Original author: Ignas
Original translation: Luffy, Foresight News
After reading many discussions on X, I found that it seems that many people are missing the core behind the Ethereum vs. Solana dispute.
This isn’t just about Ethereum vs. Solana, it’s about how we scale blockchain to achieve mass adoption. Jumping straight to the conclusion, I believe nothing is set in stone yet, and these issues are not as simple as they seem. That’s great, because we’re still early days.
The dilemma here is not just technical, but also related to cultural values.
What is the point of non-Ethereum L1?
To understand the context of the Ethereum vs Solana debate, I want to briefly review the other major L1s and their value propositions. This will help us build a picture of L1s in terms of scaling solutions.
Recently, I did 6 AMAs focusing on L1 and zkSync, discussing the role of L1 in the L2 era.
The main question discussed is what is the point of alt-L1 when Ethereum’s L2 can scale Ethereum with fast transactions and lower fees.
Unsurprisingly, the biggest area of disagreement is whether Ethereum has won the L1 game. Polygon’s Sanket and zkSync’s Alex believe Ethereum has largely won the L1 game, but the Solana, Avalanche, and BNB Chain teams disagree.
NEAR’s position is nuanced: Ethereum will continue to dominate, but other Layer 1 solutions will thrive in areas where Ethereum doesn’t excel. NEAR’s value proposition is less clear, but their recent partnership with Polygon to scale Ethereum on a data availability layer is consistent with the above view.
Bankless stated in their podcast that NEAR is migrating to an Ethereum Layer 2 solution, but this is not accurate. NEAR exists as a monolithic blockchain while also helping Ethereum achieve scalability through NEAR’s data availability and storage capabilities.
In fact, NEAR can also provide fast finality for L2, where Arbitrum settles on NEAR and then to Ethereum, while providing Ethereum + Eigenlayer-level security guarantees and a decentralized sorter for L2.
Eigenlayer stakers are re-executing transactions to ensure the sorter is honest
The core proposition of Avalanche's modular design is that it is scalable through subnets, allowing anyone to seamlessly build their own blockchain. Architecturally, Avalanche is somewhere between Cosmos and Polkadot, with P-Chain (for verification), C-Chain (smart contracts), and X-Asset (for sending and receiving funds). You can learn more about how it works in my conversation with Luigi, the head of DeFi/DevRel at Avalanche.
BNB Chain was launched to solve the problem of high gas fees on Ethereum. But even with gas fees below $0.5 (and compromises on decentralization), BSC is still not cheap enough for many use cases such as high-frequency trading. To solve this problem, they launched opBNB L2 on BSC and Greenfield for data availability.
For more information, please refer to my previous blog post in collaboration with the BNB core development team.
Do these scaling solutions sound complicated? Welcome to the world of modular blockchains. This is the core of the Ethereum vs. Solana debate, and it’s what I really care about.
The assumption here is that a single blockchain needs to compromise between the three key aspects of blockchain technology: security, scalability, and decentralization. Blockchains can only satisfy two of them, and Ethereum focuses on security and decentralization, resulting in high gas fees and slow transaction speeds. Therefore, it needs to outsource scaling to the execution layer and data availability layer.
See my X thread below for more on this.
However, Solana is ambitiously hoping to solve the trilemma through a single blockchain design. Is this possible?
Defending Solana
Solana’s vision is to bring together all the benefits of cheap and fast transactions, fast finality, and low latency, in one place. In effect, this eliminates the need for cumbersome cross-chain bridges, and at a fraction of the cost of the best Layer 2 solutions available today.
A single swap transaction on Arbitrum costs ~$0.69 in gas (at the time of writing), which is still not good enough… We need L3!
L2 Gas Fees
Now, all of these advantages require powerful hardware, which makes running a validator expensive. In fact, Lido has even exited stSOL staking due to high development costs.
Additionally, there has been criticism regarding the distribution of SOL tokens, with 48% going to insiders and venture capitalists. Finally, Solana lacks a second production client (there is only one blockchain software client in Solana, which means that compromising the blockchain only requires modifying one program).
Due to the above features, the Ethereum community (note that the majority of my portfolio is in ETH) claims that Solana is not as decentralized as Ethereum. This is a sensitive topic, but my current thoughts are as follows:
Ethereum L2 is also not truly decentralized (the sorter is centralized);
Hardware prices will continue to fall, which will benefit Solana in the long run;
Solana will launch Firedancer, a second validator for the decentralized network;
One could argue that the future of Ethereum scaling is in the hands of the VCs funding L2, DA protocols, etc.
I am playing the role of devil's advocate here.
In fact, Solana scores higher than Ethereum according to the Nakamoto Coefficient. It represents how many entities are needed to control 33% of the staked shares of a blockchain, reflecting the decentralization and security of the blockchain. A higher value means that the network is more resilient against manipulation. Solana scored 22, while Ethereum scored only 2.
