Solana vs Ethereum: Which Blockchain Dominates 2024?

What is Solana?

Solana, often nicknamed an "Ethereum killer" during its early days, was launched in 2020 by Anatoly Yakovenko to be a high-performance blockchain. As Ethereum became congested with high gas fees, especially during the NFT boom, Solana was the competitor, offering a faster, more cost-effective alternative. It quickly gained popularity, attracting a dedicated following and hosting large-scale events attended by thousands of aspiring Solana maxis.

Institutionally, Solana was backed by the FTX crypto exchange, which supported its rise—until the infamous FTX crash in late 2022, which saw Solana's price plummet to a low of $8 (20 times lower than its value today). What gives Solana an edge in 2024 is the large number of retail traders using the low-fee, high-speed network for launching and trading meme coins, with over 80% of all new crypto tokens now being hosted on Solana.

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What is Ethereum?

Ethereum, launched in 2015 by Vitalik Buterin, is the original smart contract platform that revolutionized blockchain by enabling decentralized applications (dApps). Positioned as the next step after Bitcoin, Ethereum quickly became the foundation for the burgeoning DeFi and NFT markets. Despite the launch of countless L1 competitors, Ethereum remains the most widely used blockchain, especially in institutional and large-scale financial applications.

Following its transition to Proof-of-Stake (PoS) in 2022, Ethereum now focuses on scalability, particularly through Layer 2s, and has become a leader in the tokenization of real-world assets, further solidifying its position as the go-to Layer 1 for institutions. The biggest narrative of 2024 for Ethereum was the unexpected speed at which the Ether exchange-traded funds (ETFs) were approved in the middle of the year.

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Solana vs Ethereum in 2024

The best way to compare Solana and Ethereum is to look at their performance, both in terms of price action and onchain data.

• Price: SOL’s market cap is currently $67 billion, marking a 40.43% increase in 2024 and a remarkable 569.23% surge over the past year. In comparison, Ethereum's market cap stands at $307 billion, with a 9.84% rise year-to-date (YTD) and 46.70% one-year pump.
• Total Value Locked (TVL): Ethereum dominates with $85.2 billion in TVL, largely driven by its DeFi protocols. That's a 134.59% increase this year. Meanwhile, Solana, though smaller, has grown to a TVL of $10.1 billion, up 255.69% in 2024.
• DEX Volume: Solana has occasionally outpaced Ethereum in DEX volume, particularly due to meme coin trading. However, Ethereum generally maintains higher overall volumes, recording $49.6 billion in August 2024, compared to Solana's $35.5 billion.
• Transactions: Ethereum and its L2s processed 0.81 billion transactions over the last three months, whereas Solana handled 3.56 billion transactions during the same period.
• Fees and Revenue: Ethereum, which once generated around $30 million in daily fees (with 90% as revenue), has seen this drop to $2 million daily following the Dencun upgrade in March 2024. Solana consistently generates between $0.5 million and $2 million in fees, occasionally surpassing Ethereum in daily revenue.
• NFT Sales: Ethereum continues to dominate the NFT space, but Solana’s Magic Eden is also gaining traction. In 2024, NFT trading volume fluctuated between $20 million and $160 million for Ethereum and $14 million to $68 million for Solana.

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Solana Narratives

Solana has one of the most dedicated communities, ready to battle any criticisms. Solana has faced several setbacks, including network outages and failed transactions. However, the current trends show that Solana is a preferred network for several narratives.

• Meme coins: Solana is the go-to blockchain for meme coin creation, driven by token generators like Pump.fun and decentralized exchanges (DEXs) like Raydium.
• DePIN: Solana’s crypto mobile strategy makes it a leader in Decentralized Physical Infrastructure Networks (DePINs). This is led by the Saga smartphone, with over 150,000 units sold, and the upcoming Chapter 2 phone, expected in 2025.
• Ecommerce Integrations: Solana’s ecosystem is further strengthened by recent mainstream adoptions, such as PayPal launching its stablecoin, PYUSD, on Solana, Shopify integrating Solana Pay for online purchases, and Stripe using Solana for payments.
• Potential Solana ETF: Unline Bitcoin and Ethereum, Solana is still viewed as a security by the US SEC, yet hype over a potential ETF approval can drive SOL's price up, thanks to asset managers like VanEck who have already filed for one.

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Ethereum Ecosystem

Ethereum has transitioned from its once-dominant DeFi focus, especially after the Terra Luna crash reduced interest in yield-generating products by more than 50% in TVL. Recently, Vitalik Buterin has been critical of the use cases of DeFi within the Ethereum ecosystem.

• Layer 2s: Ethereum’s Layer 2 networks, including Arbitrum and Optimism, manage over $10 billion in TVL, addressing scalability issues while reducing transaction costs.
• Re-Staking: Projects like Lido, EigenLayer, and Ether.fi, which specialize on liquid staking, restaking, and liquid restaking, have accumulated $66 billion in TVL, representing nearly half of the globabl DeFi market.
• ETFs: The SEC’s approval of Ethereum-based ETFs is expected to attract billions in institutional investment over the coming years.
• RWA tokenization: Ethereum is leading the tokenization of real-world assets, a market backed from institutional giants like Larry Fink's BlackRock.

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Technology Breakdown

Even though the focus on technology has declined, understanding the distinct blockchain architectures of Solana and Ethereum is crucial. Solana’s monolithic architecture combines Proof of History (PoH) with Proof of Stake (PoS), allowing it to achieve theoretical transaction speeds of up to 65,000 transactions per second (TPS). This setup is designed for high throughput and efficiency but has faced concerns about network stability and centralization.

In contrast, Ethereum employs a modular architecture built on PoS, transitioning from its previous Proof-of-Work system. This structure is further supported by Layer 2s like ZKsync and Starknet, which offload transactions from the main chain to enhance scalability and security. This modular approach allows Ethereum to maintain a balance between decentralization and performance.

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SOL vs ETH Tokenomics

Solana operates on an inflationary token model, with approximately 466 million SOL currently in circulation out of a total supply capped at 583 million. The network’s inflation rate is designed to decrease gradually, stabilizing at around 1.5% annually. Validators on Solana are incentivized with staking rewards that currently offer yields of around 6-7%. Additionally, about 50% of transaction fees are burned, which helps exert deflationary pressure over time.

Ethereum's tokenomics have improved after the Merge, with the introduction of EIP-1559, which burns a portion of transaction fees to reduce the overall supply of ETH. This mechanism aimed to make ETH deflationary "e.g. ultrasound money"; however, the network is currently slightly inflationary, with new issuance slightly outpacing the burn rate. The total supply of ETH is around 120 million, and its issuance rate is about 0.7% annually.

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Bottom Line

In 2024, Solana currently leads in retail adoption and fast transactions, while Ethereum remains the core for institutional applications, but trends may change at any time. For example, Solana could receive unexpected US ETF approvals in 2025 or become the primary network for restaking (Solayer recently raised $12 million, while Renzo expanded RZO to Solana).

Similarly, despite the Ethereum Foundation's current pivot away from DeFi, Ethereum's dominance in decentralized finance remains strong, with protocols such as Aave and MakerDAO (now Sky) making headlines once again. Ethereum ETFs may be trailing Bitcoin ETFs, but this could change quickly sending ETH to new record price levels.