Ethereum has fallen to the altar? But is Solana ready to “succeed”?

January 15 News   This Thursday (January 13), boxing champion Tyson “suddenly” posted on his personal social media platform that he wanted to “All in on Solana”. Solana has the potential to become the “Visa of the digital asset ecosystem” by offering consumers a variety of use cases, according to the report, which has sparked heated discussions in the community. So, can Solana really become the “new overlord” of digital assets and beat Ethereum? Let’s take a closer look.


Why did Ethereum lose its dominance?

Ethereum may soon lose its dominance in the DeFi space, according to a report by JPMorgan analysts. There is no doubt that Ethereum is still the dominant player in the DeFi space, but this is likely to be about to change, as JPMorgan analysts point out that Ethereum’s dominance in the space may no longer exist.

The rise of smart-contract-enabled protocols like Terra, Avalanche, and Solana has undoubtedly challenged Ethereum’s lead in DeFi, according to analysts. It has been revealed that these nascent projects have eaten into Ethereum’s dominance and could have further impact in the new year.

Ethereum’s market share in the DeFi TVL (Total Value Locked) space is almost 100% in early 2021. However, that number had dropped to around 65% by the end of the same year. According to Nikolaos Panigirtzoglou, head of JPMorgan’s analyst team, the main reason for Ethereum’s loss of ground may be related to the scalability of its network.

It is reported that if Ethereum is to continue its dominance, it will have to expand and upgrade, but it is too late to act now. Nicholas Panigittezogro further said:

“Ethereum is currently in a fierce competition to continue its dominance, and the outcome of this competition is unknown.”

Some independent blockchains such as Terra, Avalanche, and Solana have received significant funding from investors based on their advantages in scaling capabilities and are using various incentives to promote their platforms. As long as you take a cursory look at the number of transactions per second that DeFi-enabled blockchains can execute, Ethereum is already far behind its competitors.

A set of data shows that while Ethereum can complete 15-45 transactions per second (TPS), some of its competitors such as Terra and Solana can complete 1,000 and 50,000 transactions respectively.

In addition, the Ethereum blockchain also has a very common problem of high gas fees. Although it has been addressing this issue with the EIP-1559 upgrade, competitors like Solana still have significantly cheaper transaction fees.

As a result, JPMorgan analysts came to the following conclusion by analyzing the above factors: Even if the Ethereum network completes the expansion update, it is likely that it will never return to the peak of the past, because its users may have migrated to other competition. The adversary’s ecosystem is gone.

What are the strengths and weaknesses of Solana?

Notably, Bank of America said in a recent research report that smart contract platform Avalanche, while maintaining security and decentralization, is scalable allowing it to provide Ethereum for DeFi protocols, NFTs, and other activities. reliable alternative. According to data provided by DeFiLlama, the Avalanche blockchain project’s locked-up volume (TVL) has grown to more than $11 billion since then. The Solana blockchain has attracted hundreds of decentralized applications, and it has great advantages in transaction speed.

Hence, Bank of America gave the banking world’s top rating for cryptocurrencies: Comparing Solana to Visa, the world’s largest credit card network.

Solana could become the Visa of the digital asset ecosystem, Bank of America global cryptocurrency and digital asset strategist Alkesh Shah wrote in a research note published on Tuesday. “Alkesh Shah mentioned that there are more than 400 decentralized applications on the Solana blockchain, covering everything from peer-to-peer transactions to NFT markets. At the same time, he also wrote:

“Ethereum has the potential to be the exclusive blockchain for high-value transactions, as well as identity, storage, and supply chain use cases.”

Cryptocurrency proponents have long liked to compare blockchain to the transactions per second (TPS) of credit card networks. In theory, Visa can process transactions at at least 24,000 TPS, but in practice it averages around 1,700 TPS. The TPS value of Ethereum is usually 15. Considering that decentralized applications are running “on-chain”, this speed is not high. And because of the limited amount, transaction fees on the network are usually in the double digits (USD).  

While many projects are trying to solve Ethereum’s scalability issues — including through sidechains on Polygon and rollups on Arbitrum — the network congestion problem is unlikely to be significantly alleviated until Ethereum 2.0 is fully rolled out. . Ethereum founder Vitalik Buterin asserted in June 2020 that the upgraded Ethereum network transaction speed will reach 100,000 TPS.

In terms of transaction speed, Solana has an overwhelming advantage over Ethereum and Visa, with a theoretical limit of 65,000 TPS.

However, the above comparison made by Bank of America is not entirely acceptable.

Arkesh Shah also wrote in the report:

“Solana prioritizes scalability while being relatively weak when it comes to decentralization and security, as illustrated by several network performance issues since its inception.” 

Alkesh Shah was referring to a network outage last September and several other smaller issues that seemed to open up opportunities for other networks. Alkesh Shah mentioned not only Ethereum after the upgrade, but also Avalanche, which he believes has found a balance between the security modeled by Ethereum and the transaction speed modeled by Solana, which is very likely to be Make the Avalanche blockchain the best choice for decentralized finance and enterprise.

Nonetheless, Alkesh Shah is careful to add that there is not necessarily one blockchain (besides Bitcoin) that can do it all, every blockchain has its own use case that is best suited for it. Speaking of Solana, he noted:

“Solana has the advantages of high throughput, low cost, and ease of use, making it a blockchain ideal for consumer use cases such as micropayments, DeFi, NFTs, decentralized networks (Web3), and gaming.”

Over time, through user adoption and attracting developers, Solana and other blockchains may take market share away from Ethereum – how long will this “time” be? Let us wait and see.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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