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Solana vs. Ethereum: The Blockchain Battle

January 9, 2024
3 min

In the ever-evolving realm of cryptocurrency, two prominent players have captured the attention of enthusiasts and investors alike: Solana and Ethereum. 

As crypto beginners embark on their journey into the decentralized world, understanding the nuances between these platforms becomes crucial. 

In this comprehensive guide, we'll delve into the features, pros, and cons of both Solana and Ethereum to empower you with the knowledge needed to make informed decisions.

Understanding Solana

Solana, often hailed as a high-performance blockchain, stands out for its remarkable scalability and low transaction costs. Launched in 2020, it aims to address some of the scalability issues faced by earlier blockchain networks and has become a go-to for blockchain developers despite such a short timeline.

The team behind Solana is known as Solana Labs that was founded in 2017 by Anatoly Yakovenko and Raj Gokal. They proposed the idea of Solana with their whitepaper titled “Solana: A new architecture for a high performance blockchain”. 

Solana, much like Ethereum, uses the Proof of Stake (PoS) consensus mechanism which aims to build on Proof of Work first proposed by the Bitcoin Network. Proof of History (PoH) is also an important consensus mechanism used within Solana. 

It aims to achieve both security and scalability. PoH leverages cryptographic techniques to create a historical record that efficiently proves the order and timing of transactions, enhancing the trustworthiness of the distributed ledger.

Solana's Native Coin: SOL (Solana Coin)

SOL, the native cryptocurrency of the Solana network, fuels transactions and smart contracts. Known for its rapid confirmation times and low fees, SOL has garnered attention as a potential investment and a key competitor to ETH.

The SOL token has been a main talking point for crypto investors since its inception back in 2020. During the 2021 bull run, Solana’s native token hit all time highs of $249 and is currently climbing back up as we go into the early months of 2024.

At the start of 2023 it seemed all but over for Solana. Outages on the network compromised the security and sent the token crashing. Since then it has steadily climbed back up in value thanks to a number of positive headlines, updates from the team and a loyal community.

Solana’s Collaboration with VISA

Summer drew to a close in September and it seemed like crypto was in a bit of a gray area as the FTX trial was well underway. 

That was until Solana announced their official partnership with VISA, one of the world’s most prominent names in traditional finance. VISA would begin to utilize the Solana network to process transactions and gain exposure to the blockchain.

VISA sees vlue in the high throughput of transactions and scalability brought forward by Solana. Transactions for VISA’s stablecoin settlement will be used with Solana.

Significant Updates on Solana

On the Solana website is a backlog of updates that have been executed on the network:

  • QUIC - built by Google to digest transactions. It will become the default transaction ingestion protocol for Solana.
  • Stake-weighted QoS - is built in conjunction with QUIC. Transactions no longer are accepted on a first come first serve basis and instead it is reliant on the source.
  • Fee markets - allows users to add urgency to transactions in the form of additional fees so their transactions are added before others.
  • Transaction size increase - QUIC has allowed transactions to increase from the original 1,232 bytes.
  • Compact vote state - voting state is lowered allowing better overall performance on the blockchain.

Key Features of Solana

Here is a breakdown of some of the key features associated with Solana, its network and token.

High throughput: Solana boasts an impressive throughput, with the capability to process 50,000 transactions per second (TPS).

Low transaction costs: Solana's innovative design contributes to minimal transaction fees, making it an attractive option for users.

Unique consensus mechanism: Proof of History is Solana’s consensus mechanism. It is based on PoS but uses a different method to calculate time. Transactions on the blockchain are verified through a sequence of historical hashes. 

Ethereum Unveiled

Ethereum, the pioneer in smart contract functionality, revolutionized the crypto space when it was introduced in 2015. It serves as a decentralized platform for creating and executing smart contracts.

The team behind Ethereum is Vitalik Buterin and Gavin Wood who first introduced the idea of the blockchain in a whitepaper titled “A Next-Generation Smart Contract and Decentralized Application Platform”.

In 2022 Ethereum started making  the switch to PoS from PoW to create a more sustainable and robust network. More on that below!

