Solana has experienced exponential growth since it first entered the market as an alternative Layer-1 blockchain. Though the network’s market capitalization is still significantly smaller than Ethereum, its top contender, this gap has shrunk considerably over the years. 

As Solana grows, some wonder whether it will displace Ethereum as the second-largest cryptocurrency behind Bitcoin. In a conversation with BeInCrypto, Juan Pellicer, Senior Research Analyst at IntoTheBlock, said Solana still has to overcome several hurdles before that can occur. 

Following‬‭ Bitcoin,‬‭ Ethereum‬‭ has‬‭ solidified‬‭ its‬‭ position‬‭ as‬‭ a‬‭ leading‬‭ cryptocurrency,‬‭ pioneering‬‭ the‬‭ concept‬‭ of‬‭ smart‬‭ contracts‬‭ and‬‭ establishing‬‭ itself‬‭ as‬‭ the‬‭ dominant‬‭ platform‬‭ for‬‭ decentralized‬‭ applications.‬‭ 

However,‬‭ Ethereum’s‬‭ dominance‬‭ has‬‭ been‬‭ challenged‬‭ by‬‭ the‬‭ emergence‬‭ of‬‭ competitors‬‭ like‬‭ Solana,‬‭ which‬‭ entered‬‭ the‬‭ market‬‭ in‬‭ March‬‭ 2020‬‭ as‬‭ an‬‭ alternative‬‭ layer-1‬‭ blockchain‬‭ network.

While‬‭ Ethereum‬‭ maintains‬‭ a‬‭ significant‬‭ market‬‭ capitalization‬‭ advantage‬‭ over‬‭ Solana,‬‭ this‬‭ advantage‬‭ has‬‭ notably‬‭ shrunk‬‭ over‬‭ the‬‭ years.‬‭ 

Since its launch in March 2020, Solana’s market capitalization reached its first peak in November 2021, when it reached $72.4 billion. One week ago, the token surpassed the $100 billion mark, reaching a new all-time high. 

At the time of writing, Ethereum’s market cap is $392 billion. While its advantage over Solana is significant, some have begun to wonder how long Solana needs to surpass Ethereum. 

As the network exceeds key‬‭ metrics‬‭ like‬‭ daily‬‭ active‬‭ users,‬‭ daily‬‭ transactions,‬‭ and‬‭ the‬‭ number‬‭ of‬‭ new‬‭ addresses‬‭ created‬‭ monthly‬‭, some say 2025 will be the year Solana takes the second-place trophy. 

Though Solana’s success is impressive, according to Pellicer, it still lacks what it takes to overthrow Ethereum. 

“While‬‭ Solana‬‭ may‬‭ continue‬‭ to‬‭ grow‬‭ and‬‭ potentially‬‭ challenge‬‭ Ethereum‬‭ in‬‭ specific‬‭ niches,‬‭ overcoming‬‭ Ethereum’s‬‭ entrenched‬‭ position‬‭ as‬‭ the‬‭ dominant‬‭ platform‬‭ in‬‭ the‬‭ immediate‬‭ future‬‭ is‬‭ still‬‭ unlikely,‬‭ though‬‭ the‬‭ competitive‬‭ landscape‬‭ is‬‭ dynamic and evolving,” he said. 

Pellicer considered many factors before coming to that conclusion.

High Throughput and Low Transaction Costs Maintain Solana’s Competitiveness

‭Solana and Ethereum boast particular strengths that, in turn, attract different audiences. 

Ethereum’s‬‭ continued‬‭ dominance‬‭ is‬‭ largely‬‭ due‬‭ to‬‭ its‬‭ established‬‭ trust,‬‭ widespread‬‭ adoption,‬‭ and‬‭ ongoing‬‭ development‬‭ efforts.‬‭ As‬‭ the‬‭ first‬‭ platform‬‭ to‬‭ enable‬‭ the‬‭ development‬‭ of‬‭ decentralized‬‭ applications,‬‭ Ethereum‬‭ continues‬‭ to‬‭ lead‬‭ the‬‭ market,‬‭ powering‬‭ most‬‭ decentralized finance (DeFi)‬‭ projects‬‭ and‬‭ hosting‬‭ major‬‭ non-fungible token (NFT)‬‭ marketplaces.

