Solana vs Ethereum: Is Solana Really an Ethereum Killer?

Solana Vs. Ethereum – The Ultimate Сomparison

Solana and Ethereum are both prominent public blockchain platforms. Their native tokens, Solana (SOL) and Ether (ETH), represent the second and fourth biggest cryptocurrencies by market cap as of March 2024.

While one is often promoted as an alternative or even superior solution to the other, Solana and Ethereum differ in key aspects.

Solana maintains high throughput as one of its key selling points, capable of processing over 65,000 transactions per second, far surpassing Ethereum's network capacity. This speed is attributed to Solana's unique consensus mechanism, Proof-of-History (PoH), which enhances scalability. 

Ethereum, on the other hand, is renowned for its smart contract capabilities and established ecosystem supporting decentralized applications (DApps) and decentralized finance (DeFi). Ethereum is the ‘grandfather’ of both industries, and still forms the biggest public blockchain network outside of Bitcoin (BTC). 

However, Ethereum faces scalability challenges, notably including high gas fees during periods of network congestion — a problem which has plagued it on and off for several years. 

While Ethereum prioritizes decentralization and security, Solana emphasizes scalability and speed, catering to different needs within the Blockchain space.

What is Ethereum (ETH)?

Ethereum is a decentralized blockchain platform which pioneered today’s best-known and most widely-used crypto technologies.

Along with its native token, Ether (ETH), it was introduced by Vitalik Buterin in 2015.

Ethereum is renowned for its smart contract functionality — a tool which has made its way into the backbone of consumer crypto products. Unlike Bitcoin, Ethereum allows developers to create and deploy decentralized applications (DApps) and smart contracts, facilitating a wide range of innovative use cases. ETH fuels transactions and smart contract executions with these applications. 

Ethereum's network operates on a consensus mechanism called Proof-of-Stake (PoS), having transitioned from the current Proof-of-Work (PoW) model used in Bitcoin to enhance scalability and energy efficiency — a transformation known as Ethereum 2.0. 

As an umbrella ecosystem, the Ethereum blockchain serves as a foundation for decentralized finance (DeFi), non-fungible tokens (NFTs), and various other decentralized applications.

What is Solana (SOL)?

Solana is a high-performance blockchain platform launched in 2020, designed to address scalability issues facing decentralized networks — specifically with Ethereum in mind. 

It utilizes a combination of technologies, including its so-called Proof-of-History (PoH) algorithm, to achieve large transaction throughput but with very low fees for network participants. 

Solana's architecture enables processing speeds of over 65,000 transactions per second, making it one of the fastest blockchain networks. 

Its native cryptocurrency, Solana (SOL), powers transactions and network operations, including costs associated with Solana Programs — the equivalent of smart contracts.

Since its inception, various incidents have raised questions about Solana’s decentralization and the ability of a small number of entities to control network behavior.

Solana Vs. Ethereum Сomparison: What’s the Difference?

Solana and Ethereum are both ubiquitous blockchain systems in the cryptocurrency world, and have emerged as leaders for DApps, DeFi and NFT propagation.

That said, the rivalry between the two ecosystems is intense. Both have their trade-offs, while developers attempt to iron out the main pain points and the criticism which accompanies them.

On the surface, Solana does not appear hugely different to Ethereum in terms of its features and capabilities. Where it diverges is in several key areas: transaction speed and throughput, fees and decentralization.

Ethereum’s token standard, ERC-20, has in recent years become synonymous with high transaction costs. While Solana is considerably cheaper, setting up a node — known as a validator — still demands considerable investment. 

As such, there are far fewer Solana validators than Ethereum nodes, and this raises issues over lack of decentralization.

In essence, Solana and Ethereum represent two different ways of achieving a blockchain product’s desired outcome. 

Solana Vs. Ethereum History

Solana emerged in 2020, led by Anatoly Yakovenko, initially with the goal of addressing Ethereum's scalability limitations. 

In its whitepaper, which originally appeared several years prior in 2017, Yakovlenko first described Proof-of-History (PoH), Solana’s unique consensus mechanism that powers its high-capacity network.

Solana’s testnet came in July 2019, and has since grown to include nearly 1,700 validator nodes processing nearly 300 million transactions to date as of March 2024.

Ethereum, conceptualized by Vitalik Buterin in 2013 and launched in 2015, introduced many of the core components of DeFi which have come to shape the industry. These include the concept of smart contracts, the foundation of decentralized applications (DApps) and decentralized finance (DeFi). 

Its history is marked by milestones such as the release of the Ethereum Virtual Machine (EVM), which allows for the execution of smart contracts, and the implementation of the ERC-20 token standard, facilitating the creation of new tokens and crypto-specific phenomena such as initial coin offerings (ICOs). Later, the Ethereum network transitioned from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) algorithm as part of the Ethereum 2.0 project.

