Could Solana Surpass Ethereum in 2024?
The rise of Solana as a competitor to Ethereum has garnered attention in 2023, leading many to wonder if it could potentially dethrone Ethereum as the leader in the DeFi sphere. Let’s examine the factors that contribute to Solana’s growing popularity and assess whether Ethereum should be concerned.
One of the key reasons for Solana’s emergence as a contender against Ethereum is its scalability. Solana’s blockchain technology boasts high throughput and low transaction costs, making it an attractive option for users. This scalability has proven beneficial for decentralized gaming and non-fungible tokens (NFTs), resulting in a growing user base and a significant market capitalization of $40.6 billion as of December 22nd. However, it is worth noting that this market cap only accounts for approximately 14% of Ethereum’s $278 billion market cap.
Solana’s ecosystem is another factor that contributes to its increasing popularity. It encompasses a wide range of projects, decentralized applications (dApps), and partnerships. In 2023, Solana’s community expanded rapidly, with daily active users comprising a significant portion of Ethereum’s user base. Additionally, the growing total value locked (TVL) and record-breaking trading volumes of $2.1 billion on December 22nd demonstrate high user engagement.
According to the latest CoinShares report, Solana saw a fund influx of $10 million in the week ending December 18th, while Ethereum experienced an outflow of $4.3 million. This influx successfully negated previous losses and brought the year-to-date investments in Solana to $156 million. However, when comparing the total assets under management (AUM) of Ethereum ($9.5 billion) and Solana ($588 million), it becomes apparent that Solana still has a long way to go before it can surpass Ethereum in AUM.
Sam Bankman-Fried, the founder and former CEO of the now-infamous cryptocurrency exchange FTX, expressed strong belief in Solana’s potential during a conference in late 2021. He highlighted Solana’s superior transaction speed and lower fees compared to Ethereum, suggesting that it could potentially surpass Ethereum in these aspects. However, it is essential to assess how the Solana ecosystem has fared since then.
While Solana offers advantages in terms of transaction speed and costs, Ethereum maintains its leadership position in terms of TVL and has a more established ecosystem. Despite the positive growth of Solana’s TVL in 2023, it still has a long way to go before it can reach or surpass Ethereum’s mammoth $28.2 billion TVL. Additionally, Solana currently ranks lower than Tron ($8.3 billion), Binance Smart Chain (BSC – $6.1 billion), and Ethereum scaling solution Arbitrum ($2.3 billion) in terms of TVL.
Furthermore, Ethereum continues to dominate the market with a 53% share of the DeFi market, while Solana has secured fourth place with a 2.5% share. Although there has been a dynamic shift in market dominance in favor of Solana, it still has significant ground to cover before it can surpass Ethereum.
In conclusion, while Solana has made significant strides in the market and poses a potential threat to Ethereum, it is unlikely to surpass Ethereum in 2024. Achieving that feat would require a combination of investor trust, security, and development, along with favorable market sentiment.
