Solana is an “Ethereum destroyer” competing with Polkadot, Avalanche and Binance Smart Chain?
Solana has been in the spotlight lately thanks to the SOL rally lasting several weeks and the rally despite the market storm a few days ago.
At the time of writing, SOL is trading at around $ 192, nearly 11,400% up from just under $ 2 in January. At current values, SOL is among the top 10 cryptocurrencies by capital.
Weekly SOL price table | Source: Tradingview
One of the likely catalysts for this upward momentum was funding from investors led by Andreessen Horowitz and Polychain in June, Solana has raised $ 314 million and that money will be used to develop the platform’s technology in the DeFi space. In particular, the investment takes place in the form of the purchase of SOL coins and not in the form of traditional equity.
Another important reason for the skyrocketing SOL price was the announcement of the fourth hackathon, which is scheduled for October 8th. Hackathon is a competition for developers to find cash prizes and start-up funding opportunities for their projects. This is seen as a positive move for Solana as it could lead to wider adoption of the platform’s technology.
So, with Solana making great strides, experts can’t help but compare it to a similar programmable blockchain: Ethereum. Many even say that Solana is an “Ethereum destroyer” that competes with Polkadot, Avalanche and Binance Smart Chain.
What is Solana?
Solana is a Layer 1 blockchain network that can host smart contracts. Solana was founded in 2017 by former Qualcomm Senior Engineering Director Anatoly Yakovenko and is the solution to the scaling problems of Bitcoin and Ethereum. 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 the same page as Ethereum and has smart contracts and Layer 1 infrastructure, but has a number of different suggestions.
Ethereum is still the first choice for building decentralized applications (DApps) and using smart contracts, but there is no denying that despite trying to improve, it is still struggling with longstanding problems. Due to the lack of scalability, users sometimes have to pay exorbitant gas fees. While the transition to PoS is underway and it is estimated that such fees will be reduced by increasing transaction throughput through the introduction of shard chains, the upgrade will not be fully valid into the Ethereum mainnet until the end of 2021 or 2022. This is because Beacon Chain will coordinate all shards that will still be tested from December 2020 despite going live.
On the other hand, Solana already has a PoS structure as a consensus mechanism. In addition, the platform makes significant innovations with the Proof-of-History (PoH) protocol. In a PoS system, it can be difficult for validators to find the chronological order in incoming transaction blocks. PoH solves this problem by creating a cryptographic verification history record of the time elapsed between two events.
Essentially, each Solana validator maintains its own “clock” to check the order of events and the hash of elapsed time. It thus generates a hash sequence that is achieved using a verifiable delay function. Yakovenko was description PoH in 2018 is “a way to encode time as data”.
In other words, Solana can process transactions as soon as they come in instead of waiting for a block to be filled, which can be a time consuming 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 so that it can be sent to the node faster without using too much bandwidth. Solana also implemented Tower BFT, an improved version of the Byzantine fault tolerance system, in other delegated proof-of-stake (dPoS) blockchains.
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”. The main reason is that Solana’s innovations clearly address Ethereum’s weakness.
The aforementioned PoH consensus, in which validators manage their own clocks, shortens transaction verification as nodes do not have to expend power to verify different timestamps. This improves the transaction processing speed. Solana claims it can handle up to 60,000 transactions per second, which is way beyond what Ethereum and even Bitcoin, Visa, XRP combined offer.
Maximum number of transactions per second | Source: Finextra, Ripple, Visa, Solana
In addition, the transaction costs are significantly lower. As mentioned earlier, the fluctuating and inappropriately high gas fees are one of the biggest drawbacks for Ethereum users. 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 fee is only about $ 0.0025 per transaction.
Join the NFT trend
That year, NFT became a hot trend as artists, investors, collectors, traders, and celebrities began to join the blockchain-based movement. The majority of NFTs are still traded on the Ethereum network. However, Solana is slowly trying to capture a piece of this emerging market.
The new NFT project Degenerate Ape Academy became a test of the platform’s scalability, as the entire collection of 10,000 monkeys sold out in just 8 minutes. This pushed the price of SOL to $ 53.7 on August 15, down from $ 44.11 just a day earlier.
Volume (yellow) and SOL day end (green) | Source: Yahoo! Finance
The Solanart marketplace, which is tracking sales of NFT collectibles, shows that the new collection is dominating sales on Solana, amassing a volume of 765,000 SOL tokens, or about $ 122 million at current prices.
Solana’s Top 3 NFT Collections by Total Sales (USD) | Source: Solanart
With that in mind, those who used to enjoy trading on the Ethereum network might be tempted to change their minds. Nathan Ross, former marketing director for dating app Hinge, has tweets that Solana is a better fit with NFT because it’s faster, cheaper, and easier than Ethereum.
Later on, Solana also teamed up with the popular FTX derivatives platform to launch the NFT market on September 6th.
Can Ethereum compete with Solana in the long term?
The question now is whether Solana can outperform the blockchain platforms of the top two altcoins. Ethereum 2.0 may not be complete until next year as phase 2 of the upgrade is planned for late 2021 or early 2022.
Even so, Solana’s design architecture makes it possible to stay current as it is theoretically scaled according to 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, what are the chances of Solana turning Ethereum off?
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According to Cointelegraph