Solana’s potential to eclipse Ethereum as the go-to blockchain for institutional use seems uncertain, according to a recent analysis by Sygnum, a prominent crypto bank group. Despite Solana’s impressive transaction volumes and fee generation, Sygnum’s May 8 blog post suggests that Solana’s reliance on memecoins makes its revenue base precarious.
Institutional Influence and Revenue Stability
Sygnum’s assessment highlights a critical factor in the blockchain race: the choices of traditional financial institutions. The bank group posits that the future landscape of blockchain adoption will largely depend on which platform these institutions favor for their products. Right now, Ethereum’s advantages in security, stability, and its track record appear to be tipping the scales in its favor. This aligns with Vitalik Buterin’s vision for Ethereum: Pectra, Glamsterdam and beyond, where Ethereum’s evolving framework is highlighted as a key to its sustained dominance.
“Ethereum’s framework is highly valued for its proven durability,” Sygnum noted, hinting that Solana’s current revenue model, heavily skewed towards memecoins, might not instill the same level of confidence among institutional players. This reliance, according to Sygnum, leads to a perceived instability, potentially hindering Solana’s ability to outperform Ethereum in terms of valuation.
Transaction Volumes vs. Value Locked
Despite Solana’s transaction volumes surpassing those of Ethereum and its layer 2s, the latter continues to boast a higher total value locked on-chain. Sources like Dune Analytics affirm these metrics, underscoring a crucial divergence: while Solana excels in sheer transaction activity, Ethereum maintains a more substantial economic footprint.
Sygnum also pointed out challenges within Solana’s tokenomics. While Solana leads in market share for layer-1 fee generation, much of this revenue is funneled to validators rather than enhancing the token’s value itself. “In revenue terms, Ethereum still outpaces Solana by a factor of 2 to 2.5 times,” Sygnum observed, noting that this is a crucial consideration for investors.
Solana’s Path Forward
Yet, not all is bleak for Solana. The blockchain has been making strides in decentralized finance, increasing the total value locked in its protocols. Should Solana pivot towards more stable revenue streams—such as tokenization and stablecoins—it could pose a serious challenge to Ethereum’s dominance. This potential shift is reminiscent of predictions in Bitcoin DeFi will have 300M users, beating Ethereum and Solana: Exec, where the expansion of DeFi is seen as a critical growth area for blockchain platforms.
However, this journey isn’t without hurdles. A recent proposal to reduce SOL’s inflation rate was rejected by the community, signaling potential resistance to changes that might bolster the token’s intrinsic value. This decision, alongside Ethereum’s strategic realignments, adds layers of complexity to the competitive landscape.
In the broader context, Ethereum has maintained its edge in areas gaining traction with governmental and regulatory bodies, such as stablecoins and tokenization. These are sectors where Ethereum’s integration with traditional finance is particularly robust, potentially offering a long-term advantage.
Looking Ahead
The race between Solana and Ethereum is far from a straightforward narrative of one blockchain unseating the other. Instead, it unfolds as a complex interplay of technological capabilities, strategic adjustments, and institutional preferences. Sygnum’s insights suggest a cautious optimism for Solana, provided it can stabilize its revenue sources and adapt its tokenomics to drive more value to its native token.
Whether Solana can achieve this while maintaining its current momentum remains an open question. As the crypto landscape continues to evolve, the decisions taken by both blockchains in the coming months will be pivotal. For now, Ethereum’s entrenched position and institutional support provide a formidable challenge for any contender looking to dethrone it.
Source
This article is based on: Solana lacks ‘convincing signs’ of besting Ethereum: Sygnum
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
