The Solana network: A Potential Challenger to Ethereum’s Dominance
The Solana network has been making waves in the cryptocurrency world, as it could potentially surpass the Ethereum network in terms of transaction fees, a significant development that could impact Solana’s status as a so-called “Ethereum-killer.”
According to Dan Smith, a senior research analyst at Blockworks, Solana could overtake Ethereum’s transaction fees as soon as this week. Smith’s X post on May 7 highlighted a metric known as Captured MEV, or Maximal Extractable Value, which refers to profits mostly captured through arbitrage trading on the protocols. This metric measures the maximum amount of value that can be extracted from a blockchain by a user or a group of users.
The data presented in Smith’s X post showed that Solana’s total economic value of $2.8 million was close to Ethereum’s $3.1 million on May 7. However, Ethereum’s daily transaction fees still outpaced Solana’s, with Ethereum generating over $2.75 million worth of fees in the past 24 hours, compared to Solana’s $1.49 million, according to DefiLlama data.
When looking at the total value locked (TVL), Solana’s $3.94 billion TVL is still a small fraction, around 7.4%, of the Ethereum network’s over $53 billion TVL.
Solana, launched on mainnet in March 2020, boasts a claimed throughput of 50,000 transactions per second (TPS) and aims to improve on the scalability and inefficiencies of Ethereum, positioning itself as an “Ethereum-killer.” Unlike Ethereum’s modular approach to scalability via layer-2 (L2) scaling solutions, Solana’s monolithic approach seeks to create scalability and low fees as a standalone blockchain network.
However, Solana’s approach has faced widespread criticism following its previous network outages. In early April, the demand for memecoins caused approximately 75% of Solana transactions to fail, as the network was unable to handle the large demand. Additionally, on February 6, block production on Solana stopped for approximately five hours, before engineers and validators were able to restart the network, according to Solana’s status page.
The ongoing competition between Solana and Ethereum highlights the dynamic nature of the cryptocurrency landscape, where innovative blockchain networks are constantly vying for dominance and market share. As the industry continues to evolve, it will be interesting to see how these two networks, and others, position themselves to meet the growing demands of the decentralized finance (DeFi) ecosystem and the broader cryptocurrency market.