When it comes to blockchain ecosystems, we are in the midst of a technological arms race. There are many networks out there vying for the top spot, each with their own strengths, quirks, and eccentricities. Choosing what blockchain to focus on is no doubt tough for a developer, but even for an crypto holder it can be confusing. Let’s help break this down by performing a deep dive on one of the most fascinating rivalries in this space: Solana vs Ethereum.
Brief Overview of Solana And Ethereum as Financial Assets
Ethereum and Solana are both huge blockchain ecosystems that have attracted an impressive community. However, their underlying assets, ETH and SOL have also gained a strong following.
Both are the cryptocurrencies that power these blockchains. They are the lifeblood of their respective networks, and while they are needed to keep the projects running, they can also be held in and treated merely as assets.
ETH has existed for some time now, dating back to 2015, whereas SOL came on the scene only in 2020. For a very long time, ETH rested comfortably at the number 2 spot for market capitalization in the crypto space, whilst also being attached to the only fleshed-out and well-respected blockchain ecosystem out there.
While ETH still sits at the number 2 spot in the entire market, Ethereum’s position as the primary blockchain ecosystem has never been more hotly contended. There are tons of alternatives out there all gunning for its position, with Solana being one of the most prolific and impressive.
Some traders believe you do not need to know the fundamental features and elements that are associated with these assets, however, this would be a mistake. ETH and SOL are valued precisely because of the ecosystems that breathe life into them. And so to make a solid financial decision between them you should know the basics about their structure and ethos, respectively.
There are tons of differences between these two technologies, but for now, the best way to separate them is by age and experience. Ethereum has existed for much longer, setting many of the standards for this industry, and carving out its position as the primary ecosystem. However, its legacy can sometimes translate into it being perceived as arcane and cumbersome, especially in an industry that moves so fast compared to the rest of FinTech. This is where Solana shines, as the project presents itself as being youthful and agile– the fact that it has come into existence so many years after Ethereum means it has learned from many of the network’s mistakes, leading to the creation of something that fits more in line with the contemporary space (a space that Ethereum helped to foster, but which some would argue is leaving it behind).
In essence, this boils down to a simple tale of youth vs legacy– a narrative that crypto holders are all tremendously familiar. A version of this is felt when people pit Bitcoin and gold against each other, or even the entire crypto market and the traditional stock market.
Ethereum Vs Solana: Historical Performance
Let’s hone in on the financial performance of these two cryptocurrencies, to add some clarity on the holding side.
Solana
At January 1st, 2024, SOL was worth $101.33. Due to this cryptocurrency’s short history, we are unable to track it back by five years, which is a relatively common timeframe for checking performance. Instead, we will go back by two years and take a look at its price from January 1st, 2022. At this point, it was worth $170.20.
This is a price reduction of 67.96%. Naturally, that looks worrisome, but bear in mind these two years overlap with a pretty vicious bear market that took practically every cryptoasset down.
Ethereum
At January 1st, 2024, Ethereum was worth $2,279.00 USD. Two years prior, it was worth $3,686.00 USD. This is a 61.74% price reduction. This is also unappealing, but the point to highlight here is that Ethereum has managed to hold its worth slightly better than Solana, at least over this specific span of time.
While the difference between 67.96% and 61.74% is not tremendous, from the perspective of a crypto holder, it is extremely significant and meaningful. Keep this in the back of your mind whilst reading the rest of this discussion.
Solana Vs Ethereum: The Key Differences
Now that we have a (very) rudimentary understanding of the way SOL and ETH hold their value, let’s delve into their core differences. There are so many that can be explored, but we will be picking just three.
Contemporary Technology
Solana prides itself on being technologically newer than Ethereum. For instance, one of Solana’s greatest innovations is that it uses a new computational model known as Proof-of-History, which is essentially a novel approach to Proof-of-Stake (the mechanism Ethereum uses) with some fascinating quirks. In a nutshell, this works by creating a historical record that proves an event has occurred on the blockchain at a specific moment, by encoding the passage of time into the blockchain itself. It is highly complex, and for our purposes we do not need to understand it, but it helps illustrate how unique and cutting-edge Solana can come across as.
