Is Solana an “Ethereum Killer”?

Solana has become a trending altcoin due to consecutive bullish weeks. At the time of writing, Solana is trading at around $ 207, up 11,400% from less than $ 2 in January. At its current value, Solana is among the top 10 cryptocurrencies by market capitalization at around $ 60 billion and ranks sixth among Dogecoin according to the Cointelegraph Marketplace.

One of the likely catalysts for this upward momentum was investor funding led by Andreessen Horowitz and Polychain in June, with Solana raising $ 314 million to be used to develop its decentralized finance (DeFi) technology. In particular, this investment took the form of SOL coin purchases rather than traditional stocks.

Another big reason for Solana’s price boom is the announcement of the fourth hackathon, which is scheduled for October 8th. This is seen as a positive move for Solana as it can contribute to wider adoption of its technology.

So, with Solana making great strides, experts can’t help but compare it to a similar programmable blockchain in Ethereum. Many have even gone so far as to say that Solana could be the Ethereum killer rivaling Polkadot (DOT), Avalanche (AVAX), and Binance Smart Chain (BSC).

What is Solana?

Solana is a first-tier blockchain network that can host smart contracts. Solana was founded in 2017 by Anatoly Yakovenko, a former senior engineering manager at Qualcomm, and was seen as a solution to the scaling problems of Bitcoin (BTC) and Ethereum (ETH). Two years after its inception, Solana raised $ 20 million in a Series A financing round led by Multicoin Capital.

On the other hand, while Bitcoin is widely accepted as a form of peer-to-peer money, Ethereum is the platform for doing almost anything peer-to-peer. Solana is on par with Ethereum with smart contract features and layer-one infrastructure, but it brings with it a number of other suggestions.

Ethereum is still the top choice for building decentralized applications (DApps) and deploying smart contracts, but there is no denying that it runs into legacy issues over time that it seeks to refine. Because of the inability to scale, users sometimes face high gas charges. Although the transition to Proof of Stake (PoS), which is expected to reduce these fees by increasing transaction throughput through the introduction of shard chains, has been initiated, it is unlikely to be fully integrated into the Ethereum mainnet until the end of 2021 or 2022. This is because the beacon chain coordinates all of the shards that, despite their activity since December last year, are still being tested.

On the other hand, Solana already has a PoS structure as a consensus mechanism. The most important innovation, however, lies in its Proof of History (PoH) protocol. Under the PoS system, it can be difficult for validators to find the chronological order in incoming transaction blocks. The way PoH solves this problem is to make a cryptographically verifying historical record of the time that has elapsed between two events.

Essentially, each Solana validator maintains its own “clock” that checks the order of events and hashes the elapsed time. It thus generates a hash sequence, all of which is achieved through a verifiable delay function (VDF). Yakovenko described it in 2018 as “a way to encode time as data”.

In other words, Solana can process transactions instead of waiting for a block to be filled, which can be a tedious process. This makes Solana more scalable and processes more transactions than some other blockchains.

Solana also brings a block transfer protocol called Turbine, which breaks important data into bits and then sends it to nodes faster without using too much bandwidth. Solana also implemented Tower BFT, an improved version of the actual Byzantine Fault Tolerance System (pBFT) in other authorized proof-of-stake (DPoS) blockchains. Tower BFT also praises PoS for acting as the network’s gatekeeper.

An Ethereum Killer?

Although Ethereum is the dominant network with 7,000 nodes and 90,000 validators compared to Solana’s 600 nodes and 1,000 validators, Solana is still referred to as the “Ethereum killer”. Much of this is due to the way its innovation addresses perceived weaknesses in Ethereum.

The aforementioned PoH, in which the validators manage their own clocks, shortens the transaction verification, as the nodes no longer have to use computing power to verify different timestamps. This improves the transaction processing speed. Solana claims it can process up to 60,000 transactions per second, a far cry from what Ethereum and even Bitcoin, Visa and XRP can offer together.

In addition, the transaction costs are significantly lower. As mentioned earlier, one of the biggest drawbacks for Ethereum users is that gas fees can be volatile and inappropriately high. Users sometimes pay up to $ 65 to complete a transaction. Last year, one user even paid $ 9,500 just to trade $ 120 on Uniswap. At Solana, the fees from only $ 0.0025 per transaction – unlike Ethereum.

Download on 30 publication The complete bi-weekly newsletter from Cointelegraph with charts and market signals as well as news and overviews of fundraising events.

Join the NFT trend

This year, unusable tokens (NFTs) became the talk of the town as artists, investors, collectors, traders, and celebrities began to join the movement based on this blockchain. The majority of NFTs are still traded on the Ethereum network. However, Solana is slowly trying to capture a piece of this emerging market.

A new NFT project called Degenerate Ape Academy became a test of its scalability, as the entire collection of 10,000 monkeys sold out in just eight minutes. This caused SOL’s price to rise to $ 53.70 on August 15, after trading at $ 44.11 just the day before.

Solana NFT Marketplace, Solanart tracking sales of publicly traded NFT collections, shows that Degenerate Ape Academy’s NFTs are the dominant force in Solana NFT sales. The collection has amassed a volume of 765,000 SOL tokens, or about $ 122 million at current prices.

With that in mind, those who have previously enjoyed transactions on the Ethereum network might be tempted to change it completely. Former Marketing Director of dating app Hinge Nathan Ross tweeted on how Solana fits the NFT use case better because it’s faster, cheaper, and easier than Ethereum.

Then there was integration with FTX on September 6th when the popular crypto derivatives platform launched its own NFT marketplace.

Can Ethereum compete with Solana in the long term?

The question now is whether Solana can overtake the two top altcoins. Ethereum 2.0 is not expected until next year, as the second phase of the upgrade is through late 2021 or early 2022.

Even so, Solana’s design architecture allows it to be kept up to date, as it was theoretically scaled using Moore’s Law. This means that as computers get faster, Solana will get faster over time. Essentially, Solana is future-proof thanks to its scalability. If this proves to be true, will Solana be the culprit destroying Ethereum?

Cointelegraph’s Market Insights newsletter shares our knowledge of the fundamentals that are transforming the digital asset market. The newsletter delves into the latest data on social sentiment, on-chain metrics, and derivatives.

We also review top industry news, including mergers and acquisitions, changes in the regulatory landscape, and the integration of corporate blockchains. Register now to be the first to receive this information. All previous editions of Market Intelligence are also available on Cointelegraph.com.