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Ethereum vs Solana: Which is Better for Investment?

Updated on :  

08 min read.

Ethereum has been one of the most popular blockchains dominating the scene of dApps development. It also facilitates faster and safer payments across the globe. But now, another blockchain has been raging the market – Solana. 

Released on 16 March 2020, Solana has addressed many issues that Ethereum users have been facing and has risen to a position to act as a viable alternative. Indeed, 2021 has been the year of Solana. 

Here’s a competitive analysis between Ethereum and Solana.

Ethereum vs Solana: Mechanism

The performance of both these blockchains depends a lot on the mechanism they use. Ethereum uses the Proof-of-Work (PoW) consensus mechanism that Bitcoin uses. The network miners take part in this process. This ensures that the network stays decentralised, but there is a catch. The participating barrier within the network is high. This leads to fewer transactions on the network per second and reduces the network’s performance as a whole. 

On the other hand, Solana uses the Proof-of-History (PoH) mechanism. This protocol cryptographically determines the time passage between two events. The mechanism further adds timestamps to track the order of each transaction. 

This difference in mechanism solves the problem of Ethereum and Bitcoin, where transactions on the blockchain are not logged promptly. 

Ethereum vs Solana: Architecture

Ethereum uses a ‘stateful’ architecture in which all the miners on the network must update their copy of the network each time a new transaction occurs. 

This may seem like a decentralised way to maintain records; however, it slows down the entire process. 

Solana solves this problem by using a ‘stateless architecture’. As all the transactions are time-stamped, the entire network does not need to update itself for each transaction. The updates are processed sequentially, leading to an overall speeding up of the entire process. 

Ethereum vs Solana transaction: Speed

The current version of Ethereum can process approximately 13-15 transactions per second. However, platforms like Polygon serve as a multi-chain Ethereum scaling platform. It helps increase the number of nodes in the network, thereby enhancing the transaction load. 

Solana, on the other hand, does not need Layer-2 solutions to speed up its transactions. It uses a Turbine block propagation protocol that breaks data into smaller fragments. This process, in turn, makes data transfer across the network an easy task. The entire mechanism helps the blockchain perform at a whopping 50,000 transactions per second. 

Ethereum vs Solana: Smart contracts

Ethereum is considered to be Turing complete. This unique feature helps it support a variation in programmability, which helps it to create different smart contracts. Ethereum also uses Solidity as a base programming language for coding its smart contracts. 

On the other hand, Solana uses Sealevel to manage its smart contracts. Compared to the traditional EVM-based contracts, Sealevel uses a stateless mode and contains only program logic. 

Ethereum vs Solana: NFTs

If you are interested in NFTs, you probably have heard of Ethereum-based NFT marketplaces. OpenSea is a famous example in this respect. It runs on the ERC-721 and ERC-1155 standards and aims to build a vibrant open digital economy. This platform supports cryptocurrencies like Ethereum (ETH/WETH), SOL, USDC, and DAI. The wallets that support OpenSea are:

  • MetaMask
  • Coinbase Wallet
  • WalletConnect
  • Phantom
  • Glow
  • Fortmatic
  • Kaikas
  • Bitski and many more

For minting NFTs on OpenSea, there is no fee. On the final sale, you must pay 2.5% as a service fee. There is also a Creator’s fee of 10%. 

SolSea is Solana’s NFT marketplace with integrated minting. It uses ALL.ART Protocol has embedded licenses called NFT-PROs for its non-fungible tokens. You can buy NFTs on this marketplace with fiat currencies using Moonpay or FTX Pay. The compatible wallets are:

  • Phantom
  • Coin98
  • Ledger
  • Solflare
  • Torus
  • Sollet
  • Slope

SolSea does not have bidding options like OpenSea, but they plan to implement them soon. 

There is a 3% marketplace fee for every successful NFT sale. You can also choose your own creator’s fee. 

Ethereum and Solana have transaction fees for minting, listing and delisting, which are not refundable. The method to open an account and mint NFTs is similar on both platforms.  

Ethereum vs Solana: DeFi ecosystem

Ethereum has many decentralised finance applications that cater to billions of users. Top Ethereum DeFi apps are:

  • MetaMask Swap
  • Sushi
  • Polygon POS Bridge
  • Bungee
  • Libera.Financial
  • CowSwap
  • HEX
  • Aave V2
  • ShibaSwap and many more

Comparatively, Raydium, Saber, Serum, etc., are a few DeFi apps available on Solana. Being new to the blockchain world, this platform’s DeFi ecosystem is yet to grow to a larger scale. 

Ethereum vs Solana: Investment

Ethereum and Solana both have their pros and cons. The former has been an older player in this field and thus has a larger market cap than the latter. However, with its new technologies, Solana has addressed many issues that Ethereum users face. 

Firstly it’s the network congestion. On busy days, Ethereum transactions can be a real pain to process. Additionally, the higher gas fees are also an issue that needs addressing. However, with its vast DeFi marketplace, Ethereum gives its users many opportunities to diversify their assets. 

The growth of Solana has been worth noticing, especially throughout 2021. It is too early to judge as the ecosystem is relatively new. However, it does have the potential to make its mark in the future. 

Both the native tokens of Solana (SOL) and Ethereum (Ether) are available for purchase from the following exchanges:

  • KuCoin
  • Binance
  • Uphold and many more

As an investor, you should look at the opportunities present in both ecosystems. Conducting thorough research on these blockchains and planning your investment accordingly is the best way to proceed.