Ethereum
Put ETH aside, SOL is the new supercurrency
Executive summarySolana, the fourth-largest cryptocurrency by market cap, is a blazing-fast and cost-effective blockchain network that has positioned itself as a serious competitor to Ethereum. Recent on-chain metrics reflect Solana’s growing influence and competitive position. However, Solana faces challenges including centralization issues, an inflationary token model, and past network instability. The Firedancer protocol aims to address centralization issues by introducing a second validator client and supporting sharding to improve scalability.
These network upgrades have resulted in positive growth, demonstrated by increases in key on-chain metrics such as total value locked (TVL), decentralized exchange (DEX) volume, and daily fee payers. With growing institutional interest and continued upgrades, Solana is actively working to overcome its limitations and solidify its position as a leading Layer 1 blockchain.
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Solana vs Ethereum: A comparison
Among the thousands of crypto projects today, Solana and Ethereum are two notable networks. Both are major Layer 1 blockchains with vibrant communities and a wide range of projects in various Web3 niches, including DeFi, NFTs, and Web3 gaming. Despite Ethereum’s first-mover advantage, Solana has gained prominence due to its scalability and speed, often dubbed the “Ethereum killer.”
Understanding the Blockchain Trilemma
To understand the differences between Solana and Ethereum, it’s essential to consider the blockchain trilemma. Coined by Ethereum co-founder Vitalik Buterin, this concept suggests that decentralized blockchains must balance three main factors: security, decentralization, and scalability, often compromising one to improve another.
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Ethereum uses a Proof of Stake (PoS) consensus mechanism in which validators stake ETH to verify transactions, ensuring security in the event of potential loss of staked tokens due to malicious actions. This evolved from its original Proof of Work (PoW) system. Solana combines Proof of History (PoH) with Delegated Proof of Stake (dPoS), creating a verifiable record of time between transactions and increasing the cost of malicious actions. Despite its innovative approach, Solana has faced challenges such as network outages and a smaller validator pool compared to Ethereum. In terms of decentralization, Ethereum has a large network of globally distributed nodes and validators, preventing any single entity from controlling the network. Solana, with a smaller validator pool, faces centralization issues, which it aims to mitigate through protocols like Firedancer to improve resiliency and enable more validators.
When it comes to scalability, Ethereum handles 15-30 transactions per second (tps) with gas fees varying based on congestion. In contrast, Solana handles up to 65,000 tps with minimal fees, thanks to innovations like PoH and Tower Byzantine Fault Tolerance (BFT), making it a cost-effective platform for various dApps.
Network Measurements and Adoption
Solana has shown strong growth in its financial metrics. While DeFi’s total value locked (TVL) fell 9% QoQ to $4.5 billion, it increased 26% in SOL terms. The average daily spot trading volume on decentralized exchanges (DEXs) increased 32% to $1.6 billion.
Network metrics point to increased activity. The number of active daily fee payers increased 51% from the previous quarter to 900,000, and the number of new daily fee payers jumped 114% to 247,000. Despite congestion from spam transactions, the network maintained an average of 70 million daily non-voting transactions. Active addresses also increased significantly, from 1.2 million in mid-April to 1.9 million in mid-July.
Adoption metrics highlight Solana’s growing influence across a variety of industries. In the decentralized physical infrastructure network (DEPin) sector, achievements include Helium Mobile’s new licensing program, Shaga’s $1 million fundraise, and the launch of the io.net token with a market cap of $325 million. Memecoin trading continues to drive DEX activity, with notable tokens including WIF, MEW, POPCAT, and GME. Additionally, Pump.fun, a gamified token launch platform, collected $48 million in fees in Q2, averaging $525,000 in daily fees.
Solana Technical Analysis
Solana has recently posted impressive performance, generating a return of 16.2% in the past week. Market sentiment towards Solana and its tokens, including SOL-based meme coins, remains very bullish. This has driven up the prices of key coins in the Solana ecosystem like Jupiter, Radium, and Ponke.
Technically, SOL has formed a large symmetrical triangle on the daily chart. In this pattern, a double bottom formation has appeared, signaling a bullish breakout. SOL has moved from $135 to $185 and, after retesting $172, it is challenging the $185 level again. The next target is $200, with the possibility of revisiting this year’s all-time high of $210.
Major indicators support this bullish outlook. The daily MACD is turning bullish, assessed at 8.50, and the RSI is at 65.71, indicating room for further upside. SOL has also respected the 200 EMA, suggesting continued bullish momentum and the potential for further gains.
Solana’s growth in network and adoption underscores its growing influence and solidifies its position as a leading blockchain.
For a more detailed analysis, read the full report here – Link.
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(Originally published July 27, 2024)
(This article is generated and published by Spotlight on ET team. You can contact them at etspotlight@timesinternet.in)