Ethereum OR Solana?
Ethereum killer, bitcoin rival and industry disruptor. These three phrases are frequently used to describe the salon a blockchain. But does Solana have the potential to dethrone Ethereum and take over the DeFi sector? On today’s CoinMarketCap episode, we will discover just that. We’re going to dove deeper into the Solana and Ethereum differences, similarities and the problems they solve.
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Ethereum, launched by Vitalik Buterin, and the team is a second generation blockchain. Ethereum came up with the concept of smart contracts. Smart contracts here can be thought of as a legal document where all the conditions are mentioned and once they are met, the transactions are triggered.
For example, now you can write a smart contract that will make sure that James receives 0.1 BTC only after watching this video. Ethereum also took this one step further and became the platform on which developers can build applications using its own programing language solidity. On the other hand, Solana was launched by Anatoly Yakovenko, who previously worked at Qualcomm and Dropbox as a software engineer.
So Solana is a fourth generation blockchain that leverages open infrastructure to provide greater scalability.
Like Ethereum, Solana is a decentralized, open source blockchain that can support smart contracts and decentralized applications. Solana, similar to Ethereum, is a programable blockchain that can run multiple decentralized finance operations, and they both offer the capabilities to source smart contracts programs to fulfill transactions. Only one specific conditions are met as a programable system. The decentralized blockchain platform permits users to exchange sole ether, nonfungible tokens and other digital assets. Ethereum, despite being older and perceived as a superior cryptocurrency, still has its limitations, which Solana has improved upon.
Ethereum has made a name for itself as a pioneer of numerous functionalities, which brought about more value in the crypto industry. Ethereum has made a name for itself as a pioneer of numerous functionalities, which brought about more value in the crypto industry beyond the conventional crypto utility, such as a means of payment in a store of value. one of the Ethereum utilities that stands out is providing developers with a platform to create decentralized applications or DApps and smart contracts, but these functionalities are not confined to the Ethereum network. Solana has the same utilities.
It enables developers to create DApps and smart contracts at a faster rate and cheaper cost.
It’s not surprising that Solana has joined the Cardano, Terra, Polkadot, Binance Smart Chain and more in the Ethereum Killers League. This means that Solana could eventually overtake Ethereum and replace it altogether. But how likely is this scenario? As always, the most important factors coming into play when determining the best option are transaction speeds and costs. Solana can carry out up to 50,000 transactions per second.
Yes, you heard me right. It is in the orders of magnitude more than Ethereum’s 30 transactions per second.
Solana can, in theory, even carry out more transactions per second than Visa, which comes in at 7500 TPS. Although they claim to be able to handle 24,000 transaction fees, and scalability is Solana’s greatest appeal. According to Solana’s website, the average transaction costs is around 0.
000 to five, which is much cheaper than Ethereum. On the surface, Solana seems to be a much more efficient platform. So on his major selling point is its proprietary proof of history consensus mechanism developed by Yakovenko himself, which is combined with a proof of stake that enables the platform to process transactions at unprecedented speeds, which is combined with proof of stake that enables the platform to process transactions at unprecedented rates. Simply put, proof of history is a way for validators to keep track of hashes in chronological order, thanks to a delay function.
It is possible to verify the passage of time between two events cryptographically.
Anatoly Yakovenko, the founder of Solana, described this in 2018 as a way to encode time as data. In practical terms, this means that validators can process transactions as they come without waiting for a block to be filled, which is why many more transactions can be processed every second. On top of that, Solana also uses a protocol called Turbine, which breaks up information into smaller bids, making it easier to process the excitement about Solana in its native token. Seoul is quite understandable. The blockchain mainnet was launched not so long ago in March of 2020 and has since made headlines around the world in what it offers the ability to process much more transactions per second, and of course, the exponential growth in value with sales price growing exponentially.
On January first of 2021, one soul was worth $1.51, and as of January 11th of 2022, you could buy one coin for $141. Solanas market capitalization grew from $85.8 million at the beginning of 2021 to $43 billion by January of 2022. Meanwhile, Ethereum launched in 2015 and is already considered an industry veteran with a robust ecosystem and substantial developer activity as of January eleven of 2022.
Its market cap is at $370 billion, coming right behind the O.G. Bitcoin and one ETH is worth $3,200. So what’s the difference between these two blockchains and how is it possible for a newcomer in such a short space of time to challenge the throne of the blockchain familiar to most developers in the crypto world in general? So we throw him, on the other hand, is not a good performer when it comes to transaction.
