Solana vs Ethereum: Key differences between SOL and ETH

Roland Säde
| Editor:
February 2, 2024
12 min read

Solana and Ethereum are well-known blockchain technologies with a strong presence in decentralized apps and cryptocurrency. While Ethereum is largely regarded as the forefather of smart contracts and decentralized applications, Solana has become a scalable and fast alternative. This comparison looks at the transaction speed, consensus processes, smart contract features, scalability, gas fees, ecosystem, and Solana vs Ethereum market values. In this article, we will evaluate the strengths and shortcomings of each platform and provide insights into their respective potentials and use cases by studying these characteristics.

What is Solana?

Solana, a high-speed, low-cost blockchain platform for decentralized applications was established in 2017 by Solana Foundation and Solana Labs. Often dubbed "the Ethereum killer" shares many similarities with the Ethereum network but was designed to improve upon it. Its unique value lies in facilitating transactions on the Solana network.

The Proof-of-History is an innovative method employed in blockchain systems to confirm the authenticity of historical data and protect it from tampering. It accomplishes this through a hash function, creating a distinctive 'fingerprint' for a data set, such as past transactions. This consensus mechanism is the core of Solana's blockchain. This contrasts with the earlier cryptocurrencies like Bitcoin and Litecoin, which use energy-intensive proof-of-work algorithms, which require miners to dictate the next block.

What is Ethereum?

Ethereum network was founded by Vitalik Buterin and others in 2015 - it is an open-source, decentralized blockchain that utilizes its own cryptocurrency - Ether, which is used for transactions and app interactions. Unlike Bitcoin, Ethereum is equipped with a decentralized computing system. It facilitates the creation of smart contracts and decentralized applications (DApps) that operate free from a central authority.

Smart contracts are coded in Ethereum's proprietary language, Solidity, which paved the way for different applications, including decentralized finance (DeFi) and non-fungible tokens (NFTs).

DApps enable the utilization of Ether and other cryptocurrencies such as collateralizing loans or accruing interest through lending. A person can deposit ETH into a DApp, secure a loan, and earn interest on the deposited amount.

In 2022 Ethereum transitioned from Proof-of-Work (akin to Bitcoin) to Proof-of-Stake, providing a more secure, energy-efficient means of transaction validation and blockchain augmentation.

Solana vs Ethereum Speed

When analyzing blockchain platforms, speed is critical since it dictates how quickly transactions can be processed and confirmed. To achieve transaction speed, Solana and Ethereum take different methodologies.

Solana Speed

Solana is well-known for its lightning-fast transaction processing. It employs a novel combination of Proof of History (PoH) and Proof of Stake (PoS) consensus processes to achieve high throughput. The Proof of History mechanism organizes transactions by giving a historical record that allows validators to agree on the order of occurrences. This method greatly shortens the time required to establish an agreement, resulting in rates of up to 65,000 transactions per second (TPS). Solana's speed makes it perfect for real-time transaction processing applications such as decentralized exchanges, gambling platforms, and high-frequency trading.

Ethereum Speed

Ethereum was based on a Proof of Work (PoW) consensus method. While Ethereum has a big and active user base, transaction speed has been an issue, with the network facing congestion during peak demand periods. The Ethereum 2.0 upgrade intends to address this issue by moving to a Proof of Stake (PoS) consensus method, which enhances scalability and transaction speed. However, Ethereum 2.0's complete implementation is still ongoing, and its scalability benefits have yet to be fully realized. Significant effort and numerous updates are required to achieve the target version capable of processing over 100,000 transactions per second and enhanced scalability.

Consensus Mechanism of Solana vs. Ethereum

The consensus mechanism governs how nodes in a blockchain network agree on transaction validity and sequence. Solana and Ethereum have various consensus mechanisms, each with its own set of advantages and limitations.

Solana Consensus Mechanism

Solana employs a hybrid consensus process that combines Proof of History (PoH) and Proof of Stake (PoS). As previously stated, the Proof of History mechanism provides a verifiable and efficient history of events, allowing validators to establish a rapid agreement. Solana may handle several transactions in parallel using this method, yielding great throughput and low latency. Solana's consensus method requires a relatively large number of validators to preserve decentralization.

Ethereum Consensus Mechanism

Ethereum operates on a consensus mechanism called Proof of Stake (PoS). This mechanism involves validators who hold and lock up a certain amount of cryptocurrency to secure the network and validate transactions. Validators are selected to create new blocks based on their stake in the network. Ethereum's move towards PoS aims to address scalability concerns and reduce energy consumption compared to the previous Proof of Work (PoW) consensus mechanism. The transition to PoS with Ethereum 2.0 is expected to improve transaction throughput and make the network more efficient and environmentally friendly.

