Ethereum vs. Solana: A Clash for Supremacy in the Layer 1 Domain
The rivalry between Ethereum and Solana has reached new heights due to recent developments. While Ethereum continues to stand as a leading figure in the Layer 1 blockchain realm and DeFi, Solana is making significant strides with a surge in economic activity and an expanding market share.
According to CoinMarketCap data, Ethereum commands a lion’s share of the smart contract space’s $695 billion market cap, amounting to 62%. Additionally, the network secures 70% of the Layer 1 income, solidifying its position as a powerhouse. Ethereum’s influence extends to the DeFi sector, witnessing a twofold increase in its total value locked (TVL) since the beginning of the year.
Breaking down the DeFi TVL figures, BNB Chain follows closely behind with $85 billion, while Solana holds $59 billion. In terms of contributions to DeFi TVL, BNB Chain added $5 billion in the second quarter, compared to Solana’s $4 billion.
Solana is making strides, yet Ethereum remains unwavering in its dominance. Mert Mumtaz, the CEO of Helius Labs, highlights that Solana occasionally outshines Ethereum in economic activity, driven by higher MEV and priority fees. Despite Solana’s growth, Ethereum’s DeFi TVL stands tall at $57.36 billion, surpassing Solana’s $4.5 billion. Tron and BNB Chain claim intermediate positions with $7.7 billion and $4.8 billion, respectively. Ethereum’s continued supremacy in the Layer 1 domain, despite the emergence of Layer 2 solutions, underscores the blockchain’s enduring demand.
A growing trend is the strength of the SOLETH trade, gaining momentum as ETH faces a decline in market share. Ryan Connor, a researcher at Blockworks, has shed light on the increasingly compelling case for the SOLETH relative value trade. Connor points out that Ethereum’s market cap and price-to-sales ratio are nearing cycle highs, while Solana’s price-to-sales ratio rests at all-time lows. Ethereum’s shrinking revenue and Solana’s expanding market share and revenue raise pertinent questions for traditional finance investors regarding Ethereum’s valuation.
ETH’s trailing 1-month price-to-sales (P/S) ratio has fluctuated considerably, hitting approximately 220 recently, whereas Solana’s ratio dropped to 67. Furthermore, Solana’s blockspace profitability has surged, nearing $80 million in emissions. In contrast, Ethereum’s blockspace profitability peaked at around $2 billion in the middle of 2021 before stabilizing.
The t30d DEX volume market share chart depicts ether maintaining a dominant share, although Solana’s presence is on the rise, currently capturing about 30%. While this data supports Solana’s expanding influence, it also underscores Ethereum’s enduring leadership.
Examining the price performance, on July 3, 2024, Ethereum is priced close to $3,280, witnessing a 5% decline in the last 24 hours and a nearly 3% drop over the past week. With a market cap of $395.8 billion and a trading volume of $10.4 billion, Ethereum’s market position remains strong.
Solana is currently valued at around $142, registering a 5.68% decrease in the previous 24 hours but a 3.68% uptick over the past seven days. This price movement correlates with Solana’s increasing market activity, while Ethereum’s relatively stable performance reflects its entrenched dominance in the market.
Sources: CoinChapter.com, Google News, Santiment