There are other aspects of Solana that highlight this, such as its ability to settle transactions faster than Ethereum and scale more efficiently. Additionally, due to Solana’s young age, it was released at a time when interoperability was the buzzword in the industry, therefore its architecture has been set up to be more compatible and friendly to other chains. This is something Etherueum struggles with, as its devs did not think about the future in these terms.
Aesthetic Differences
It seems strange to discuss aesthetics when it comes to such abstract concepts as blockchains, but the way designers, developers, and executives present these two ecosystems is strikingly different. While the aesthetics of a project does not affect its utility, from an holding perspective, you should be curious about this, as appearances and narratives influence funding and engagement.
Ethereum tends to present itself as being foundational to the entire industry, leaning into its maturity in the space. Alongside that, it also promotes inclusivity and community-building. In fact, some might argue that the idea of a community-driven and democratic internet was pushed far greater by Ethereum than it was by any other project or organization.
Solana takes a different approach, leaning into a narrative of futurism, presenting itself as more ready and prepared for what is to come. It also shows itself to be more business-oriented, focusing on onboarding and integration with the web2 world. This is where Solana’s birth in 2020 helps it once again, as web3 was starting to become a household term, meaning it could easily attach itself to it.
Volatility
Economically speaking, SOL is more volatile than ETH. This is the case for most newer cryptocurrencies, and especially altcoins. There is some debate as to whether ETH counts as an altcoin anymore, or if it has managed to elevate itself up to a similar status as Bitcoin, but the fact that this conversation is even happening shows how one is in a different league from the other (at least when it comes to the perception of crypto holders). Of course, make no mistake, ETH is also volatile, as is the whole market. But SOL is known to rise and fall more fiercely than ETH.
The Advantages And Disadvantages Of Ethereum
We’ve given an overview of the differences between Solana vs Ethereum, but to add some dimension to our discussion, we need to break down the advantages and disadvantages of these assets and ecosystems– starting with Ethereum.
Advantages of Ethereum
These are some of Ethereum’s greatest advantages, from a crypto holder perspective.
Longer History
Etheruem’s relatively long history gives it two fantastic strengths. Firstly, it means crypto holders have greater tools for tracking its financial movements and potentially spotting patterns. This is great for short-to-medium-term traders who often rely on analytics.
Secondly, its history means that it has proven itself to be battle-tested, strong, and relevant. The crypto space moves fast, and so many projects come and go. But Ethereum has remained in its place, showing a tremendous level of immovability. It’s ironic because despite Solana building a narrative that it is future-proof, Ethereum has actually built a legacy that clearly displays its endurance.
A Huge Community
The Ethereum community is so bustling you could almost consider it as overflowing. In fact, many new developers in the crypto space often wonder whether the Ethereum market is too saturated, and consider trying to integrate themselves into a smaller ecosystem (such as Solana).
It is impossible to discuss Ethereum’s community without its mentioning (both official and unofficial) figurehead, Vitalik Buterin, the project’s co-founder and enigmatic thought leader. Nothing crystallizes the idea that Vitalik leads the space beyond a mere development level more than the city of Vitalia, a physical community on the island of Roatán, in Honduras. As you can likely guess, this is a space named directly after Vitalik, designed to be a hub for crypto and blockchain builders, holders, artists, and fans. You would probably find avid Solana fans in this city, too, but make no mistake, they would be firmly within Ethereum’s territory.
Industry Standard
It is strange to think of industry standards in the world of crypto, as it suggests some level of centralized control or a hierarchy of some sort. Yet, to create a global and distributed network, you need to have some codes of conduct and rules for implementation. In this sense, Ethereum sets the tone and standard that the rest of the space often follows.
The best example of this is via its tokenization rules. Ethereum built the ERC-20 token standard, which is a model for how programmers make fungible tokens. However, the concept has extended far beyond this blockchain, as others, such as BNB, Polygon, and Avalanche, also follow this standard to some extent, with many of their own tokens being compatible with Ethereum’s ERC-20 standard.
In fact, when the blockchain industry first began trying to be interoperable, many projects attempted so by bending to Ethereum’s rules and protocols, showing the sheer strength of the ecosystem.