Solana vs Ethereum Smart Contracts

Smart contracts are agreements that self-execute based on predetermined circumstances placed into code. They enable secure and automated blockchain interactions. Both Solana and Ethereum offer smart contracts, but their capabilities differ.

Solana Smart Contract

Solana is a step up from other blockchains as its robust architecture makes it well-suited to provide the solution to existing issues surrounding DeFi. Solana's smart contract capabilities are robust and innovative. The platform provides developers with a powerful environment to create and deploy smart contracts, enabling the execution of decentralized applications (DApps) with high performance and scalability. Solana's smart contracts leverage its unique consensus mechanism and high throughput, allowing for efficient and rapid processing of contract transactions. With Solana's smart contracts, developers have the flexibility to build complex and resource-intensive applications that can scale seamlessly, offering an enticing ecosystem for developing decentralized applications and solutions.

Ethereum Smart Contract

Ethereum is widely regarded as the first smart contract platform. It provides a stable and mature ecosystem for the deployment and execution of smart contracts via the Ethereum Virtual Machine (EVM). The broad developer community and ecosystem of Ethereum provide a diverse set of tools, libraries, and frameworks to aid with smart contract development. Furthermore, Ethereum's impending Ethereum 2.0 upgrade intends to improve smart contract features, such as increased scalability and lower gas expenses.

Solana vs. Ethereum Scalability 

Scalability is crucial for blockchain platforms because they must manage increasing transactions while maintaining performance. In terms of scalability, Solana has gained recognition for its impressive performance. With its unique architecture and innovative technologies, Solana has been designed to handle a high volume of transactions efficiently and faster than Ethereum.

Solana Scalability

The architecture of Solana is built with scalability in mind. Solana achieves high throughput and can process numerous transactions in parallel thanks to its unique combination of Proof of History (PoH) and Proof of Stake (PoS) consensus processes. Solana's scalability makes it ideal for applications requiring huge transaction volumes, such as decentralized exchanges, gaming sites, and decentralized finance (DeFi) protocols.

Solana marks the beginning of a new paradigm of a blockchain solution that leverages yet untapped PoH (Proof of History) consensus combined together with PoS (Proof of Stake). This approach achieves great progress in tackling the long-existing issue of scalability for blockchain networks.

Ethereum Scalability 

Because of its Proof of Work (PoW) consensus process, Ethereum has had scaling issues. However, the shift to Ethereum 2.0, which includes implementing a Proof of Stake (PoS) consensus mechanism, intends to enhance scalability dramatically. With the introduction of shard chains in Ethereum 2.0, the network will be able to execute several transactions simultaneously, enhancing its scalability potential. Ethereum's huge and active development community is also actively researching layer-two solutions to improve scalability and reduce congestion on the Mainnet, such as Optimistic Rollups and ZK-Rollups.

Solana vs. Ethereum Gas Fees

The transaction fees necessary to accomplish operations on a blockchain network are referred to as gas fees. When comparing Solana and Ethereum gas fees, there is a noticeable distinction. Solana operates on a different consensus mechanism called Proof of History, allowing for faster transaction processing and significantly lower fees than Ethereum.

Solana Gas Fees

Solana uses a unique fee mechanism where its pricing scheme is designed to deliver predictable and low-cost transactions, which might be especially useful for high-frequency trading and applications that demand frequent contacts. Unlike Ethereum, Solana's transaction fees are based on processing resources and data size rather than the concept of gas units. Solana's ability to offer low-cost transactions makes it attractive for users seeking efficient and cost-effective blockchain operations, presenting a notable advantage over Ethereum's gas fee structure.

Ethereum Gas Fees

The gas charge model in Ethereum integrates the concept of gas units, in which each operation in a smart contract uses a set quantity of gas. Gas prices on Ethereum vary according to network congestion and demand. Gas prices might become unreasonably expensive during periods of heavy demand. This scalability issue has spurred Ethereum developers to investigate layer-two solutions and Ethereum 2.0 upgrades in order to lower gas fees and enhance network capacity.

Ethereum Ecosystem vs. Solana

A blockchain platform's developer community and ecosystem are critical to its growth and adoption. Ethereum and Solana have thriving developer and user communities but differ in the applications and use cases of the projects built on top of them.

Solana Ecosystem

The Solana ecosystem has grown significantly, drawing developers and projects looking to capitalize on its speed and scalability advantages. Solana's ecosystem contains a variety of decentralized applications, DeFi protocols, NFT marketplaces, and gaming platforms. 

Thanks to its scalable infrastructure and fast transaction processing capabilities, Solana has emerged as a powerful platform for high-performance blockchain applications. Within the Solana ecosystem, several notable projects have gained traction, such as Serum, a decentralized exchange (DEX) built on Solana that offers fast and low-cost trading of digital assets. Another prominent project is Mango Markets, a decentralized trading platform that enables users to trade perpetual futures and spot markets directly from their Solana wallets. These projects, along with many others, demonstrate the potential and versatility of the Solana ecosystem.