Gas fees, Ethereum gas fees reached as high as $60 in mid-May of 2021. The average transaction fee of Ethereum ranges from around $25 to $30, with the integration of Ethereum’s 2.0, gas fees are expected to decrease. However, gas fees are still substantially higher to its competitors, although layer two chains such as arbitrage and optimism are tackling this issue. Developers are still leaving Ethereum’s platform to look for cheaper blockchains.
Ethereum continues to rely on a proof of work consensus mechanism. This algorithm creates kind of a competition between miners, or they need to solve a complex mathematical problem. Whoever is the fastest winds and gets to add new transactions to the blockchain, the miner then shares the block with the network and is rewarded with ease.
As you might guess, mining takes a lot of computing power and as a result involves high energy consumption. Meanwhile, the world is trying to overcome environmental issues and climate change, so people have concerns about mining and in particular, the proof of work consensus.
The point is that the Ethereum proof of work mechanism currently consumes energy equivalent to a mid-sized country like Austria, although this does not provide the security of the proof of work chain but would cost the Ethereum mean it is currently in the process of moving to the beacon chain proof of stake consensus mechanism as a part of the Ethereum 2.0, which promises to be 99.95% more energy efficient.
And this is probably bad news for miners, but good news for stakers. The Ethereum team expects the merger to be completed by Q1 or Q2 of 2022 and predicts that this change will make the blockchain more eco friendly and lower technical barriers for anyone to stake, allow for better decentralization and improved security.
On the other hand, Solana has security issues of their own. Recently, Solana experienced a dos attack or a distributed denial of service, which is not the first time this kind of attack hit Solana. Could the repeated attacks on the Solana network result from severe design flaws of the network proof of History protocol? Is this a result of the combination of Solana sacrifice of security for speed while ignoring the consequences of the trade off? Proof of history allows for deterministic blocks that can easily be targeted by attacks.
Solana leaves itself open to be easily attacked as the attackers can predict and pick off the next block producer in line by being deterministic.
Now what about the supply and demand? According to CoinMarketCap, Seoul, the native token of Solana, has a total supply of 500 in 10.6 million Seoul, of which 311 million are already in circulation. Solana has an in-built deflationary mechanism as part of its delegated proof of stake algorithm.
Token holders are incentivized to validate transactions. As a result, all fees paid in Seoul are also burnt, which means the total supply is gradually reduced. And did you know that in recent times, Solana has been criticized for not being fully decentralized? The reason is that currently 19 validators together control more than 33% of the total stake. Theoretically, if they collude, they can censor slash stop the entire network.
And when compared to Ethereum, Solana still has a small number of validator nodes 1142 working for Solana compared to 200,121 validators working for Ethereum. In the case of Ethereum, it should be noted that Ethereum is not intended primarily as a means of a payment, as in the case of Bitcoin or Dogecoin.
There are no inbuilt means of creating scarcity over time. However, there is no cap of the total supply of ETH, the native token of Ethereum. There is a limit of the number of tokens released into the system each year, which is said to be 80 million.
This means there is always enough ETH to support operations of the network without creating an abundance that would negatively affect the token value. So this brings us to the question Solana versus Ethereum, which one is better? one of the things holding many older smart chains back is how transactions are validated. Interactions between miners or validators on chains like Ethereum can be cumbersome and prevent transactions from going through in high volumes required by most DeFi projects.
So long as consensus mechanism with its cryptographic time stamping may well have solved this issue, and if it can actually hit 65,000 transactions a second, it would be faster than any other blockchain and faster than most traditional finance platforms.
Simply put, Solana is better for low transaction fees and speedy transfers. While Ethereum is better for security and decentralization, It does come with a price as the recent DDoS attacks have shown. Another metric to look into is the total value locked in protocols on each blockchain.
According to DeFi Llama, the total value locked for Ethereum comes up to over 145 billion, while Solana is at 9.59 billion.
On the surface, this means investors and whales are locking up more funds on Ethereum DApps. If they can catch up to Ethereum in terms of network capabilities, users and investors may shift their attention to Solana. So that’s all for today’s CoinMarketCap episode. And now I pass the question on to you guys. Ethereum or Solana.
Let us know in the comments section now below. Anyways, guys, we’ll see in the next one..