Step Aside ETH, SOL is The New Supercoin (2024)

Executive Summary
Solana, the fourth largest cryptocurrency by market cap, is a lightning-fast and cost-effective blockchain network that has positioned itself as a strong competitor to Ethereum. Recent on-chain metrics reflect Solana’s increasing influence and competitive stance. However, Solana faces challenges, including centralization concerns, an inflationary token model, and past network instability. The Firedancer protocol aims to address centralization concerns by introducing a second validator client and supporting sharding to enhance scalability.

These network updates have driven positive growth, demonstrated by increases in key on-chain metrics such as Total Value Locked (TVL), decentralized exchange (DEX) trading volume, and daily fee payers. With growing institutional interest and ongoing upgrades, Solana is actively working to overcome its limitations and solidify its position as the leading layer 1 blockchain.

Solana vs Ethereum: A Comparison
Among the thousands of crypto projects today, Solana and Ethereum are two notable networks. Both are major layer 1 blockchains with vibrant communities and a wide range of projects across various web3 niches, including DeFi, NFTs, and Web3 gaming. Despite Ethereum’s first-mover advantage, Solana has gained prominence due to its scalability and speed, often being dubbed as an “Ethereum killer.”

Understanding the Blockchain Trilemma

To grasp the differences between Solana and Ethereum, it’s crucial to consider the blockchain trilemma. Coined by Ethereum co-founder Vitalik Buterin, this concept suggests that decentralized blockchains must balance three main factors: security, decentralization, and scalability, often compromising one to enhance another.

Ethereum uses a Proof of Stake (PoS) consensus mechanism where validators stake ETH to verify transactions, ensuring security through potential loss of staked tokens for malicious actions. This evolved from its original Proof of Work (PoW) system.

Solana combines Proof of History (PoH) with delegated Proof of Stake (dPoS), creating a verifiable time record between transactions and increasing the cost of malicious actions. Despite its innovative approach, Solana has faced challenges like network outages and a smaller validator pool compared to Ethereum.

In terms of decentralization, Ethereum boasts a vast network of globally distributed nodes and validators, preventing any single entity from controlling the network. Solana, with a smaller validator pool, faces centralization concerns, which it aims to mitigate through protocols like Firedancer to enhance resilience and enable more validators.
Regarding scalability, Ethereum processes 15-30 transactions per second (tps) with gas fees varying by congestion. In contrast, Solana handles up to 65,000 tps with minimal fees, thanks to innovations like PoH and Tower Byzantine Fault Tolerance (BFT), making it a cost-effective platform for various dApps.

Network Metrics and Adoption
Solana has shown strong growth in its financial metrics. Although DeFi Total Value Locked (TVL) fell by 9% quarter-over-quarter to $4.5 billion, it increased by 26% in SOL terms. The average daily spot trading volume on decentralized exchanges (DEX) rose by 32% to $1.6 billion.

ET Spotlight

Network metrics indicate increased activity. The number of active daily fee payers grew by 51% quarter-over-quarter to 900,000, and new daily fee payers surged by 114% to 247,000. Despite congestion from spam transactions, the network maintained an average of 70 million daily non-vote transactions. Active addresses also rose significantly, from 1.2 million in mid-April to 1.9 million by mid-July.

Adoption metrics highlight Solana’s growing influence across various sectors. In the Decentralized Physical Infrastructure Networks (DEPin) sector, achievements include Helium Mobile’s new licensing program, Shaga’s $1 million raise, and io.net’s token launch with a $325 million market cap. Memecoin trading continues to drive DEX activity, with notable tokens like WIF, MEW, POPCAT, and GME. Additionally, Pump.fun, a gamified token launch platform, collected $48 million in Q2 fees, averaging $525,000 in daily fees.

Solana Technical Analysis
Solana has shown impressive performance recently, yielding returns of 16.2% in the past week. Market sentiment towards Solana and its tokens, including SOL-based meme coins, remains highly bullish. This has boosted the prices of key Solana ecosystem coins like Jupiter, Radium, and Ponke.

Technically, SOL has been forming a large symmetrical triangle on the daily chart. Within this pattern, a double bottom formation has emerged, signaling a bullish breakout. SOL rallied from $135 to $185 and, after retesting $172, is now challenging the $185 level again. The next target is $200, with potential to revisit this year’s all-time high of $210.

Key indicators support this bullish outlook. The daily MACD is turning bullish, valued at 8.50, and the RSI stands at 65.71, indicating room for further upward movement. SOL has also respected the 200 EMA, suggesting continued bullish momentum and potential for further gains.

ET Spotlight

Solana’s growth in network and adoption metrics underscores its increasing influence and solidifies its position as a leading blockchain.

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