Partnerships have been crucial in expanding the Solana ecosystem and driving its adoption. Solana has forged strategic collaborations with industry leaders and institutions to foster innovation and accelerate the growth of its ecosystem. For instance, Solana has partnered with Chainlink, a decentralized oracle network, to bring secure and reliable real-world data to Solana-based applications. Additionally, the Solana Foundation has collaborated with Serum, the decentralized derivatives exchange, to provide advanced trading capabilities and enhance the overall user experience on the Solana network. 

Ethereum Ecosystem

Because Ethereum was the first and most established smart contract platform, it has a robust and large ecosystem. It is home to numerous decentralized applications, DeFi protocols, NFT marketplaces, and other cutting-edge projects. The Ethereum ecosystem consists of diverse projects, applications, and partnerships that drive the growth and advancement of decentralized finance (DeFi), non-fungible tokens (NFTs), and other groundbreaking use cases. Ethereum has become a hub for decentralized applications (DApps) and protocols that facilitate activities like decentralized lending, automated market-making, and yield farming within this ecosystem. Notable projects, such as Uniswap, a decentralized exchange (DEX), and Aave, a prominent decentralized lending and borrowing platform, exemplify the innovative capabilities of the Ethereum ecosystem. Additionally, partnerships with industry leaders like ConsenSys, Chainlink, and the Ethereum Enterprise Alliance (EEA) have been instrumental in promoting collaboration and propelling the adoption of Ethereum-based solutions.

One standout project within the Ethereum ecosystem is OpenSea, the largest NFT marketplace. OpenSea empowers users to securely buy, sell, and trade a wide array of digital assets, including artwork, collectibles, and virtual real estate, using Ethereum-based tokens. The platform's popularity has been instrumental in fueling the NFT craze, showcasing the immense potential of blockchain technology for digital ownership and provenance. Another noteworthy endeavor is MakerDAO, an innovative decentralized autonomous organization (DAO) that enables users to generate stablecoins, such as DAI, by leveraging collateralized debt positions (CDPs) on the Ethereum blockchain. By providing a stable and decentralized alternative to traditional fiat-backed currencies, MakerDAO has played a pivotal role in fostering the growth of decentralized finance and offering users increased financial flexibility and autonomy.

Price of Solana vs. Ethereum

When evaluating blockchain platforms, price, and market capitalization are critical elements to consider. Will Solana overtake Ethereum in terms of price and market capitalization? Let's take a closer look at the current situation.

Solana Price

Solana (ticker: SOL) at the moment (16.07.2023) is priced at $27.84. The live market cap of Solana stands at an impressive around $11 billion. Solana boasts a circulating supply volume of 548,846,363 SOL coins, matching its maximum supply volume. Furthermore, the 24-hour trading volume for Solana has reached $1 billion.

Ethereum Price

Ethereum (ticker: ETH) is one of the most frequently used cryptocurrencies, with a large market capitalization. As of the time of writing (16.07.2023), Ethereum (ETH) is valued at around $1,928. The trading volume during this timeframe amounted to an impressive $5.4 billion.

In terms of market capitalization, Ethereum holds the second position among cryptocurrencies, as per CoinMarketCap data. Its live market capitalization stands at a substantial $231,775,232,008. With a circulating supply of 120,254,303 ETH coins, Ethereum maintains a significant presence in the market.

Pros and Cons of Solana and Ethereum

The choice between Solana and Ethereum is based on individual use cases, requirements, and preferences. Let us summarize the comparison and provide recommendations based on the findings.

Solana and Ethereum have advantages and disadvantages. Solana excels in transaction speed, scalability, and low fees, making it an excellent choice for applications requiring high throughput and real-time interactions. Ethereum, on the other side, benefits from its existing ecosystem, large developer community, and impending Ethereum 2.0 improvements aimed at improving scalability and lowering fees. However, Ethereum is presently facing scaling issues and increasing gas fees.

Choosing between Solana and Ethereum

When deciding between Solana and Ethereum, analyzing the project or application's requirements is critical. Solana may be the best option if speed, scalability, and low fees are important. Ethereum is more appropriate if a project requires a stable ecosystem, strong developer support, and compatibility with existing Ethereum-based apps. To make an informed decision, developers and users should examine their needs, weigh the trade-offs, and review each platform's ecosystem and infrastructure.

Solana and Ethereum are well-known blockchain technologies with distinct features and applications. Solana's emphasis on speed, scalability, and cheap fees distinguishes it as a viable alternative to Ethereum for certain applications. Ethereum, on the other hand, continues to dominate the blockchain industry due to its established environment, forthcoming updates, and large developer community. As the industry evolves, it is critical to track the evolution of both platforms and evaluate their applicability in light of individual project requirements.

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