Ethereum vs Solana: A look into the pros vs cons

Beyond Bitcoin, the original and still dominant cryptocurrency, there are an array of different cryptoassets vying for mainstream investor attention for various reasons.

Two of which are currently within the top five crypto assets by market capitalisation according to CoinMarketCap; Ethereum (second largest at over USD$477 million) and Solana (fifth largest at over USD$50 million).

So, why are these two assets so popular amongst investors and what benefits and risks do they pose?

Defining Ethereum & Solana

Before getting too far into the details of each of these crypto assets, let’s break them down.

What is Ethereum?

Ethereum (ETH) is a decentralised platform that runs smart contracts, which are applications that run exactly as programmed by any willing third party without any possibility of downtime, censorship, fraud or interference from additional third parties.
These projects run on an entirely open-source blockchain network, an enormously powerful shared global infrastructure that can move value and information seamlessly. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past and many other things, all without a middle man or counterparty risk.
The Ethereum blockchain has also made it possible for users to borrow, lend, and receive interest on crypto, without turning to financial institutions or relying on other intermediaries.

The project was crowdfunded during August 2014 by fans all around the world. It is developed by the Ethereum Foundation, a Swiss non-profit, with contributions from across the globe.

What is Solana?

Solana (SOL) is an open source project that aims to be the world’s first web-scale, high-performance, permission-less blockchain.

Solana seeks to use a revolutionary innovation called Proof-of-History to remove performance bottlenecks, allowing transaction throughput to scale proportionally with network bandwidth.

Earned by staking coins for validators who run the network or by providing computing resources to validate transactions, Solana is run by ‘Solana Clusters’, which are a set of computers that work together and can be viewed from the outside as a single system.

So, what makes them similar?

Most of it has to do with their ability to host and run DeFi applications.

The term ‘DeFi’ stands for decentralised finance, and has become popular in recent years due to the increase in offerings of financial services available on the blockchain.

Currently most DeFi applications and platforms run on the Ethereum blockchain, as it was the platform that pioneered open source application development.

While Ethereum stood as a unique platform for many years, now a string of other blockchain projects being labelled as ‘Ethereum Killers,’ are starting to rise up and impress investors with their technologies, which in some cases one-up the world’s second biggest crypto.

Both of these blockchains have a few key similarities including the fact that they are decentralised, open-source, public blockchain protocols. They are also extremely modular and can be programmed to work with a plethora of different applications.

Nevertheless, Ethereum and Solana are poles apart when it comes to other factors like performance and overall scalability potential.

Which is better Ethereum or Solana?

While to cryptocurrency beginners, Ethereum and Solana can seem quite similar, in reality there are multiple differences, as well as benefits and disadvantages of each.

Ethereum is considered a front-runner and first-mover in the blockchain space, however, it’s biggest downfall is that it is fundamentally limited in its capacity for global-scale application due to the small number of transactions per second it can support.

In comparison, Solana promises higher transaction speeds than Ethereum at lower costs. Solana can support tens of thousands of transactions per second, while Ethereum can support roughly 13 transactions per second.

The secret behind Solana’s ability to do this is through its use of the Proof-of-History consensus mechanism. This mechanism helps to track hashes chronologically and verify the period between two events. In essence, it helps verify the transactions without waiting for the full block to be filled, therefore, more transactions are processed within a short period of time.

Solana also uses a Turbine protocol to break down data into smaller packets, easing the verification process and boosting processing speed. Ethereum is also aiming to roll out a similar feature in the not-too-distant-future.

However, the fact that Solana focuses more on scalability and potentially less so on security, this could be considered one of its downfalls. This is due to the relatively limited infrastructure and security on its blockchain when compared to long established networks such as Etheruem. Despite Ethereum’s perceived limitations, it does have plans to become more scalable and sustainable after the Ethereum 2.0 upgrade.

Solana is still very early in its development timeline, having only launched in 2020. In this sense it does have a long way to go before we may start to see the level of engagement achieved by the Ethereum network.

All in all, Ethereum has certainly managed to acquire some really dedicated community members who are confident that the protocol is bound to succeed. Since it has played a pivotal role in providing backbone for DeFi to thrive, it has its own value in the community which cannot be replaced.

Solana, on the other hand, is the ‘new kid on the block’ that is continuing to find a strong footing whilst growing rapidly. It is hard to tell which blockchain will take the DeFi crown in the longer term, but given that Ethereum has had skin in the game for so long, it may be the crowd favourite for some time to come.

So, should you invest in Ethereum or Solana?

Like with all crypto, investors should understand that Ethereum and Solana are quite volatile assets and should be only invested in if they understand the basic tenets of investing, do their research and only invest what they can comfortably afford.

Cover image source: Wit Olszewski/ Shutterstock.com

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This article was reviewed by our Content Producer Marissa Hayden before it was updated, as part of our fact-checking process.

Ray Brown

Market Analyst, CoinSpot

Ray Brown is a market analyst at Australia's leading cryptocurrency exchange, CoinSpot which was founded in 2013. Ray has written for a wide range of Australian media outlets on topics such as NFTs, stable coins and demystifying cryptocurrency for beginner audiences.

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