In March 2024, the Dencun upgrade sought to further broaden Ethereum’s reach while addressing some of its key pain points, notably high transaction fees.

Solana Vs. Ethereum Tokenomics

Solana and Ethereum have distinct tokenomics models that reflect their respective designs and goals.

Ethereum's token, Ether (ETH), serves as the native cryptocurrency of the Ethereum network. Ether plays a crucial role in powering transactions and executing smart contracts, along with securing the network. Gas fees are what incentivizes network participants, while PoS rewards those who pledge more liquidity to the network. 

Ether had a market cap of $387 billion in March 2024, making it easily the largest market cap of any cryptocurrency except Bitcoin.

Solana's native token, SOL, serves multiple functions within the Solana ecosystem. SOL operates as the primary means of transaction fees, similar to Ethereum's gas fees. 

Solana's tokenomics are designed to prioritize scalability and efficiency, with SOL facilitating fast and low-cost transactions which typically cost a mere fraction of a single US dollar cent. 

SOL is staked by network validators to secure the blockchain, and stakers are rewarded with additional SOL tokens — a similar setup to ETH.

Solana’s market cap as of March 2024 was $76 billion, making it the fifth-largest cryptocurrency behind Bitcoin and Ether, along with stablecoin Tether (USDT) and Binance Coin (BNB).

Solana Vs. Ethereum Blockchain

Ethereum now uses Proof-of-Stake (PoS) as its network consensus mechanism.

After transitioning from the Proof-of-Work (PoW) algorithm used by Bitcoin during the Ethereum 2.0 upgrade, Ethereum network participants can now stake liquidity and be rewarded pro rata.

Validators — the official term by which Ethereum refers those involved in adding transactions to the blockchain — stake ETH via smart contract, and then fulfill the role of ensuring that new blocks of transactions propagate to the network and that these blocks are valid.

PoS dictates that block times are fixed — a key contrast with PoW, which allows for a flexible block confirmation periods which are kept in check by automated rising and falling adjustments to mining difficulty.

Ethereum validators operate via so-called slots and epochs, the internal clock of the Ethereum blockchain, corresponding to 12-second and 32-second periods respectively. For each slot, a single validator is chosen at random to propose a new block, which it must then broadcast to the rest of the network. Each epoch meanwhile features a “committee” of validators whose task is to vote on the validity of blocks being proposed.

Solana meanwhile combines PoS with its own unique consensus mechanism called Proof-of-History (PoH).

Like Ethereum, network validators participate in confirming blocks of transactions as valid, and are rewarded with tokens based on pledged liquidity — a feature Solana calls stake-weighted validator consensus.

PoH, meanwhile, allows a concept of time to permeate the blockchain, allowing for the ability to know exactly when a given transaction occurred and for this information to have complete consensus. 

The key benefit of this is increased transaction processing speed. Solana block confirmations typically require 0.4 seconds, while a transaction with finality based on 32 network confirmations tends to take just under 13 seconds.

Smart Contract Languages and Tooling of Solana and Ethereum

Ethereum, the pioneering blockchain platform for smart contracts, introduced the concept of decentralized applications (dApps) and smart contracts executed on its blockchain using Solidity.

This language, while powerful enough to become something of an industry ‘go-to’ for many years, has a steep learning curve and has been shown to suffer from various vulnerabilities since its inception.

Popular frameworks for Ethereum developers include Truffle and Hardhat, along with testing libraries such as OpenZeppelin for ensuring the security of smart contracts. 

One of the primary languages supported by Solana for smart contracts — known as ‘programs’ within the Solana ecosystem — is Rust. Rust’s memory safety features make it particularly well suited for blockchain development, reducing the risk of vulnerabilities and exploits.

Solana offers a fairly comprehensive ecosystem to streamline the development process. Solana's Command Line Interface (CLI) provides essential utilities for deploying, testing, and interacting with programs. 

Integrated development environments (IDEs) like VS Code with Solana extensions offer enhanced developer experiences, including syntax highlighting, code completion and debugging capabilities. In July 2023, the launch of Solang and Neon EVM allowed for markedly increased interoperability between Ethereum and Solana.

Ecosystem and Developer Community of Solana and Ethereum

As the largest altcoin by market cap, it likely comes as no surprise to learn that as of 2024, Ethereum harnesses the largest number of active developers in the cryptocurrency sphere.

Together with Bitcoin, Ethereum accounts for nearly 80% of active developers, with more than 7,000 at work monthly at the start of the year according to a report issued by crypto investment firm Electric Capital. In 2023, Ethereum saw over 16,000 developers supporting it.