Disadvantages of Ethereum
Of course, Ethereum also has some huge drawbacks. These are some of the reasons why people turn to other assets and ecosystems, such as Solana.
Congestion and Cost
Ethereum is not a cheap blockchain, and it hasn’t been for some time now. For the last few years, Ethereum has been struggling with congestion issues, meaning that there is an inundation of transactions occurring on it that it cannot efficiently manage. This leads to transaction fees rising, and the average user getting outpriced. It is also why many traders avoid using DeFi exchanges that run on Ethereum.
Safety Concerns for DApps
The Ethereum blockchain is highly safe and secure, and there have been very few major issues or faults that have occurred with it. However, the same cannot be said for the decentralized applications (dApps) built on top of it. DApps are known to have vulnerabilities at times, which often leads people to use programs on other networks, or even to use centralized services (such as Ledn).
This level of vulnerability has given rise to a sub-industry of DeFi auditors, who check through smart contracts and dApps to ensure they are safe and secure. But even then, there can be errors that go unnoticed. Solana does not face this issue as much as Ethereum. It’s not 100% clear why, but a fair argument is that Solana’s underlying programming language, Rust, is well-known for having inherent safety checks built within it, whereas Ethereum’s Solidity (used to write its smart contracts) does not.
Fear of Being Left Behind
Perhaps this is less of a disadvantage and more of a sentiment shared by developers and traders alike, but there is a looming fear that the Ethereum network will one day fall to the wayside as newer, faster, and more flashy blockchains muscle their way in and prove their worth. Sadly, if this were to happen, it probably wouldn’t occur with a bang, where Ethereum one day fails and perishes, but rather it would happen with a whimper, in the sense that it would slowly get abandoned by devs.
The developer scene is as important to Ethereum as ETH is, and the two feed into each other’s successes. But if developers decide that they would rather move to other blockchains, then it could cause Ethereum to dry up and lose its significance on the world stage. To some extent, you can keep your eye out for this by paying attention to the industry, but to truly spot it, you would need to be extremely dialed into the space.
The Advantages And Disadvantages Of Solana
We’ve gained some great insights on Ethereum, and seen why some people love it and why others avoid it. Let’s now do the same with Solana, so we can add some balance.
Advantages of Solana
We’ll start with the advantages of Solana, so we can place it in its best light.
Highly Commercial
The Solana team is highly aware of the commercial side of this industry. Look no further than their website to see that they pride themselves on being able to attract businesses, and form bonds with traditional (non-blockchain specific) companies. They are building an image that appeals to the corporate world, which is great for funding and bringing new customers in. From a holders perspective, this spells very good news.
Conscious of the Future
The Ethereum ecosystem is often criticized for not being able to keep up with the contemporary solutions that other blockchains deal with. For instance, the problem of congestion and high fees on the ETH network is not only caused by its overwhelmingly large community, but also because its architecture is hard to upgrade. Whereas other blockchains, like Solana, have kept this in mind and built their chains with these problems in mind. In fairness, Solana is not exactly easy to upgrade either, but the advantage it does have is that its team prepared for high engagement, and so it should be ready to handle the same size and scale of transactions that Ethereum faces with more ease and elegance.
Part of the Newer Wave of Blockchain Tech
Solana belongs to a special collection of blockchains that are built with the Rust programming language. It would be hard to explain all the intricacies and peculiarities of this language, but for the sake of our discussion, know that Rust is great at creating safe and secure projects, and has many tools for cryptographic and immutable activity.
Alongside Solana, NEAR and Polkadot are also built with Rust. These are a part of the newer wave of ecosystems within the industry. The best benefit that comes with these blockchains is that their shared language means that they are more interoperable with each other, allowing for greater connectivity. It further means that devs can interact with these chains with some level of ease, as they have some architectural similarities.
Disadvantages of Solana
Solana definitely has some significant flaws within it, that any holders should be mindful of. These are three of the major ones.
Lacking Name Recognition
Ethereum is starting to become a household name– perhaps not in the same way as Bitcoin, but definitely more so than Solana. In fact, you would struggle to find a person outside of the crypto industry who knows what exactly Solana is, or has even heard of it. This is important as a trader, as name recognition can help with price stability and economic strength.
