Original title: Solana vs Ethereum: Solana is our best bet to get to crypto's chatGPT moment
Original author: Teng Yan
Original translation: Kaori, BlockBeats
Editor's note: The analysis and comparison of Ethereum and Solana has become a common topic in the crypto world. Who will be the first to gain large-scale adoption and promote the expansion of crypto technology to a wider range is also a controversial discussion. Teng Yan wrote an article to explore the two different blockchain philosophies of Ethereum and Solana, and their trade-offs in achieving scalability, security, and decentralization. He also proposed the current model of blockchain development and emphasized the importance of diversification and adaptability, as well as the role that Solana may play in this regard.
This year I will be writing a series of shorter blog posts, each presenting a key idea. I have been reading a lot lately, and writing helps me clarify my understanding of various topics. These posts are like a journal for my reflections.
First, I’ve been thinking a lot about the Ethereum vs. Solana debate, which is a hot topic in the crypto world. I’m not going to dive into the technical differences here — there are many in-depth analyses, such as Syncracy Capital’s Solana paper, which I highly recommend reading. Instead, I want to provide a more personal perspective on where our industry is headed.
I think Solana is likely to become one of the most valuable human inventions in the future, alongside Ethereum and Bitcoin.
We are running out of time
Cryptocurrency has been around for over a decade. It has attracted hundreds of billions from investors. It has become a magnet for the brightest minds. We probably have one of the highest concentrations of talent in any industry (except perhaps AI).
Yet we have yet to find that elusive killer use case — the one where the average person feels serious pain. The one where governments can’t shut down cryptocurrencies.
We desperately need a cryptocurrency like the ChatGPT Moment. ChatGPT is the fastest growing app to date, reaching 100 million users in just two months.
As time goes by, the pressure builds. While there is some political and social support for cryptocurrencies right now, if nothing impactful emerges, these sentiments will wane over time. We stand at a crossroads, and the next few years will determine whether cryptocurrencies become a critical, world-changing technology… or are confined to a few niche use cases.
We can't wait any longer. The time is now.
In order to find that killer app, the infrastructure layer must be ready.
A tale of two philosophies
Ethereum and Solana use two different concepts to solve problems in the blockchain field. But their goals are the same.
Solana's philosophy is to first create a useful blockchain, and then achieve decentralization and censorship resistance over time. It is designed to be high-performance and a state-of-the-art execution layer.
Low cost, low latency, and high throughput.
Solana optimizes for atomic composability, believing it to be the most useful feature of blockchain.
The user experience is better than the EVM (e.g. no token approval required).
Solana scales as hardware scales. And Moore’s Law has been going on for decades.
3 years of battle-tested, established tools and partnerships. Not like those new, untested high throughput systems.
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 foundation makes Ethereum have a monetary premium today. Its future development plans (Surge, Verge, Purge, Splurge) are all centered on improving scalability. This is a journey that will unfold gradually over the next few years, not be completed immediately. Today, transaction costs are high and throughput is low.
Today, ETH has a significant monetary premium that justifies its nearly $300B valuation, which cannot be explained by fees/revenues alone. This means that a significant portion of the population views it as money. It is used as:
Unit of account and method of exchange (many tokens and NFTs are denominated in ETH and traded in ETH)
Store of Value
Deflation has lasted for more than a year
All of the above are key properties of money.
The widely accepted blockchain trilemma states that it is extremely difficult to achieve the best of scalability, security, and decentralization in a single blockchain at the same time. The model suggests that focusing on improving any two of these areas often compromises the third.
The widely accepted blockchain trilemma states that it is extremely difficult to achieve optimal scalability, security, and decentralization in a single blockchain. This model suggests that focusing on improving any two of these areas often compromises the third.
There is no perfect blockchain. Trade-offs must be made.
There is no blockchain without tradeoffs. Much of the discussion around Solana and Ethereum revolves around the compromises inherent in their designs. The key question is how to balance these tradeoffs — whether scalability comes at the expense of decentralization, or whether security should be prioritized even if it impacts performance and fees.
Solana faces concerns about its security and stability, especially since there have been no major hacks to date and there has been limited scrutiny of its smart contracts, many of which are closed source. Given the inherent risks associated with software development and code, it seemed only a matter of time before security issues arose. This week, the entire chain was suspended for the 11th time in its history.
Nonetheless, Solana has likely reached a level of security and decentralization where scalability becomes the primary focus and the most important metric in optimizing the chain to be as usable as possible.
Big Questions
We are still exploring: What exactly do builders, entrepreneurs, and society collectively expect from blockchain technology?
Consider this: decentralization is not an either-or concept, but a spectrum.
Some use cases require more decentralization, others don't. Money and finance: Yes, I need assurance that I control my assets and no single entity can take them away. Otherwise, I'd just use a bank. But what about gaming? What about social media? These don't need full decentralization, as long as they improve upon existing platforms by enabling greater user ownership and aligning incentives.
With that in mind, here is my current mental model of the future of blockchain:
Power laws apply. A small number (<5) of general chains will capture the majority of attention.
There will be multiple chains, many with specialized purposes. Application-specific chains will be ubiquitous.
There is no one-size-fits-all solution.
Both Ethereum and Solana will coexist. They will both likely thrive and become huge technology platforms. But despite its flaws: low censorship resistance, desperate need for fee markets, light clients, etc., I find myself leaning more towards the idea of Solana.
Because Solana is ready to support huge consumer-facing applications today — for example, compressed NFTs can only be used on Solana.
We need to find the ChatGPT moment for crypto. Soon. Not in another 5-10 years.
And Solana may be our best choice to achieve this goal.
Other thoughts on blockchain:
Will we get to a point where users are chain-agnostic, meaning they no longer need to consider which blockchain a particular application is on? In this scenario, all backend processes are handled seamlessly and users don’t need to worry about blockchain compatibility.
Such a future would introduce fragmentation and weaken network effects, challenging the power-law dynamics observed in the EVM ecosystem that most developers and users focus on today. There is value in composability and for certain types of projects to be on the same chain.
Polynya points out that most Web3 applications do not require the strict global consensus provided by public blockchains. Because of the tradeoffs involved, it only makes sense for objective money and identity. Everything else can be done using off-chain methods.
Currency + identity on-chain. Everything else is off-chain.
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