VanEck recently compared Ethereum (ETH) and Solana (SOL), suggesting that SOL could soon capture a large portion of ETH’s market share.
According to the $108 billion asset manager, Solana has several advantages over Ethereum in terms of technology, transaction speed, and cost-efficiency, which could help it reach 50% of Ethereum’s market cap in the near future.
Solana’s Technological Superiority
In a recent report, Martin Leinweber, a Director at MarketVector Indexes, noted that part of Solana’s technological edge over Ethereum is its superior processing power.
For context, Solana handles far more transactions than Ethereum—about 3,000% more—and does so at a fraction of the cost. While Ethereum relies on Layer 2 solutions to scale its network, Solana manages these feats directly at Layer 1, which allows for greater efficiency and scalability.
In addition to that, the report confirmed that Solana boasts a growing user base with 1,300% more daily active users than Ethereum. This makes it more appealing for developers, especially those dealing on decentralized applications (dApps) and DeFi solutions.
Ethereum and Solana Market Caps
Despite its performance, Solana’s market cap currently stands at $70.698 billion, making it the fifth-largest crypto asset. This figure is only about 22% of Ethereum’s market cap, which currently sits at $315.13 billion.
in this news on Solana, VanEck suggests this may be due to Ethereum’s first-mover advantage and its institutional backing. Notably, Ethereum launched in mid 2015 and quickly garnered institutional interest as it pioneered smart contracts tech. Meanwhile, Solana launched five years later, in 2020.
However, the report asserted that with continued improvements in its network and a growth in adoption, Solana has the potential to reach up to 50% of Ethereum’s market value. Emerging predictions place SOL at a price of around $330 in the coming months, enough to reach a $155 billion market cap.
Challenges Solana Faces
Nonetheless, Solana also sees challenges that inhibit institutional interest. One of the most significant roadblocks is regulatory uncertainty in the United States, a country that boasts most of the potential institutional investors.
The U.S. Securities and Exchange Commission (SEC) suggested that SOL may be a security in several cases against crypto firms. Interestingly, the agency revealed in July it will no longer pursue this tag in the Binance case, but concerns remain.
If the SEC officially categorizes SOL as such, it could limit its accessibility to U.S. investors, complicating ETF applications and hindering broader institutional adoption. On the other hand, Ethereum already features multiple spot ETFs.
Besides the regulatory issues, Solana has faced technical issues, including periodic outages, which have raised questions about its long-term stability.
Despite these outages, the Solana team has been proactive in implementing network upgrades and exploring solutions like the new Firedancer client, which could improve network reliability and decentralization.
Meanwhile, in the short term, both Solana and Ethereum have been victims of the ongoing market uncertainty. At the reporting time, Solana currently changes hands at $150.9, up 0.92% over the past 24 hours. However, Ethereum trades for $2,619, down 0.13% in 24 hours.
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