“‬‭Ethereum’s‬‭ infrastructure‬‭ is‬‭ unmatched‬‭ in‬‭ economic‬‭ security,‬‭ maintaining‬‭ a‬‭ flawless‬‭ uptime‬‭ record‬‭ since‬‭ inception,‬‭ which‬‭ fosters‬‭ unparalleled‬‭ trust‬‭ for‬‭ institutional‬‭ and‬‭ high-value‬‭ applications.‬‭ Its‬‭ DeFi‬‭ ecosystem‬‭ remains‬‭ the‬‭ most‬‭ mature,‬‭ with‬‭ pioneering‬‭ protocols‬‭ setting‬‭ industry‬‭ standards,‬‭ though‬‭ competitors‬‭ like‬‭ Solana‬‭ are‬‭ rapidly closing the gap with faster, cheaper alternatives,” Pellicer told BeInCrypto. 

Solana’s competitive edge comes from its high throughput and low transaction costs. The network uses two consensus mechanisms: Proof-of-History (PoH) and Proof-of-Stake (PoS). 

The combination of PoS and PoH allows individual nodes to validate the entire blockchain using only a small piece of information. This is possible because PoH creates a verifiable history of transactions, which means a node doesn’t need to be constantly connected to the network to verify its validity. In turn, transaction speeds are much faster.

Originally running on a Proof-of-Work (PoW) consensus mechanism, Ethereum transitioned to PoS in September 2022. Regardless, the network often suffers from congestion and slow transaction speeds.

While‬‭ Ethereum‬‭ can only process‬‭ around‬‭ 15‬‭ transactions‬‭ per‬‭ second,‬‭ Solana‬‭ can handle over 2,600‬‭.

“This‬‭ results‬‭ in‬‭ a‬‭ smoother‬‭ user‬‭ experience,‬‭ particularly‬‭ for‬ high-frequency‬‭ applications‬‭ and‬‭ retail‬‭ users.‬‭ This‬‭ technological‬‭ differentiation,‬ coupled‬‭ with‬‭ effective‬‭ marketing‬‭ and‬‭ a‬‭ vibrant‬‭ ecosystem‬‭ of‬‭ applications‬‭ focused‬‭ on‬‭ speed‬‭ and‬‭ affordability,‬‭ has‬‭ fueled‬‭ Solana’s‬‭ rapid‬‭ growth‬‭ and‬‭ market‬‭ cap‬‭ increase,‬‭ attracting‬‭ users‬‭ and‬‭ projects‬‭ seeking‬‭ alternatives‬‭ to‬‭ Ethereum’s‬‭ higher‬‭ gas‬‭ fees‬‭ and‬‭ slower transaction finality,” Pellicer explained. 

‭However, Ethereum has other advantages that outweigh Solana’s speed.

Ethereum Excels in DeFi

Since its launch in 2015, Ethereum has become a widely used blockchain platform for developers and enterprises.

The platform’s smart contract functionality has enabled the creation of numerous decentralized applications (dApps), contributing to the growth of ecosystems focused on DeFi, gaming, and NFTs. 

Today, Ethereum’s DeFi total value locked (TVL) stands at nearly $124 billion.

“This‬‭ creates‬‭ deep‬‭ liquidity,‬‭ robust‬‭ infrastructure,‬‭ and‬‭ a‬‭ rich‬‭ ecosystem,‬‭ making‬‭ it‬‭ difficult‬‭ for‬‭ newer‬‭ platforms‬‭ like‬‭ Solana‬‭ to‬‭ replicate‬‭ quickly.‬‭ This‬‭ entrenched‬‭ network‬‭ effect‬‭ provides‬‭ Ethereum‬‭ with‬‭ significant‬‭ inertia‬‭ and‬‭ competitive‬‭ advantage,‬‭ as‬‭ users‬‭ and‬‭ developers‬‭ benefit‬‭ from‬‭ the‬‭ existing‬‭ infrastructure,‬‭ community‬‭ support,‬‭ and‬‭ established protocols within the Ethereum ecosystem,” Pellicer said.