A number of developers are cross-chain workers, interacting with and contributing to multiple interoperable blockchain ecosystems at the same time.

Developer energy, outside classic directions such as DApps, is currently focused on the Ethereum roadmap for 2024, which will see a host of improvements take shape via the Dencun upgrade. Among these are significantly reduced transaction fees for Layer 2 transactions — a key milestone in scaling the ecosystem.

A report by Solana itself meanwhile estimated that there were approximately 2,500-3,000 monthly active developers in its ecosystem in 2023. This took into account only those working on public depositories.

Solana developers are involved in a host of different spheres. These include, per the report, everything from advancements in tooling, developer experience and quality of content to diversity of available programming languages, debugging and maintenance.

Use Cases and Applications of Solana and Ethereum

While far from identical technically, both Solana and Ethereum represent go-to solutions for a wide range of crypto products and services, and entire subsectors are based on the technological innovations they provide.

Broadly speaking, the two networks most commonly support DApps and DeFi implementations — including decentralized exchanges (DEXes) — as well as everything from non-fungible tokens (NFTs) to marketplaces and gaming applications, along with yield farming.

Ethereum, as the first major blockchain network capable of supporting such vast interconnected ecosystems, has found its way into every facet of the modern DeFi industry, and has stayed relevant in spite of various competitors vying for market share. 

As of 2024, blockchain interoperability is the name of the game as increasing decentralization demands a solution beyond selecting a single network. Ethereum remains the incumbent to some extent purely because it has the longest proven track record.

That said, the speed and scalability of Solana make it well suited for applications requiring high throughput, such as high-frequency trading, gaming and real-time data analytics. Solana's low transaction costs also make it attractive for microtransactions.

These use cases form entire subject categories in themselves and are constantly expanding as the broader DeFi industry, which is barely five years old, expands.

•   The TabTrader Academy has full in-depth guides to NFTs, DEX trading, yield farming and more, as well as where DeFi is headed into the future.  

Famous Projects on Solana and Ethereum Blockchain

Given its ability to process vast numbers of transactions quickly with ultra-low fees, Solana has seen some of its biggest success stories come from the DEX sector.

As of 2024, the top three names are Jupiter, Raydium and Orca, which now see more than $1 billion in daily trading volume. These also form the second, third and fourth-largest DEXes in the world by volume respectively.

Nonetheless, fellow DEX Uniswap on Ethereum still tops the list, having originally launched in 2018 to remain the godfather of decentralized trading platforms.

Other use cases for Solana which have gained major traction meanwhile also revolve around staking and lending. Here, investors aim to earn passive income on existing holdings, with staking arguably a separate industry in its own right.

Ethereum meanwhile hosts some of the biggest names in the crypto world. In addition to Uniswap, these include decentralized lending protocols MakerDAO and Aave. as well as Curve Finance, one of the best-known automated market makers (AMMs).

Solana Vs. Ethereum Transactions

Solana Vs. Ethereum Transaction Number

Ethereum currently sees in excess of 1 million transactions per day, spiking to record highs of nearly 2 million in January 2024.

1 million transactions or more has in fact been the daily norm for the network since mid-2020, and this expansion has directly impacted costs and fueled efforts to increase network capacity.

Ethereum remains the center of decentralized crypto, and it is thus reasonable to assume that average transaction numbers will continue to increase, even with the presence of competitors such as Solana.

One of Solana’s main design goals was avoiding high fees regardless of network load, and thus high transaction numbers were anticipated from the outset. These currently number around 2,500 per second, with arbitrage and NFT minting bots nonetheless responsible for a significant portion of these.

Solana Vs. Ethereum Transaction Speed

For the average user, neither Ethereum nor Solana presents significant problems when it comes to achieving finality with on-chain Layer 1 transactions.

While costs are often noticeable immediately, multiple confirmations require a matter of seconds for Solana and barely any longer for Ethereum.

This is where PoS comes into its own — on-chain transactions on Bitcoin, for instance, take thirty minutes or more to achieve three confirmations, often with significant fees to match.

Solana Vs. Ethereum Transaction Gas Prices 

It is common knowledge that, despite upgrades and the Ethereum 2.0 transition, gas fees for on-chain ETH transactions are often very high.

As of March 2024, the problem remains, regularly making the cost of execution on the Ethereum network considerably larger than its nearest competitors. 

The situation, however, is fluid — gas fee trackers can help assess the optimal amount to pay for a given transaction, but this amount can fluctuate considerably.

The type of transaction also greatly influences the required fee — a simple transaction can be performed for the equivalent of around $1.50 at the time of writing, for instance, but selling an Ethereum NFT might cost closer to $50.