Limited Availability
Solana is nowhere near as available and accessible as Ethereum when it comes to financial services. You will find far more projects listing ETH than they do with SOL, and alongside that, there is often more liquidity, too. For example, if you were looking for a SOL-backed loan or a SOL savings account, you would have far fewer options than you would with ETH. When it comes to Ethereum, you get a much larger pick of services, such as Ledn, which offers ETH loans and Growth Accounts where you can earn up to 4% APY.
Outages and (Potential) Centralization
Despite Solana representing itself as future-proof and reliable, it has been subject to several outages within its short lifespan. Over its last two years, it has experienced at least ten significant outages to its blockchain, halting or seriously harming its functionality.
This is an extremely high number for such a condensed period– made especially concerning when you consider how Solana gives the impression of being highly reliable. The sheer volume of outages also calls into question the level of decentralization found in the Solana ecosystem. One potential reason why some outages occur is that Solana is easier to target due to it having a smaller pool of node runners. Interestingly, part of the reason why there are fewer of these participants is because Solana asks much more of its node runners than other blockchains do, meaning the barrier for entry is higher. This might help it to be speedier and cheaper than Ethereum, but the drawback is that it increases some vulnerabilities.
It also means the fewer participants there are, the quicker it is to coordinate a response to errors on the blockchain. But the byproduct of doing so is that they can essentially shut the chain down to make amendments. In the traditional business world, this would be wholly seen as a smart practice, but in the blockchain sector, the ability to easily coordinate an outage on the fly for safety reasons is indicative of centralized behavior.
Solana Vs Ethereum as a Hedge Against Inflation
Many traders turn to crypto as a means of hedging against traditional fiat inflation. If you held either cryptocurrency at the start of their launch, then they would both outperform the US dollar by a very wide margin. This technically means they can both work as a hedge.
However, this is not a great reflection of what current-day crypto holding looks like. Let’s take the two-year historical data we noted earlier on for Solana and Ethereum, and compare it to how the US dollar performed over that time. Using an inflation calculator, we can see that USD in 2024 is worth 6.7% less than it was in 2022. This means that overall, USD held its value much better than either Ethereum or Solana, which had a deficit of 61% and 67% respectively.
That being said, this timespan was particularly hard for crypto, and so it is not an accurate sign of the future. What should be considered mostly is the fact that Ethereum was able to maintain more of its worth than Solana, even during a bear market, indicating it should be a greater hedge against inflation overall.
Is Ethereum a Better Asset Than Solana?
There is no definitive answer to this. At a certain point, it comes down to personal preference, and your own insights (and instincts) as a crypto holder. Take into consideration all the points made here, and see which ones hold more weight for you. This will give you the most meaningful and significant answer out there.
Make The Most Of Your Ethereum Holdings With Ledn
If you choose to hold Ethereum over Solana, then you have a special opportunity to earn interest on it via Ledn’s Growth Accounts. These are crypto savings accounts that can produce up to 4% APY on your ETH. If you are planning on holding for the long term, then it makes the most sense to put your ETH to use, rather than let it lie dormant. If you are undecided, then this is a major benefit to keep in mind when considering Ethereum vs Solana, as passive income can be a great way to add diversity to your portfolio.
Alongside this, Ledn also gives you access to ETH-backed loans, meaning you can access fiat without the commitment of selling your Ethereum in exchange for it. This offers a powerful level of financial freedom that can be hard to find when working specifically with SOL.
Conclusion
There is no clear winner in the Solana vs Ethereum war. In fact, there may never be. Pitting cryptocurrencies against each other will always yield complicated results and heated debates. However, the insights provided here should give you an outline of what the main talking points are between the two, and help you form your own opinion as a crypto holder.
If Ethereum comes out as the victor in your personal assessment, then it is a good idea to look into earning a passive income with your ETH. Ledn’s Growth Accounts are a fantastic method of achieving this– they are a transparent and well-respected company with a great track record for risk management and reliability. Not only that but their ETH-backed loans also provide you with a simple way of accessing fiat without fully giving away your crypto, which is perfect for peace of mind.
Disclaimer
This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.