Ethereum was initially built to overcome the limitations of Bitcoin. While revolutionary, Bitcoin is extremely limited in its functionality and it didn’t take long for developers like Vitalik to notice this. For new users to be onboarded into crypto and Web3 something needed to change and that’s where Ethereum comes into play.

Ethereum's Native Coin: ETH (Ethereum Coin)

ETH, Ethereum's native cryptocurrency, fuels the network by facilitating transactions and executing smart contracts. As one of the most traded cryptocurrencies, ETH holds significant market value and continues to be a runner up behind Bitcoin in terms of influence and market share.

The Ethereum token brought on a new way to invest and earn with crypto as they made the all important switch to the PoS consensus mechanism. It is now possible to stake crypto and become an active contributor to a number of blockchains through this practice.

As well as the Ethereum native token being a popular choice for investors, new possibilities were brought forward by the token and blockchain.

ERC-2O tokens are hosted via Ethereum network and harness the functionalities and more. Whether it is a gaming token like SAND or a protocol token like SUSHI, both of these tokens are built with Ethereum’s consensus mechanism and the necessity for decentralization and scalability.

There are more than 280,000 ERC-20-compliant tokens built on Ethereum. Over 40 of them make up the top 100 cryptocurrencies by market capitalization which points towards the overall popularity of both the token and network!

Ethereum 2.0 and Its Significance

Ethereum 2.0, also known as ETH 2.0 or Serenity, is a major upgrade to the Ethereum blockchain aimed at improving scalability, security, and sustainability. 

The upgrade is being rolled out in multiple phases, with the transition from the current Proof of ork (PoW) consensus mechanism to a Proof of Stake (PoS) mechanism being a central component. 

The primary goals of Ethereum 2.0 include:

Scalability: Ethereum 2.0 aims to address the scalability issues faced by the current Ethereum blockchain, which has been known for its limited transaction throughput. 

Security: PoS is designed to enhance the security of the Ethereum network by relying on validators who lock up a certain amount of cryptocurrency (ETH) as collateral. Validators are chosen to create new blocks and validate transactions based on the amount of cryptocurrency they hold and are willing to "stake" as collateral.

Sustainability: Ethereum 2.0 aims to make the network more sustainable by transitioning from a resource-intensive PoW algorithm (used in mining) to a PoS algorithm. This shift is expected to reduce the environmental impact of Ethereum mining.

The Ethereum 2.0 upgrade is being implemented in multiple phases:

Phase 0 (Beacon Chain): The Beacon Chain, which is the PoS blockchain running in parallel with the existing PoW chain, was launched in December 2020. Validators can start staking on the Beacon Chain, but full functionality is yet to be implemented.

Phase 1: This phase is expected to introduce shard chains, which are smaller chains running in parallel to the main Ethereum chain. Shard chains aim to increase transaction throughput.

Phase 1.5: This is a crucial phase involving the transition from PoW to PoS. The Ethereum mainnet will become a shard on the Ethereum 2.0 network, and PoW will be replaced by PoS. 1.5 also aims to bridge 

Phase 2: Focused on further improvements and enhancements to the Ethereum 2.0 network. 

Shanghai Update: This is the most recent installation of the Ethereum 2.0 update that came in April 2023. Code has been implemented to perform rollups at a faster and cheaper rate. Shanghai has also allowed users to withdraw their staked ETH tokens which wasn’t possible before.

Pros and Cons: Solana and Ethereum

Now that we have covered the fundamentals of both Solana and Ethereum, it’s time to delve into the pros and cons of both blockchains.

Solana - Advantages

Scalability: Solana's high throughput enables it to handle a vast number of transactions simultaneously. Currently 3,700 transactions per second are processed via the Solana network at the time of writing. But Solana is capable of 65,000 transactions per second overall. 

Low Transaction Costs: Users benefit from minimal fees, fostering a cost-effective environment. On average, transactions on Solana cost only $0.00025. Compared to VISA and Mastercard where 1.15% to 3.15% of the transaction's overall value is the cost, Solana is very cost effective.