A strong driver behind Ethereum’s solid developer base is its use of Solidity as its base programming language. 

Solidity is a language specifically designed for smart contracts and the Ethereum Virtual Machine (EVM). It benefits from a mature ecosystem, extensive tooling, and a large pool of already proficient developers. 

Solana’s core programming language is Rust. This system offers advantages in terms of rapid performance rates and overall safety. 

“While‬‭ Rust‬‭ offers‬‭ advantages‬‭ in‬‭ terms‬‭ of‬‭ execution‬‭ speed‬‭ and‬‭ security,‬‭ it‬‭ has‬‭ a‬‭ steeper‬‭ learning‬‭ curve‬‭ and‬‭ a‬‭ smaller‬‭ developer‬‭ community‬‭ within‬‭ the‬‭ blockchain‬‭ space‬‭ compared‬‭ to‬‭ Solidity.‬‭ This‬‭ difference‬‭ can‬‭ impact‬‭ developer‬‭ adoption‬‭ rates‬‭ and‬‭ the‬‭ types‬‭ of‬‭ applications‬‭ built,‬‭ with‬‭ Ethereum‬‭ attracting‬‭ a‬‭ broader‬‭ range‬‭ of‬‭ developers‬‭ initially,‬‭ while‬‭ Solana‬‭ may‬‭ appeal‬‭ to‬‭ those‬‭ focused‬‭ on‬‭ performance-critical applications and those already familiar with Rust,” Pellicer added.

Ethereum also remains the preferred network for users who prioritize decentralization before speed.

Solana Centralization Concerns

Solana’s validator node requirements, which demand significant hardware investments, can create barriers to entry, potentially leading to a concentration of power within the network among those capable of affording the necessary infrastructure.

While Solana currently has around 2,000 active validators, Ethereum passed the one million benchmark last year– the largest number recorded by any blockchain network. Though Solana’s reliance on this type of hardware expedites the network, this has raised concerns about whether this high-efficiency rate comes at the cost of decentralization. 

During last October’s Token2049 conference, whistleblower Edward Snowden gained attention for bringing up this point.

Speaking through a video link, Snowden raised concerns that Solana’s focus on speed and efficiency comes at the cost of decentralization, which he sees as essential for keeping blockchain technology trustworthy. He also said that it makes the network more susceptible to government interference.

His comments reflected doubts shared by many crypto community members.

“Solana‬‭ faces‬‭ valid‬‭ concerns‬‭ regarding‬‭ centralization‬‭ due‬‭ to‬‭ its‬‭ validator‬‭ hardware‬‭ requirements‬‭ and‬‭ relatively‬‭ smaller‬‭ validator‬‭ set,‬‭ which‬‭ could‬‭ potentially‬‭ lead‬‭ to‬‭ network‬‭ control‬‭ by‬‭ fewer‬‭ entities.‬ While‬‭ Solana‬‭ prioritizes‬‭ performance‬‭ at‬‭ a‬‭ potentially‬‭ higher‬‭ centralization‬‭ trade-off,‬‭ Ethereum‬‭ prioritizes‬‭ decentralization‬‭ and‬‭ security,‬‭ now‬‭ with‬‭ improved‬‭ energy‬‭ efficiency‬‭ and‬‭ ongoing‬‭ scalability‬‭ enhancements,” Pellicer said. 

For Solana to become more competitive, it will need to address these risks. 

What Solana Needs to Surpass Ethereum

Solana would have to take several significant steps to surpass Ethereum regarding market share and influence. According to Pellicer, it would need to overcome four specific hurdles.

