Solana (SOL) the best alternative to Ethereum (ETH)? »Crypto-insiders

In our Discord community for members, we’ve received several analysis requests for Solana over the last few days. So we thought it would be a good idea to put this project in the spotlight and dedicate a premium series of articles to it. In this series, we dive into the basics behind a cryptocurrency and will return periodically to monitor developments. As you are used to from us, we analyze various statistics to draw a clear and realistic picture. We also take a brief look at recent developments and assess what effect it has had. If you still have questions after reading this article, you can easily ask them in our Discord community, here our analyzes are usually shared 48 hours earlier, and you can easily get in touch with experienced analysts and traders.

Solana (SOL)

In just 2 years, Solana has established itself as a solid man in the top 10 tokens. The goal of Solana is to become a smart contract platform available for common applications. It is important that it is scalable (a known issue with blockchain). Where Ethereum (ETH) struggles to scale, Solana promises to be a smart contract platform with low transaction costs and fast processing.

Price Market value 24 hour volume
Solana € 47 16 billion 1.1 million
Ethereum € 1,860 225 billion 11.9 million
Bitcoin € 27,770 529 billion 19.54 million

Table 1: Solana vs. market leaders Bitcoin and Ethereum, source; coinmarketcap.com

Basic

In this section, we look at important basic metrics. Fundamentals focuses on the underlying technology, development, and users of a blockchain network to provide an idea of ​​a project’s long-term potential. This forms the basis for assessing risk and making investment choices.

Now that we know what problem Solana will solve and how this project wants to differentiate itself from its competitors, it’s good to take a look at some statistics.

Scalability

These promises of scalability? Solana knows how to live up to it. Solana currently processes 50,000 transactions per second with extremely low transaction costs (0.00025 pr. transaction). In this area, Solana performs better than Ethereum (see Figure 1). Ethereum can currently only handle about 30 transactions per second and suffers from high transaction costs (gas charges) from 20 to sometimes yes 100. Founder Vitalik Buterin promises improvements on all fronts with Ethereum 2.0. The maximum transaction volume will be around 100,000 transactions per second. But where Ethereum 2.0 has often had delays and is not yet fully operational (expectation is 2023), Solana is already making the claims true.

Project Solana Ethereum
Volume of transactions 50,000 – 65,000 rpm 15 – 30 rps
Transaction costs 0.00025 € 4 – € 21
Consensus mechanism Proof of effort proof of work

Table 2: Comparison of Solana and Ethereum Source; Solwealth

Be careful not to confuse Ethereum’s high gas charges as criticism. The high gas charges are a result of the extremely high demand for the grid. With a large developer base and strong financing, Ethereum is a market leader.

Developers on the network

An important indicator of a healthy growing network is the number of developers on the network. Developers create on-chain tools such as NFT trading markets, DeFi / yield farms, Blockchain games and future innovative applications that we do not even know exist yet. A wide range of tools on a network attracts users who can use the cryptocurrency for their desired purpose. In addition, having many developers also means that the network is actively improved; developers are deeply intertwined with the network and are therefore encouraged to do so innovate on the network and thus make it faster and cheaper. The more developers, the more decentralized (and fairer) votes are cast for network growth. This is often central to a healthy network.

The figure below clearly shows how Solana is growing along with the impressive growth of Ethereum. Ethereum is still far ahead with almost 3000 developers, where Solana currently has (around) 1000 developers. However, these figures show impressive growth, especially considering that Solana has only been active since April 2020.

Figure 1: Source; Electric capital

Recent developments

Solana Pay

Recently, Solana has it Solana Pay project announced. The goal; a global means of payment (of cryptocurrencies and stable currencies such as USDC) with low peer-to-peer direct transaction fees between customer and merchant.

Its strength lies in eliminating an intermediary in transactions (such as banks, governments, etc.). In this way, the trader can create personal offers and (on-chain) loyalty programs cheaply and quickly. With this, Solana Pay can disrupt the current global centralized transaction market. Its value has been estimated at around $ 2 trillion (McKinsey, 2020), see image below. For comparison; Solana currently has a total market value of $ 30 billion.

Figure 2: Source; Mckinsey 2020

Of course, Bitcoin, Ethereum and many other cryptocurrencies also take part of the “cake” of the transaction market. It’s hard to say what that distribution will look like in the future, but Solana’s ambition and strong support base (many developers and user growth) are putting wind in Solana’s sails.

Where XRP (Ripple) focuses more on institutional transactions, Solana focuses on the general consumer and merchant. While it has been possible to accept cryptocurrency transactions for consumers, shops and merchants for years, Solana has the ambition to put the power of on-chain decentralized payments in the hands of consumers and merchants; think of integrated DeFi dividend generation, fraud protection and on-chain ownership of the customer-seller relationship.

Risks

Of course, it’s not just roses and moonlight. There are a number of things you need to be aware of if you want to invest in Solana.

Central Nodes Solana Foundation

Solana is currently relatively centrally established due to its dependence on the Solana Foundation. Currently, the Solana Foundation is the only entity to develop core nodes on the blockchain. This is estimated at 1500 nodes. This is nothing compared to Ethereum, which has about 300,000 nodes. That centralization makes Solana more susceptible to attack. With confidence in the Solana Foundation, the crypto community often prefers decentralized networks.

Blockchain offline

Solana turns out to be inclined to attack. As a result, the Solana blockchain has been partially or completely offline a number of times. For example, there have been DDOS attacks. In September 2021, blockchain was completely offline for 17 hours due to an attack where bots forced 400,000 transactions per second. Ethereum is much more decentralized compared to Solana and in practice cannot be taken offline.

Many tokens owned by insiders

Many of the Solana tokens are held (and wagered) by insiders. This is because Solana has issued an initial token allocation of 50% to insiders. This is much more than Ethereum (15%) and Bitcoin (0%).

Buy or sell Solana?

Solana shows strong growth and ambition. It gives us confidence for the future. Although Solana is still (relatively) young and there is a lot of competition in the smart contract area, Solana keeps what they promise so far.

For answers to the question of buying or selling, we would like to refer you to our Discord community. Our analysts and experienced traders discuss their own entry and exit points on a daily basis. We also regularly share additional price analyzes and updates of projects that we have discussed earlier in this section. Through Discord, we can share knowledge with each other 24/7, and we try to be at the forefront of the market with our members.

Disclaimer: Investment involves risks. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips on this website are based on our analysts’ own insights and experiences and are for educational purposes only.

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