Ethereum and Solana Engage in Intense Competition in Layer 1 Blockchain Realm
The rivalry between Ethereum and Solana has escalated recently due to significant developments in the blockchain space. Ethereum continues to maintain its dominance in the Layer 1 blockchain sector and decentralized finance (DeFi), but Solana is rapidly gaining ground with substantial economic activity and an expanding market share.
According to CoinMarketCap data, Ethereum commands a commanding 62% share of the $695 billion smart contract market cap. The network also leads in revenue, capturing 70% of Layer 1 income. Ethereum’s influence extends deeply into DeFi, where it has doubled its Total Value Locked (TVL) since the beginning of the year.
In the smart contract realm, BNB Chain follows Ethereum with a $85 billion market cap, while Solana holds $59 billion. Regarding DeFi TVL, BNB Chain contributed $5 billion in the second quarter, slightly ahead of Solana’s $4 billion.
While Solana shows growth across several metrics, Ethereum remains the dominant player. Mert Mumtaz, CEO of Helius Labs, highlighted Solana’s occasional surpassing of Ethereum in economic activity, driven by higher MEV (Maximum Extractable Value) and priority fees.
Despite Solana’s advancements, Ethereum maintains a substantial lead in DeFi TVL at $57.36 billion compared to Solana’s $4.5 billion. Tron and BNB Chain occupy the middle ground with $7.7 billion and $4.8 billion, respectively. Ethereum’s continued dominance in Layer 1, even amid the rise of Layer 2 solutions, underscores its enduring demand.
Ryan Connor from Blockworks recently discussed the growing attractiveness of the SOLETH relative value trade. Connor pointed out that Ethereum’s market cap and price-to-sales ratio are near cycle highs, while Solana’s price-to-sales ratio remains at all-time lows. He noted Ethereum’s revenue decline juxtaposed with Solana’s expanding market share and revenue, posing valuation questions for traditional finance (TradFi) investors.
Ethereum’s trailing 1-month price-to-sales (P/S) ratio has fluctuated significantly, recently hovering around 220, whereas Solana’s ratio has dropped to 67. Moreover, Solana’s blockspace profitability has surged, reaching nearly $80 million in emissions, whereas Ethereum’s profitability, after peaking at around $2 billion in mid-2021, has stabilized.
The t30d DEX volume market share chart indicates that Ethereum maintains a majority share, although Solana has been steadily increasing its presence, now capturing about 30%. While this data illustrates Solana’s rising influence, it also underscores Ethereum’s sustained leadership.
In terms of price performance as of July 3, 2024, Ethereum is priced around $3,280, reflecting a 5% decline in the past 24 hours and a nearly 3% decrease over the past seven days. Ethereum’s market cap stands at $395.8 billion with a trading volume of $10.4 billion.
Solana, on the other hand, is priced at approximately $142, marking a 5.68% decrease in the last 24 hours but a 3.68% increase over the past week. This price movement aligns with Solana’s growing market activity, while Ethereum’s relative stability underscores its entrenched market dominance.
