Here are just three of the many reasons that’s the case.
Good investments have durable drivers of value. To find that durable value in the context of crypto, you want to look for a blockchain that people are willing to pay to use, and that they actually use a lot.
Solana matched the combined monthly active wallet addresses of all other major Layer-1 (L1) and Layer-2 (L2) blockchains in June, with 127.7 million monthly active addresses. Ethereum posted 7 million in the same period.
Engaged users are also converting into money, which remains on the network. Solana led all other chains for the third straight time in the second quarter, with roughly $271 million in network revenue. Users have broadly continued to be willing to cough up fees to do their on-chain work since then, though Solana’s lead has lessened somewhat.
Look at application revenue, and the picture is similar. In the 30-day period ended Sept. 30, Solana’s ecosystem applications generated $186.9 million in app revenue, whereas Ethereum generated $85.6 million despite that chain being several times larger by market cap.
Whereas Ethereum still shines for high-value transaction settlement, the usage breadth is plainly tilting Solana’s way. That means more fees today and a stronger magnet for app developers tomorrow, both of which are bullish.
In crypto, “transactions” can mean many things. A cleaner way to look at how much a blockchain is being used is thus to examine smart contract interactions, which count when users actually touch smart contracts to perform tasks on a chain.
During the past 12 months, Solana’s smart contracts were called on the order of 10 billion times, versus roughly 178 million for Ethereum.
In other words, developers on Solana are seeing a steady drumbeat of real interactions that Ethereum’s base layer is simply not matching right now. That usage compounds value for investors, as more smart contract calls create more feedback for teams, more reasons to iterate, and more justification for venture investment to fund the next cohort of apps. That’s before even going into the app revenue and fees that users pay.
Solana’s utilization thus sits at a very different scale than Ethereum today, and that’s a big reason to buy it instead of its competitor.
As of late September, Solana’s effective real-time throughput is around the low thousands of transactions per second (TPS), with peaks being much higher during stress tests. In contrast, Ethereum’s base layer typically sits in the mid-teens to low-20s TPS.
That huge gap is why Solana is a far more attractive venue for payments companies, decentralized finance (deFi), consumer finance tools, and social or gaming apps that need to assume they can serve country-scale demand without their fee burden spiking or transactions queueing at an inopportune time. Solana’s current capacity and low fees make it the natural home for that class of application, even as Ethereum leans on its L2 rollups to scale and keep gas (user) fees under control. Assuming that network effects continue to form where activity is cheapest and fastest, it’s far more likely that additional consumer-facing teams will use Solana first, then consider cross-deploying elsewhere.
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Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.
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