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YEREVAN (CoinChapter.com) — Solana (SOL) has emerged as an Ethereum (ETH) competitor, getting more traction in 2023. But Can Solana flip Ethereum as a leader in the DeFi sphere? Let’s look at the throne contender to decide if Ethereum has anything to worry about.
Solana Becomes Increasingly Popular With Investors
In 2023, Solana has positioned itself as a strong contender against Ethereum. Several factors contribute to this rising status, for example, its scalability. Solana’s blockchain technology, known for its high throughput and low transaction costs, is a key factor in its appeal.
Its ability to process many transactions per second became handy for decentralized gaming to non-fungible tokens (NFTs). This performance has led to a growing user base and a substantial market capitalization of $40.6 billion as of Dec 22. Notably, it accounts for only about 14% of Ethereum’s market cap of $278 billion.
Meanwhile, Solana’s ecosystem also includes a range of projects, dApps, and partnerships. Its community rapidly expanded in 2023, with daily active users comprising a significant portion of Ethereum’s user base. The growing total value locked (TVL) also testifies to high user engagement. Moreover, the blockchain’s trading volumes peaked at a record $2.1 billion on Dec 22.
Moreover, according to the latest CoinShares report, in the week ending Dec 18, Solana fund influx equaled $10 million against a $4.3 million Ethereum OUTFLOW, successfully negating previous losses and bringing the year-to-date investments to $156 million.
However, as the table above shows, the total assets under management (AUM) of Ethereum ($9.5 billion) and Solana ($588 million) are still hard to compare. So, will Solana flip Ethereum in AUM? Not anytime soon. But let’s look at other statistics.
Solana and Ethereum Market Dominance
Sam Bankman-Fried, the founder and ex-CEO of the now infamously bankrupt cryptocurrency exchange FTX, strongly believed in Solana’s potential during a conference in late 2021. He noted that Solana is one of the few existing public blockchains with a roadmap capable of scaling to millions of transactions per second at a very low cost per transaction.
The discredited CEO highlighted Solana’s superior transaction speed and lower fees than Ethereum, calling it a “plausible candidate to surpass Ethereum” in these aspects. But let’s see how the Solana ecosystem fared since then.
Ethereum TVL Dwarfs Solana
While Solana offers several advantages in terms of transaction speed and costs, Ethereum remains a leader in terms of TVL and has a more established ecosystem. True, Ethereum faces challenges like network congestion and high transaction fees, which Solana aims to address with its technology.
However, the numbers don’t lie. Despite the positive dynamic, Solana can’t flip Ethereum just yet and is unlikely to do so in 2024.
The chart above demonstrates that while Solana TVL has grown considerably in 2023, it still has a long way to go before it can reach or even surpass Ethereum’s mammoth $28.2 billion TVL. Additionally, Solana is not second in line for the throne. It has lower TVL than Tron ($8.3 billion), Binance Smart Chain (BSC – $6.1 billion), and Ethereum scaling solution Arbitrum ($2,3 billion).
Ethereum also reigns in terms of market dominance. The leading altcoin commands 53% of the defi market (down from 58% in January 2023), while Solana took fourth place with 2.5% (up from 0.55% in January).
In conclusion, it is important to note that while market dominance distribution has experienced a dynamic in favor of Solana, the ecosystem has a long way to go until it can flip Ethereum. A confluence of investor trust, security, and development could help Solana get there, but the overall market sentiment will also play a role.
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