The report paints an optimistic picture for Solana, suggesting it could reach a price of $330 and capture 50% of Ethereum’s current market capitalization. This bullish outlook is primarily driven by Solana’s superior speed and transaction processing capabilities.
VanEck’s analysis reveals stark differences in performance between the two platforms. Solana’s throughput, or its ability to process transactions per second (TPS), is over 3,000% higher than Ethereum’s. This translates to a capacity of thousands of transactions per second for Solana, compared to Ethereum’s comparatively limited throughput. Furthermore, Solana boasts a daily active user base that surpasses Ethereum’s by 1,300%. Crucially for users, Solana’s transaction fees are significantly lower – nearly 5 million percent cheaper than Ethereum’s.
These advantages, VanEck argues, position Solana as a strong competitor to Ethereum, particularly in areas like payments and remittances. The report highlights the potential for stablecoins, a key driver of decentralized finance (DeFi), to benefit from Solana’s superior processing metrics. Lower fees and faster transaction speeds could translate into significant cost savings for stablecoin users, potentially driving wider adoption of the Solana network.
With a market cap of US$71.5 billion and only US$6.46 billion total value locked, there remains plenty of room for Solana growth in the DeFi space. Source: DeFiLlama
However, despite these promising metrics, VanEck acknowledges a discrepancy in adoption between retail and institutional investors. While retail investors are gradually recognizing Solana’s potential, institutional investors have been slower to embrace the platform. The report speculates that this hesitancy may stem from a preference for established assets like Ethereum, which is often considered a “blue-chip” asset in the cryptocurrency space.
Ethereum’s Challenges and the Rise of Layer-2 Solutions
VanEck’s analysis extends beyond Solana, providing insights into Ethereum’s recent price struggles. A previous report by the firm pointed to value extraction from Ethereum’s layer-2 networks as a key factor contributing to its underperformance.
The Dencun upgrade, implemented in March 2024, significantly reduced transaction fees for Ethereum’s layer-2 scaling solutions, leading to their rapid growth. However, this growth came at the expense of Ethereum’s layer-1, which saw revenues plummet by 99% between March and September 2024. This indicates a user migration to more efficient and cost-effective layer-2 solutions, potentially diminishing the demand for Ethereum’s base layer.
While Ethereum’s network fees have shown signs of recovery in recent weeks, VanEck highlights the rise of platforms like Solana and Sui as a further challenge to Ethereum’s growth. These newer blockchains, with their emphasis on speed and efficiency, could continue to attract users away from Ethereum, potentially impacting its price and revenue.
The report suggests that while Ethereum still benefits from its first-mover advantage, this advantage is being eroded by the emergence of faster and more efficient competitors. Solana, in particular, is seen as a significant contender with the potential to challenge Ethereum’s dominance in the smart contract space. Ethereum’s ability to adapt and innovate in response to these emerging rivals will be crucial in determining its long-term viability.