“Firstly,‬‭ achieving‬‭ parity‬‭ or‬‭ surpassing‬‭ Ethereum‬‭ in‬‭ developer‬‭ adoption‬‭ is‬‭ crucial,‬‭ requiring‬‭ significant‬‭ investment‬‭ in‬‭ developer‬‭ tooling‬‭ and‬‭ community‬‭ building.‬‭ Secondly,‬‭ Solana‬‭ needs‬‭ to‬‭ cultivate‬‭ truly‬‭ innovative‬‭ and‬‭ unique‬‭ DeFi‬‭ applications‬‭ that‬‭ differentiate‬‭ it‬‭ beyond‬‭ speed‬‭ and‬‭ cost‬‭ advantages.‬‭ Thirdly,‬‭ addressing‬‭ centralization‬‭ concerns‬‭ and‬‭ demonstrating‬‭ long-term‬‭ network‬‭ stability‬‭ and‬‭ resilience‬‭ are‬‭ vital‬‭ for‬‭ attracting‬‭ institutional‬‭ capital‬‭ and‬‭ broader‬‭ trust.‬‭ Finally,‬‭ Solana‬‭ would‬‭ need‬‭ to‬‭ capture‬‭ emerging‬‭ market‬‭ segments‬‭ or‬‭ use‬‭ cases‬‭ where‬‭ Ethereum‬‭ is‬‭ less‬‭ dominant to carve out a truly leading position,” he said. 

‭Solana has previewed upcoming products that are scheduled for launch this year. Among them is the Solana Seeker, an Android-powered smartphone designed for Web3 applications. This device offers enhanced functionality and design for users interacting with the Solana ecosystem, including managing crypto assets.

Meanwhile, Solana’s upcoming Firedancer validator client is designed to improve network stability and transaction processing. Its distinct codebase offers greater resilience against widespread outages and is expected to enhance Solana’s performance.

In the United States, there is widespread anticipation over the potential launch of a Solana spot exchange-traded fund (ETF). How significantly these initiatives will contribute to increased network adoption remains to be seen. 

Scalability Continues to be Ethereum’s Achilles Heel

Ethereum must address its points of contention to maintain its dominance over the crypto market. Scalability remains a central challenge.

The network’s current architecture, which can only handle a limited number of transactions per second, limits its ability to accommodate users’ increasing demand. Users tend to experience intense network congestion, which results in slower transaction times and increased fees for those interacting with dApps on the network. 

Ethereum has developed a Layer-2 ecosystem to reduce congestion in response to these issues. However, these solutions have received criticism for causing user fragmentation.

“Ethereum‬‭ must‬‭ continue‬‭ to‬‭ innovate‬‭ and‬‭ successfully‬‭ roll‬‭ out‬‭ its‬‭ scaling‬‭ solutions‬‭ to‬‭ maintain‬‭ its‬‭ competitive‬‭ advantage.‬‭ It‬‭ needs‬‭ to‬‭ ensure‬‭ its‬‭ Layer-2‬‭ ecosystem‬‭ becomes‬‭ seamless‬‭ and‬‭ user-friendly,” Pellicer told BeInCrypto. 

Also, safeguarding and expanding the aspects that already make Ethereum so competitive will prove essential to maintain its edge over other networks.

“‬‭For‬‭ Ethereum,‬‭ sustained‬‭ success‬‭ hinges‬‭ on‬‭ the‬‭ successful‬‭ scaling‬‭ of‬‭ its‬‭ ecosystem‬‭ through‬‭ Layer-2‬‭ solutions,‬‭ continued‬‭ innovation‬‭ in‬‭ DeFi‬‭ and‬‭ broader‬‭ application‬‭ areas,‬‭ and‬‭ maintaining‬‭ its‬‭ strong‬‭ developer‬‭ community,” he added.

Though Pellicer doesn’t expect Solana to surpass Ethereum anytime soon, the increasing stakes between competing networks is a good sign. 

“Ultimately,‬‭ increased‬‭ competition‬‭ and‬‭ the‬‭ rise‬‭ of‬‭ a‬‭ strong‬‭ alternative‬‭ platform‬‭ like‬‭ Solana‬‭ could‬‭ be‬‭ beneficial‬‭ for‬‭ the‬‭ broader‬‭ crypto‬‭ ecosystem,‬‭ fostering‬‭ innovation‬‭ and‬‭ driving‬‭ adoption‬‭ by‬‭ offering‬‭ users‬‭ more‬‭ choices‬‭ and diverse functionalities,” Pellicer said.

Whether Solana can continue climbing the ranks will only be answered in time.