With significantly lower fees and much faster transactions, could the Solana network become Ethereum’s worst nightmare by one day taking its place as the reference platform of Web 3.0?
The Solana blockchain has made headlines recently, while its native token – the SOL – has recorded significant gains.
At the time of writing, the asset was trading at $175 – a price multiplied by 114 since the beginning of the year.
Claiming a valuation of $ 51.5 billion, the young company currently points to the position of the ranking of CoinMarketCap, after having recently surpassed Dogecoin and then the XRP. Solana, however, is still far from Ethereum, whose “Market Cap” amounts to $ 390 billion.
But how to explain this surge in SOL?
Among the reasons for this increase is the recent fundraising carried out by Solana. In June, a group of investors led by Andreessen Horowitz and Polychain raised $314 million. Objective: to improve its technology in decentralized finance (DeFi). Rather than receiving shares from Solana Labs – the company behind the network –investors had obtained SOL coins—no doubt proof of their belief in the potential for appreciation of cryptocurrency.
Another reason for the markets’ enthusiasm is the announcement of its 4th “hackathon”, scheduled for October 8. These hackathons invite developers to work collaboratively on IT projects, allowing them to receive awards and funding opportunities. Investors saw this announcement as positive news, which could help drive the adoption of Solana technology.
While Solana has made headlines, many observers compare it with another “programmable” blockchain network: Ethereum. Some believe Solana – or other competing networks, such as Avalanche, Polygon or Binance Smart Chain – could one day dethrone the Bitcoin dolphin.
What is Solana?
Solana is a blockchain network capable of executing smart contracts. Founded in 2017 by Anatoly Yakovenko, a former Qualcomm engineer, it presents itself as a solution to the “scalability” problems faced by Ethereum. Two years after its creation, Solana raised $ 20 million in a “Series A” round led by Multicoin Capital.
While Bitcoin is the reference cryptocurrency for making payments, Ethereum is, on the other hand, the platform of choice for running applications on a blockchain. With its “smart contracts” capabilities, Solana plays in the same court as Ethereum but by offering a different technology.
As Defi Llama’s figure, Ethereum remains the platform of choice for decentralized applications (DApps) and smart contracts. At the time of writing, the network claimed a “Total Value Locked” of $103.22 billion, or nearly 70% of the amount held by all blockchain networks.
For its part, the value placed on the Solana network was only $ 10.72 billion.
However, the platform showed considerable growth since this figure had been multiplied by 7 in the space of a month.
If Ethereum takes the lion’s share of the DeFi ecosystem, it’s impossible to deny the inherent problems with its technology. Users sometimes have to pay tens of dollars to make a simple transaction.
Admittedly, the network has transitioned to a proof-of-stake validation protocol (with “stakes” to secure the network instead of miners). It should significantly reduce the amount of its fees by allowing it to process transactions in a much more efficient way. However, the changeover is expected to be completed in 2022. Note also the development of various “second layer” solutions, which aim to help the Ethereum blockchain face its “scalability” problems.
Problems that Solana needs to learn. The network already has a proof-of-stake validation mechanism, to which is added a “proof-of-history” (PoH) protocol. It is supposed to allow him to process transactions as they arrive without waiting to fill a block. Solana is thus much more “scalable” than Ethereum, processing a more significant number of transactions over the same period.
Solana also relies on a “block propagation” protocol called Turbine. It fragments essential data so that it is sent to network nodes faster. Finally, Solana joined Tower BFT, an advanced version of the Byzantine fault system. It allows consensus to be reached in a distributed network even when some nodes do not respond or do so with incorrect information.
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Solana, an “Ethereum killer”?
Even though the Ethereum network has a considerable lead – with 7,000 nodes and 90,000 validators, compared to only 600 nodes and 1000 validators for Solana – Solana is often presented as an “Ethereum killer”. This is probably related to the fact that his innovations seem to answer the current weaknesses of Vitalik Buterin’s network.
Thanks to PoH consensus, transaction verification is much faster since nodes no longer have to check the many horodotages and can save considerable computing power. The developers of Solana indicate that their blockchain can process up to 50,000 transactions per second, which is far ahead of what can offer competing networks such as Ethereum, Bitcoin, Visa or XRP.
In addition, transaction fees are significantly lower on the Solana blockchain. As mentioned above, one of the main problems for Ethereum users is gas fees, which can reach incredibly high amounts. In recent weeks, these fees have repeatedly exceeded the $50 mark. Last year, a netizen accidentally paid $9,500 to make a simple $120 exchange on the decentralized Uniswap platform.
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On Solana, these fees average only $0.00025 per transaction – nothing like Ethereum.
The madness of NFTs
In recent weeks, non-fungible tokens (NFTs) have attracted excitement from artists, investors, collectors, traders and celebrities, some of whom were previously far removed from the blockchain ecosystem. If most NFTs are still traded on the Ethereum network, Solana intends to make a place for itself in this nascent market.
A new NFT project, Degenerate Ape, enabled a full-scale test of its “scalability”, while 10,000 monkeys were sold in just 8 minutes. By increasing the demand for the SOL token, the latter’s price rose from $ 44.11 to $ 53.70 between August 14 and 15.
On Solanart, an NFT marketplace backed by Solana, Degenerate Ape represents the first collection in terms of sales. These digital monkeys have already recorded 765,000 SOLs of transactions, or about $122 million.
Should Ethereum be worried?
The question now is whether Solana could ever overtake Ethereum.
Because Ethereum probably does not intend to let go. Divided into several stages, its Ethereum 2.0 update is expected to be finalized in 2022. According to the developers, it should allow the network to say goodbye to its “scalability” problems by increasing from a capacity of 10 to 100,000 transactions per second.
But Solana, which is supposed to be able to process up to 50,000 transactions per second, should continue. Its architecture has been designed to allow it to keep up with the improved performance of IT equipment. Its network should, in theory, be able to roughly follow the curve of Moore’s Law – a model according to which the growth in the number of transistors present on a microprocessor chip is supposed to double every 2 years.
Even if it does not have the “first-mover advantage” of Ethereum, its network, the amounts placed in its contracts and the number of projects backed by its blockchain, Solana should – with other competitors such as Binance Smart Chain, Polygon or Avalanche – continue to attack the supremacy of Vitalik Buterin’s network.
