As a narrative, Solana has been picking up steam as of late. From the Solana Virtual Machine (SVM) to decentralized physical infrastructure (DePIN), $SOL and its surrounding ecosystem could be home to a host of innovative, consumer-facing dApps.
Learn more about what makes Solana unique, and how it stacks up compared to the biggest blockchain ecosystem, in Ethereum.
Over and out ⬇
Background on Solana
Solana needs little introduction: the monolithic Layer-1 came to prominence during the bull market of 2021 and since then has drawn a love-or-hate reaction from the crypto crowd.
In the past, critiques against Solana included increased centralization risk and blockchain downtime.
While improvements have been made to the underlying blockchain tech, many still express criticism of Solana, and the $SOL token as an investment.
Following the collapse of FTX, $SOL fell below $10; it has since recovered to the $35 mark in the market’s recent rally.
Price isn’t the only number going up on Solana; projects built on top of the chain are also seeing success.
Over $1B in funding has flown into the ecosystem, backing DeFi dApps, liquid staking solutions, NFT marketplaces, games, and more.
The chain has a growing developer ecosystem, with Solana Breakpoint currently taking place in Amsterdam.
Ethereum vs Solana
Investments in projects within the Solana ecosystem have fueled enthusiasm for its potential.
Ethereum and Solana are taking different directions, which is encouraging as it caters to different types of builders.
Different approaches were taken by Ethereum and Solana regarding scarcity and abundance in their blockchain architectures.
Both approaches are reasonable depending on the scale and stage of network growth.
Growing a network requires an approach based on abundance while scaling and consolidation require a different perspective.
Ethereum as Android
Ethereum is becoming a platform for layer-2 networks to settle on and rely on for security and stability.
Most users of Ethereum are now using layer-2 networks like Polygon, Arbitrum, etc., rather than the mainnet directly.
Joel Monegro of Placeholder VC draws comparisons between this market structure and that of Android, where Google phones make up only a small percentage of all Android devices.
Similarly, only a fraction of transactions will happen on the Ethereum mainnet in the future, with most occurring on alternative platforms.
Developers building on Ethereum may need to consider the differences between various layer-2 networks.
Deploying layer-2 solutions on top of Ethereum allows for cost savings by utilizing existing infrastructure.
However, there can be challenges in managing user experience across different networks built on top of Ethereum.
Vance Spencer of Framework Ventures suggests that there will be around a thousand rollups to scale Ethereum.
On the other hand, some argue that only one or two rollups may be sufficient to achieve scalability. Currently, these would be Arbitrum and Optimism.
Despite more and more Ethereum layer-2s entering the market, it is yet to be seen whether Ethereum’s Rollup-centric roadmap is a viable solution to scalability.
So far, the advent of more standalone chains has fragmented liquidity even further, making it harder for DeFi composability and interoperability across Smart Contracts deployed on different chains.
Solana as IOS
Joel Monegro views Solana as the IOS to Ethereum’s Anrdoid.
Developing for iOS is often easier than developing for Android due to the complexities involved with Android.
Many companies launch their iOS apps before their Android apps because it allows them to get to market faster.
User experiences tend to be better on iOS due to the time saved from not having to deal with the complexities of Android.
This aligns with Solana’s UX and consumer-facing dApps, which include NFT marketplaces, social applications, games, walk-to-earn apps, DePIN, and more.
Solana shares similarities with Aptos in terms of parallel execution and a unique virtual machine.
The differentiating factor is the ecosystem, where Solana has an advantage due to strong infrastructure development.
Technological differences matter less as competition shifts towards marketing and business development.
Solana Distinct Qualities
Solana follows a monolithic approach by maximizing throughput on the base layer and minimizing developer complexity
Solana is still in a phase where it compensates participants largely through capital expenditure but may shift towards revenue-based compensation as internal revenue increases.
Mehdi Farooq of Animoca Brands sees Solana as more of a growth-stock while Ethereum is a value-stock.
The SVM Rollup for Eclipse is seen by many as a positive development for Solana in terms of expanding its reach.
It taps into a new market by scaling Ethereum’s ecosystem rather than taking liquidity away from Solana.
Opening up the SVM developer and user ecosystem to untapped developers, users, and liquidity benefits Solana in the long run.
$SOL can provide a way to hedge against the EVM. Solana’s developer ecosystem shows promise, boasting an increasing developer count despite a decreasing native token price.
The reality of valuing L1s may suggest that revenue, throughput, and TVL may be overshadowed by more speculative figures like developer and user adoption.
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