Solana and Ethereum are both smart contract platforms that support a broad ecosystem of applications and tokens. While the two projects share many similarities, they also have several important differences for users and traders.
Overview
When Ethereum launched in 2015, it broke new ground as the first programmable blockchain with smart contract capabilities.
With significant momentum among developers and users, the project established a sizable first-mover advantage for smart contract networks. However, Ethereum’s popularity soon became a constraint as it became apparent that the platform couldn’t scale to support the demand for block space, and ethereum gas fees soared.
Solana wasn’t even the first competitor to Ethereum—it was one of many, including EOS and Polygon, that emerged during the 2017 bull market. However, like many others, Solana marketed itself as faster and cheaper than Ethereum at a time when block space on the first blockchain was at a premium.
The project launched on mainnet in early 2020. During the bull market that followed, it gained a significant advantage over rival next-generation platforms when FTX founder Sam Bankman-Fried threw his weight behind the project. Although the fallout of the subsequent FTX collapse would hit Solana harder than many projects, it managed to gain a sufficient base of support to weather the storm.
As such, Solana remained a resilient competitor to Ethereum, even since the latter upgraded from proof of work to proof of stake. Solana also gained significant advantages through collaborative efforts such as the Wormhole Bridge, making it easier for assets and users to move between ecosystems.
Use cases and adoption of Solana and Ethereum
Both projects are smart contract platforms, so they compete within the various use cases of blockchain. Overall, Ethereum has the first-mover advantage, with a larger community and a better-funded ecosystem. As such, it hosts many of the sector's flagship apps and services, such as the MetaMask wallet, Uniswap exchange, and Bored Ape Yacht Club NFTs. Ethereum also has the enterprise/institutional advantage, with more adoption, in part due to the backing of ConsenSys.
Solana has proven to be a significant rival to Ethereum in those verticals that rely on transactions that are fast, cheap, or both, fostering its own ecosystems of DeFi, NFTs and gaming. Derivatives exchange Jupiter, NFT marketplace Magic Eden, and space exploration game Star Atlas were all first developed for Solana.
Solana Technology vs. Ethereum Technology
While both projects offer similar functionality, Solana is faster and cheaper, thanks to the underlying technology. Solana can process speeds of up to 29,000 transactions per second, while Ethereum can still only manage a maximum of around 45 transactions per second, even following several key upgrades.
Further, Solana transactions cost a fraction of a cent, whereas fees on Ethereum can still stretch to several dollars or even more for gas-heavy activities such as NFT minting.
Solana’s consensus model is the core reason for its high throughput capabilities. Like Ethereum, the project uses a proof of stake model, but it also incorporates a unique protocol for time stamping called Proof of History. This protocol eliminates the need for the validator network to reach consensus over transaction and block times and facilitates parallel processing.
In contrast, Ethereum relies on the validator network to maintain a record of transaction chronology. Thus, the network must process transactions sequentially, which creates a bottleneck during periods of high demand.
However, despite offering many advantages, the Solana network has suffered several incidents of downtime over the years since it launched on the mainnet, where no blocks were produced for several hours at a time. In this regard, Ethereum has the advantage since it has never experienced unplanned outages, maintaining uninterrupted operations even throughout major upgrades like the Ethereum Merge.
Ethereum smart contracts are programmed using the Solidity programming language, whereas Solana uses Rust. However, developers on Solana also have access to the Solana Program Library (SPL), a pre-written set of programs for deploying various applications and processes.
SOL vs. ETH
Both SOL and ETH are used as native cryptocurrencies for their respective platforms and can be staked as part of the underlying PoS consensus to generate rewards. In fact, both SOL and ETH are two of the most popular choices for staking cryptocurrencies, although Solana rewards are generally paid at a higher rate.
Both coins operate a mint-and-burn mechanism when it comes to the issuance of new coins. Following a 2022 upgrade, Ethereum implemented a model where a percentage of gas fees are burned (destroyed) with each transaction, introducing a deflationary mechanism to offset the new ETH created with each block. If the ETH burn rate exceeds the rate of supply as determined by the Ethereum protocol, then ETH is deflationary. Otherwise, the supply increases, making it an inflationary asset.
Solana issues new tokens at a pre-defined rate, which will reduce incrementally until it reaches the minimum of 1.5%. It also burns transaction fees at a defined rate of 50%, with the remainder allocated to the validator processing the transaction.
In terms of market cap, ETH has occupied the second position on the crypto ranking tables for many years now. Since gaining popularity in 2021, Solana maintains a relatively stable position in the top ten cryptocurrencies, except for the volatile period following the FTX collapse.
Solana vs. Ethereum essentials
- Solana launched on mainnet in 2020 and quickly became one of the most significant challengers to Ethereum, which had already established a sizable first-mover advantage.
- Solana is faster and cheaper to use than Ethereum thanks to its unique underlying consensus protocol, but the former has suffered several outages over recent years.
- SOL is one of the most valuable cryptos by market cap, although ETH remains second following BTC.