However, decentralization is a spectrum, and if you really care about decentralization, you should buy and hold Bitcoin. It is insurance against Ethereum, fiat currencies, or other black swan events.
In practice, I think the single most important attribute of DeFi is self-custody. I hope that neither the Solana Foundation nor the government can seize or freeze my funds. In fact, I feel more confident holding SOL on Solana than holding ETH on Coinbase's Base (this has nothing to do with price). Unfortunately, high gas fees on Ethereum push people to L2 where security and decentralization are compromised.
BTC on Bitcoin > ETH on Ethereum > SOL on Solana > ETH on Coinbase
What's more, the discussion about decentralization is dominated by Western countries. However, the success of platforms such as Tron and BSC in non-Western countries, and even the success of social network Farcaster in the West, shows that the use case of blockchain needs to be sufficiently decentralized. Not everyone can afford $18 in swap fees, you know? Ethereum and L2 are currently a rich man's game.
Anyway…I’d like to see blockchain’s use cases diversify.
While I feel more confident using DeFi on Ethereum mainnet for lending and staking large sums of money or holding expensive NFTs, I am much happier trading on Solana and using it for small or non-financial transactions.
Solana seems to be a good fit for most GameFi, Metaverse, P2E, Derivatives, Options, etc. DApps. This is exactly why Solana launched the Solana Phone equipped with a DApp store. STEPN is a great example, and I am eager to see more consumer-facing applications launched on Solana to validate my views on Solana.
This is also why TVL is not a perfect metric for the Solana ecosystem. Ethereum has the most assets because it is a store-of-value blockchain. But these assets exist passively in smart contracts that generate yield, while Solana emphasizes capital velocity — the volume of transactions assigned to each dollar of TVL.
With its high scalability and low transaction fees, Solana enables rapid value flow and capital turnover. This velocity of capital movement demonstrates the attractiveness of the Solana infrastructure to users and investors. - Michelle, DeFi BD, Solana Foundation
The future of modular vs. monolithic blockchains: Why can’t we have it both ways?
To be fair, Solana isn’t the only monolithic blockchain. NEAR, Algorand are two other examples, and Fantom is moving towards a monolithic scaling design.
But things get more interesting because NEAR is a monolithic and modular blockchain that provides data availability to Ethereum L2. Algorand has Co-chains for private blockchains.
The above overview of the two polar frameworks is too simplistic, and I recommend following Justin, who shares a good perspective on this issue. He is in favor of either sharding or using Rollup for scaling.
Others, like Tyler Reynolds, are more convinced that monolithic blockchains are the answer.
But as you can see, there are many scaling solutions, and the community is still divided on which one will prevail. So, my main points are:
There are many ways to scale blockchain, each with its own pros and cons. However, I am a pragmatic person and want to maximize my returns by investing in solutions that are likely to dominate in the near future and have higher upside potential.
Especially in the current environment, Ethereum transaction fees during busy hours are outrageous, and the cost of using L2 is not cheap, which has a negative impact on the user experience. I hope that the Ethereum community will abstract the user experience in the near future.
Therefore, I cannot ignore the potential upside of Solana’s vision of scaling via a monolithic design. If they succeed in attracting more developers, DApps, and users, the opportunity for growth cannot be ignored.
If you read my blog, you know that I focus on ecosystems that have 1) technological innovation, 2) wealth creation opportunities, and 3) compelling stories.
Solana meets all three criteria. It offers a unique scaling vision that has successfully attracted a large group of believers and naysayers. Hate is a useful metric for attention because it shows that even skeptics care about Solana.
Finally, Solana’s ecosystem was wiped out during the bear market, and even NFT projects like DeGods and yOOts left Solana. It’s like a war-torn country that is currently rebuilding. This provides opportunities because only a few DApps are able to attract users’ 1) attention; 2) capital inflows. You can see the list of projects in this article by Jacob.
In a world that is constantly debating Windows vs. Mac, Android vs. iOS, it’s easy to get caught up in polarized discussions. But as investors, the question shouldn’t be about choosing one or the other. Instead, we can allocate a portion of our portfolio to achieve a comfortable balance that also includes other L1s.
Personally, I think Solana’s vision is compelling enough to warrant some allocation. Taking an extreme stance goes against my belief in keeping an open mind and continually re-evaluating my views as new information emerges.
I also care about the practical approach and I would try Solana first instead of dismissing it just based on the opinions of those who don’t like it.
I'm very bullish on Ethereum, and probably most people are too. That’s why I even left out the “defending Ethereum” part, because Ethereum’s value proposition is strong. But that doesn’t mean I wouldn’t consider investing in other Layer 1 solutions.
Disclaimer: The author holds both ETH and SOL.
