investors turned to for several years when they wanted to diversify their portfolios because it has a wide array of functionalities.
It’s quite different from Bitcoin because it has features that go beyond being a means of payment. Ethereum captured the public’s interest as a platform that enables the creation of smart contracts and decentralized apps.
Solana was launched later, but it registered a quick price spike, mainly because it also supports smart contracts, but it’s more accessible than Ethereum to a broad audience. Those who choose to buy Solana know that it has different strengths and weaknesses than Ethereum, and it’s a unique asset to have in an investment portfolio.
This article aims to determine whether Solana could become the most talked-about altcoin and a worthy competitor to Ethereum.
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Let’s start with the beginning
To determine which crypto project will capture the public’s attention in the following years and become a leader in the industry, it’s best to discuss both blockchains to understand their underlying technology and use cases. We already noted that both blockchains support the creation of smart contracts, but it’s essential to highlight that they do it differently.
Ethereum has gained the reputation of being the pioneer in the smart contract environment because it was the first blockchain to create this capability. It’s the largest cryptocurrency by market cap, has a large user base and powers some of the most successful decentralized services and applications. Unfortunately, the network has been dealing with the scalability issue for some time, due to the slow transaction speed.
The Merge was one of the steps the project has been taking in the direction of improving the network effectiveness. The event marked the switch from the proof-of-work to the proof-of-stake consensus that transformed Ethereum into a greener blockchain. Before the Merge, Ethereum relied on the same mining technique as Bitcoin, which required miners to solve complex mathematical problems to verify transactions and confirm blocks. The proof-of-work algorithm requires huge amounts of energy.
After the Merge, Ethereum switched to using stakers instead of miners and has become a more secure network because stakers have to lock up their Eth funds to validate network transactions. The transactions are also processed faster than before, but the blockchain remains slower than Solana.
Solana was launched 5 years after Ethereum and was designed from the beginning to offer services similar to Ethereum but at a faster speed and for lower prices. Solana relies on the unique combination of the Proof-of-History and Proof-of-Stake algorithms to confirm transactions, which allows it to perform faster than other blockchains.
Solana confirms 29.000 transactions per second and has a low transaction fee, which attracts developers looking to create DeFi projects, games, or non-fungible projects. Despite all this, the project has experienced stability issues and some network downtime, which prevented it from reaching the same heights as Ethereum.
Could Solana become a more profitable asset than Ethereum in the long run?
Solana has witnessed a massive growth over the last two years and some experts believe it could catch up to Ethereum in the near future if it continues on the same path. Here are the main reasons they make this prediction.
More and more crypto projects are migrating to Solana
Projects like Audius, Helium, Render, and Circle migrated from Ethereum, or other networks to Solana, mainly because they wanted to take advantage of the features the unique protocol offers. This trend has grown in popularity because project developers are constantly looking for solutions to enhance decentralization, and run the project on multiple blockchains, if possible.
Solana makes efforts to improve its decentralization
In the Spring, the Solana blockchain had over 2.400 validators, so the network continues to thrive and maintain its Nakamoto coefficient high. While Ethereum has over 3,000 validators, it has a lower Nakamoto Coefficient. The coefficient refers to the number of minimum validators that are allowed to own 51% of the project’s stake.
This concept was presented in 2017 by Leland Lee and Balaji S. Srinivasan in order to prevent cumulative ownership, which could impact decentralizations negatively. This issue has come to attention lately after institutional investors acquired large quantities of tokens to reinforce their positions in the network.
Investors are advised to use pools with lower stake amounts, to support decentralization across the ecosystem. All blockchains, including Bitcoin, are dealing with validator dominance issues.
Solana works to improve network stability
2021 was a nefarious year for Solana because it dealt with numerous network outages. However, the blockchain continues to invest resources into improving its processes and has regained the public’s trust. There was a time when crypto enthusiasts were joking on social media about Solana having opening hours or functioning on a Proof-of-Restart algorithm. The efforts paid back, and the ecosystem has a strong network uptime, so it can only be praised for how it handled the situation.
Will Solana overthrow Ethereum?
At the moment, there is little chance for Solana or another altcoin to take over Ethereum. It will most likely remain dominant in the sector, and most investors will hold more ETH than SOL. However, they will most likely add SOL and other coins listed as Ethereum killers to their portfolios for diversification, as they could gain ground in the future. Solana is predicted to receive an influx of funds in the coming years due to its DeFi projects, which could drive a bull run for the project.
Ethereum remains a market favorite as it’s more established than the other altcoins and has a larger market capitalization. Despite the high fees, institutional investors prefer Ethereum, and individual investors usually follow their example.
Last Updated on by Icy Tales Team
