I’ve been thinking a lot about the Ethereum vs. Solana debate, which is a hot topic in the crypto space.
I’m not going to go into the technical differences here, there are already a lot of in-depth analyses in the industry, such as Syncracy Capital’s Solana paper, which I highly recommend everyone to read.
Instead, I want to offer my personal perspective on where our industry is headed.
I believe Solana could become one of the most valuable human inventions in the future, on par with Ethereum and Bitcoin.
We are running out of time
Cryptocurrency has been around for over 10 years. It has attracted hundreds of billions in funding from investors. It has become a magnet for the brightest minds. We probably have one of the highest concentrations of talent of any industry (except maybe AI).
Yet we have yet to find that elusive killer use case: something that people can’t lose, something that the average person would find extremely painful if it were taken away, and that would make it impossible for governments to shut down cryptocurrencies.
We desperately need a “ChatGPT moment” for cryptocurrencies. ChatGPT is the app that has reached 100 million users in the shortest time to date, taking just 2 months.
As time goes by, the pressure is building. While cryptocurrencies are currently enjoying some political and social support, these sentiments will wane over time if no impactful results are produced. We are at a crossroads, and the next few years will determine whether cryptocurrency will become a critical, world-changing technology.
We can't wait any longer, the time has to be now.
In order for us to get killer apps, the infrastructure layer has to be ready for it.
A tale of two philosophies
Ethereum and Solana employ two different philosophies, but with the same final state in mind.
Solana's philosophy is to build a useful blockchain first, and then move toward decentralization and censorship resistance over time. It is designed for high performance and to be the best execution layer.
Low cost, low latency, high throughput
Solana optimizes for atomic composability, believing it to be the most useful feature of a blockchain
UX improvements to the EVM (e.g. no token approval required)
Solana scales as hardware scales, Moore’s Law has been in effect for decades
After 3 years of battle testing, the tools and partnerships are in place.
Toly succinctly outlines his vision here:
On the other hand, the idea of Ethereum is to first build a decentralized and censorship-resistant blockchain and then improve its usability over time.
This gives ETH a monetary premium. Ethereum's future development plans (Surge, Verge, Purge, Splurge) focus on improving its scalability. This is a journey that will unfold gradually over several years, not immediately. Today, transaction costs are high and throughput is low.
The widely known blockchain trilemma states that it is extremely difficult to achieve the best of scalability, security, and decentralization in a single blockchain. The model suggests that focusing on improving any two of these areas often compromises the third.
There is no perfect blockchain and trade-offs are necessary.
Much of the debate between Solana and Ethereum revolves around the nature and extent of these compromises. The crux of the matter is how to balance these trade-offs: how much decentralization can be sacrificed for scalability, or whether security should be paramount, perhaps at the expense of performance and fees.
The key issue
We need to figure out: What do builders, entrepreneurs, and society want to get from blockchain technology?
Decentralization is not a binary concept, but a spectrum.
Some use cases require more decentralization, others don’t. Money and finance: Yes, I need to be guaranteed that I control my assets and no single entity can take them away from me. Otherwise, I’ll just go with a bank. But gaming? Social media? These are incremental improvements to existing platforms that don’t require full decentralization by enabling greater user ownership and aligning incentives.
With that in mind, here is my current mental model of the future of blockchain:
Power Law: A small number (<5) of general purpose chains will capture the majority of attention;
There will be multiple chains, many of which have specialized use cases, and application-specific chains will be ubiquitous;
No one-size-fits-all solution
Ethereum and Solana will coexist. They will both likely thrive and become huge technology platforms. But I find myself leaning towards the idea of Solana despite its flaws: weak censorship resistance, desperate need for a fee market, light clients, etc.
Because Solana is now ready to support large-scale consumer-facing applications, for example, compressed NFTs can only be used on Solana.
We need to find crypto’s ChatGPT moment. Now, not in another 5-10 years. Solana may be our best bet to achieve that.
