Experts believe that Solana's advantages in speed and cost efficiency make it more competitive in payments and remittances than Ethereum, leading to a decline in Ethereum's price.
Author: Vince Quill
Translation: Koala, Mars Finance
Solana's holistic architecture allows the network to achieve speed and efficiency that modular blockchains do not possess.
A report released by VanEck on September 25 predicted that Solana (SOL down $150) could reach $330 and inflate to 50% of Ethereum's (ETH down $2,612) current market value, mainly due to Solana's outstanding speed and transaction processing metrics.
The report cited Solana's throughput, which can process thousands of transactions per second (TPS), a 3,000% increase over Ethereum's TPS. Solana's daily active user count is 1,300% higher than Ethereum's, and transaction fees on the Solana network are nearly 5,000,000% cheaper.
The report's authors believe that Solana's clear advantages in speed and cost efficiency make it more competitive in payments and remittances than Ethereum. Stablecoins, in particular, are considered a major driver of decentralized financial activities and can leverage Solana's outstanding processing metrics to pass cost savings on to users.
The authors stated that retail investors are "slowly realizing" Solana's potential to challenge Ethereum as a smart contract platform, and are puzzled by institutional investors' lack of awareness of Solana's advantages. The report speculates that one possible reason for institutional investors' lagging adoption may be their reluctance to shift from blue-chip assets like ETH to the younger Solana.
VanEck analyzes Ethereum's dismal price performance
As early as September 2024, VanEck released a report outlining the factors suppressing Ethereum's price. According to VanEck's analysis, Ethereum's poor price performance is primarily driven by the extraction of value from Ethereum's layer 2 network.
The explosive growth of Ethereum's layer 2 scaling solutions occurred after the Dencun upgrade to Ethereum in March 2024, which significantly reduced transaction fees on Ethereum's layer 2 network.
The rapid growth of these layer 2 projects and the substantial reduction in transaction fees led to a 99% decline in Ethereum's layer 1 revenue since March 2024. However, Ethereum network fees successfully recovered in late September 2024.
VanEck also specifically pointed out that users turning to faster layer 1 networks like Solana and Sui (SUI) are another major factor suppressing Ethereum's price and transaction revenue. According to VanEck's report, Ethereum still enjoys a first-mover advantage, but this advantage is rapidly diminishing.
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