According to Cointelegraph, Solana has yet to demonstrate convincing signs that it could surpass Ethereum as the preferred blockchain for institutional use. This assessment comes from the crypto bank group Sygnum, which highlights concerns over Solana's revenue stability due to its concentration in the memecoin sector. In a recent blog post, Sygnum noted that while Ethereum's current market sentiment is poor, attention has shifted to Solana's transaction volumes and its recent dominance in fee generation. However, the medium-term outlook is expected to be influenced more by the platform choices of traditional financial institutions rather than market sentiment.
Sygnum emphasized that Ethereum's security, stability, and longevity are highly valued, making it a likely choice for institutions over Solana. The market perceives Solana's revenue generation as less stable, primarily due to its heavy reliance on the memecoin sector. This instability could limit Solana's potential to outperform Ethereum, as the valuation differential is attributed to these differing revenue sources. Despite Solana's higher transaction volumes compared to Ethereum and its layer 2 solutions, Ethereum maintains a greater value locked on-chain. Sygnum also pointed out that Solana's tokenomics present a challenge similar to criticisms faced by Ethereum regarding its mainnet's stagnant transaction volumes, which have been affected by reduced costs for layer 2 networks.
While Solana leads in market share for layer-1 fee generation, most fees are paid to validators and do not enhance the value of the Solana token. In terms of revenue, Ethereum still surpasses Solana by a factor of 2 to 2.5 times. Sygnum argued that Solana's tokenomics are more adaptable than Ethereum's scaling strategy, yet Solana does not seem inclined to increase token value, as evidenced by the community's rejection of a proposal to reduce SOL's inflation rate in March. Despite these challenges, Solana could potentially gain ground on Ethereum if it focuses on stable revenue sources such as tokenization and stablecoins.
Sygnum acknowledged that Solana, often referred to as an "Ethereum killer," could make strides in the blockchain market. Ethereum currently holds a dominant market share in use cases gaining traction, supported by governments, regulators, and traditional finance, including tokenization, stablecoins, and decentralized finance. However, Solana has made progress in increasing the value locked in its decentralized finance protocols. If Solana can secure more stable revenue sources, it could challenge Ethereum's position. Despite Ethereum's recent strategic pivot, which has temporarily halted its two-year underperformance against Solana, Solana continues to enjoy strong backing. This shift could provide a sentiment boost for Ethereum as it adjusts its market strategy.
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