Solana's Sun Shines Bright: Can This Decentralised Blockchain Platform Beat Ethreum?

On September 1, crypto-enthusiasts woke up with the bullish news of the decentralized blockchain platform, Solana gaining more than 20% in one day, hitting an all-time high and achieving almost $40 billion in market cap. Solana has now made its way into the top 10 cryptocurrencies by market cap. However such meteoric highs are not new to SOL; its price is 200% higher since the start of August 2021. The crypto-space is rife with speculations of if Solana (SOL) could overtake Ethereum (ETH) one day. Since ETH is currently the second-largest cryptocurrency by market cap, it is certainly worth examining the origins of these speculations

What Is Solana (SOL)?

Solana is a decentralized computing platform that aims to improve blockchain scalability by using a combination of proof of stake consensus and so-called proof of history. Solana claims to be able to support 50,000 transactions per second without sacrificing decentralization and aims to keep transactions less than $0.01 for both developers and users. Additionally, SOL has projected itself as a decentralized blockchain built to enable scalable, user-friendly apps. Since its debut about 18 months ago, SOL now hosts about 400 projects in the DeFi (decentralised finance), Web3 and NFT (non fungible token) space. Further, SOL claims it is censorship-resistant in terms of remaining open for applications to run freely and transactions to be processed without any hindrance.

While SOL can certainly assuage censorship concerns, it is worth asking if SOL can really overtake ETH (and other crypto projects such as KLAY, ADA, DOT and GRT) in the DeFi and NFT space. As things stand, ETH stands heads and shoulders over all other crypto projects in DeFi space which is valued at around $120 billion as of 2021. However, ETH suffers from scalability issues along with high gas fees which can make listing NFT tokens on ETH powered systems an expensive proposition. However, SOL is underpinned by eight different innovations that could make it a stiff contender for ETH's throne. These include:

• Proof of History (for consensus)

• Sealevel (for parallel smart contract operations)

• Pipeline (multiple data stream processing from different hardware devices)

• Turbine (supports scalability and can sustain 50,000 transactions per second)

• Cloudbreak (allows parallel database reading and writing via horizontal scaling)

• Gulf Stream (memory pool for rapid transaction confirmation)

• Archivers (Supports petabyte scale data processing storage via its Proof of Replication system)

All of these advances can help SOL become a powerful player in the decentralised app (DApp) ecosystem. SOL's NFT offerings have made a splash in the recent past and SOL allows for staking. Additionally SOL enjoys the backing of well-known cryptocurrency capital providers CMCC Global, Foundation Capital, and Multicoin Capital.

So Can SOL Displace ETH?

This is the proverbial million-dollar question. I do not claim to have an answer for this. However what is undeniable is that over the past few months, SOL has seen remarkable gains

Figure 1: Solana Price Chart From September 2020-September 2021

Starting from less than $1 in September 2020, SOL prices are touching all-time highs as of September 2021. Additionally, this uptrend has been in evidence since July 2021 although trading volumes shot up significantly in September 2021. This early positive price moves combined with its scalability potential make SOL a very promising cryptocurrency indeed. Yet it's too early to say if SOL could overtake ETH or even remain in the top 10 cryptocurrencies. Apart from the obvious price disparity between SOL and ETH, the former's DeFi space only has 5 projects with a TVL (total volume locked) of greater than $100 million while the ETH DeFi space has greater than 60 projects. But then, SOl is just getting started. In the broader scheme of things, how far SOL (and indeed other cryptos) go eventually will chain mass blockchain adaptability.