Fees on Solana are noticeably different. With the network built with capacity in mind, ultra-low transaction costs have been a feature from the outset. For a regular transaction, these can cost a fraction of a US dollar cent.

As with any network, however, excess loads can cause a spike in fees for all participants, as was the case during spates of memecoin trading.

Which is better: Solana or Ethereum?

Ethereum and Solana are increasingly competing for market share and prowess in the rapidly expanding DeFi industry.

While the battle has raged for only four years, capacity remains a key argument when it comes to new projects choosing where to launch.

The two blockchains nonetheless retain some unique qualities which have ensured their ongoing popularity regardless of teething problems or changing crypto market trends.

Pros of Ethereum

Ethereum is the original and largest blockchain network for DeFi projects today, and has hosted the first steps in technologies which have since become ubiquitous in crypto — smart contracts, DApps, DEXes and more.

Its time-tested reliability and comparatively cost-effective operation have made it the go-to ecosystem for developers, and still attracts endless new projects in 2024.

The upgrade to PoS has helped to address capacity and efficiency issues, and further improvements continue to appear, the most notable of which has been the Dencun upgrade.

Ethereum’s native token, Ether, forms an industry in its own right, and is an attractive target for investment outside the crypto sphere, notably from traditional financial institutions.

While many blockchain networks tussle for market share, Ethereum shows no sign of ceding its presence to competitors.

Cons of Ethereum

Criticism of Ethereum mainly centers around high fees which can often prevent on-chain transactions being carried out without negating their original purpose.

Ethereum’s transition to PoS has not fully resolved the problem, and gas fees remain significantly higher on average than those of Solana or other major blockchain networks such as Ripple and Polygon.

Other problems are those which are common to crypto as a whole. The constant battle against security vulnerabilities, for instance, is not without its victims, and regulatory uncertainty constitutes a further headache for Ethereum-based projects.

Pros of Solana

Solana seeks to excel at its core use cases, these being processing large numbers of transactions quickly at a low cost.

This has become a reliable feature of the network, with transaction throughput catering to around 2,500 per second, each costing less than a single US dollar cent.

This in turn enables a wide range of DeFi projects to leverage the Solana blockchain, particularly those requiring large numbers of on-chain microtransactions.

As a relative newcomer, Solana has sought to provide wide-ranging support and tooling to developers looking to build DApps and smart contracts.

Cons of Solana

While normally fast and cost effective, Solana is not immune from spikes in transaction fees, especially given the large numbers of automated transactions which propagate on its network.

A separate debate currently revolves around decentralization of its network — Solana has fewer validators than Ethereum, and security concerns have evolved as a result.

In its few years of operation, the Solana mainnet has been halted altogether more than ten times, with block production stopping and SOL prices seeing flash volatility. While not resulting in long-lasting impact, such events have placed Solana in the spotlight versus its competitors, particularly Ethereum, which to date has never seen a mainnet outage.

The Bottom Line: Is Solana the ‘Ethereum Killer?’

Solana and Ethereum coexist within a rapidly-expanding crypto industry full of innovative products and services.

While competition between the two is keenly felt in both user and developer circles, four years after its mainnet launch, interoperability between the two blockchains is only increasing.

Ethereum, as a tried-and-tested network with well-known pros and cons, remains the backbone of DeFi industry standards — DApps, smart contracts, DEXes and more. It still attracts large numbers of developers, and while it faces ongoing hurdles in the form of high transaction fees and slower confirmation times at peak network load, steps are being undertaken to mitigate these.

Solana has captured significant attention in its few years of operation, and has succeeded in offering high transaction throughput, reliable processing and rock bottom fees on a constant basis.

Questions nonetheless remain over its decentralization and the ability of validators to control the blockchain, as well as overall reliability — as demonstrated by its comparatively frequent mainnet outages.

So far, both the Ethereum and Solana blockchain ecosystems cater to varied and increasing swathes of the crypto industry — consensus has not produced mass migration toward one and away from the other.

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FAQ

Is Solana better than Ethereum?

Solana and Ethereum both fulfill a wide range of functions within the crypto industry, and despite each having its pros and cons, consensus has not yet shown one to be the clear ‘go-to’ solution for users or developers.

Will Solana overtake Ethereum?

While Solana has proven extremely successful in its short lifetime, as of 2024, the Ethereum network remains one of the backbones of crypto industry innovation. 

Is SOL a better investment than ETH?

As free-trading altcoins, both Ether (ETH) and Solana (SOL) can experience significant volatility. Trading either requires skill and discipline in order to navigate erratic market moves — a phenomenon common to cryptocurrency as a whole. The TabTrader Academy is a dedicated resource which helps traders assess trading risks in this unique, constantly-evolving industry.