Developer-Friendly: Solana's developer ecosystem is growing, providing a platform for innovative projects. Match that with the scalable nature of Solana it is a go to option for blockchain developers.

Solana - Challenges

While Solana presents advantages for investors and developers alike, there are some drawbacks to be aware of.

Adoption: While gaining traction, Solana is still working on achieving widespread adoption. Compared to Ethereum, Solana has only 466 dApps currently registered on it. While Ethereum boasts over 3,000.

Decentralization Concerns: Critics argue that Solana's focus on speed compromises decentralization. In 2021 it was unearthed that 50% of Solana's SOL tokens are held by Venture Capital investors which begs the question, “is Solana truly decentralized?”.

Network Capabilities: Over the years there have been a number of network outages experienced on Solana. This leaves investors and developers wondering if it is sustainable to build and invest in it.

Ethereum - Advantages

Established Ecosystem: Ethereum boasts a robust and diverse ecosystem with numerous decentralized applications (DApps). These dApps are spread across a number of different industries including finance and gaming.

Liquidity: ETH remains highly liquid, making it a preferred choice for traders and investors. Ethereum network has a large number of liquidity providers scattered across different pools and decentralized exchanges.

Ethereum 2.0: The ongoing Ethereum 2.0 upgrade addresses scalability concerns and enhances the platform's sustainability. Furthermore the PoS consensus mechanism has allowed blockchains to become more friendly for the environment in terms of energy output.

Ethereum - Challenges

Ethereum really is a monumental blockchain for more reasons than not. However it is good practice to understand any potential drawbacks it may have for investors and developers.

Scalability Issues: Prior to Ethereum 2.0, scalability has been a persistent challenge, leading to congestion and higher transaction fees. This overall makes other blockchains such as Solana more appealing for users and developers.

Transition Complexity: The shift to Ethereum 2.0 involves a complex transition process, with uncertainties regarding timelines and potential hurdles. It took some time for the transition to begin, a total of seven years after the initial launch of the Ethereum Mainnet.

Slashing within Staking: Ethereum was the first blockchain to introduce staking which is revolutionary in itself. But it is not without headache and this can come in the form of slashing. Stakers pay the price for validators errors which can prove costly in returns for those staking on Ethereum.

Solana vs. Ethereum: A Comparative Analysis

Performance Metrics

Throughput: Solana's impressive TPS outshines Ethereum's current capabilities. Currently Solana processes 65,000 TPS, whilst Ethereum processes 30 TPS.

Transaction Costs: Solana's low fees contrast with Ethereum's historically higher transaction costs. On the Solana network, users pay around $0.0001 and $0.0003. Ethereum’s transaction fee on the other hand has previously reached the $1 mark!

Ecosystem and Adoption

Ethereum's Head Start: Ethereum's established ecosystem gives it an edge in terms of the number of DApps and projects.

Solana's Growth: Solana is gaining momentum, attracting developers with its performance advantages.

Future Potential and Upgrades

Ethereum 2.0: The transition to Ethereum 2.0 positions it for long-term scalability and sustainability.

Solana's Innovation: Solana's commitment to innovation and performance enhancements suggests a promising future.

Solana vs Ethereum - Who Wins?

As a crypto beginner, the choice between Solana and Ethereum depends on your specific needs and preferences. If you prioritize speed, low transaction costs, and innovation, Solana might be an attractive option. 

On the other hand, Ethereum's well-established ecosystem and ongoing upgrades make it a compelling choice for those valuing a proven track record.

Remember to consider factors like your investment goals, risk tolerance, and the specific use cases you envision. The crypto landscape is dynamic, and staying informed ensures you navigate it with confidence. 

Solana vs. Ethereum is not just a choice between two blockchains but an exploration of the diverse possibilities within the decentralized world.

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Katya V.

Katya is one of Cryptology’s skilled content managers and a writer with a diverse background in content creation, editing, and digital marketing. With experience in several different industries, mostly blockchain and others like deep tech, they have refined their ability to craft compelling narratives and develop SEO strategies.