Solana, a fast programmable blockchain and a potential alternative to Ethereum, just saw the price of its SOL coin rise by 13 percent in 24 hours to a record high of $247, pushing its market cap to No. 4 globally, ahead of another Ethereum rival Cardano.
Rising transaction fees on Ethereum, the world’s No. 1 smart-contract blockchain, appear to be driving investors to rival programmable blockchains and coins with faster, cheaper transactions, Coindesk reported.
Two of the hottest names in the blockchain space, Solana and Cardano are often compared because they have several things in common including smart contracts and a proof-of-stake system to validate transactions. Another is the idea that “the market believes Solana and Cardano have the best chance of usurping Ethereum as the leading blockchain,” according to CryptoQuestion.
Transactions completed on Solana cost less than a penny. Ethereum transactions currently cost $5.99, according to YCharts. Solana is faster too. It can produce 2.5 blocks, or data files per second while it takes Ethereum 15 seconds to produce one block. So by the time Ethereum finishes producing a block, Solana can produce 37.5 of them.
Cardano charges transaction fees to cover the cost of processing and storing the transaction. A Cardano transaction fee pays to have transaction data included in blocks added to the blockchain permanent record, and the fee fluctuates according to supply and demand. The current average fee for a transaction is about $0.41, according to Messari. When the Cardano chain was first tested in 2017, it was able to process up to 257 transactions per second.
Solana’s market cap sits at $72 billion. A general-purpose blockchain, it’s similar to Ethereum but based on the proof-of-history (PoH) and proof-of-stake (PoS) consensus. Ethereum is moving away from proof-of-work mining to proof-of-stake validators. Solana’s native currency SOL is used to pay for transaction fees and staking in order to support the network. It aims to become the blockchain infrastructure for modern internet applications. Solana end-user applications include decentralized finance (DeFi), non-fungible tokens (NFT), marketplaces and games.
Cardano is built on a proof-of-stake consensus protocol, which validates transactions without the high energy costs associated with PoW. It facilitates peer-to-peer transactions with its internal cryptocurrency, ADA. Cardano’s market cap sits at $63 billion, according to CoinGecko. Cardano is now the sixth-largest cryptocurrency by market cap, two places behind Solana. Cardano was trading at $1.98 at the time of writing, down more than 30 percent from its all-time high of $3.10.
By comparison, Ethereum’s market cap is $531.6 billion, putting it at the No. 2 spot in the world. Bitcoin, the No. 1 crypto, has a market cap of $1.15 trillion.
When Ethereum introduced its “London fork” in August to help lower transaction fees, the fees went up instead, Forbes reported. That demonstrates “the law of unintended consequences when it comes to software development,” wrote Clem Chambers, the CEO of stocks and investment website ADVFN. “It is not hard to destroy technological dominance in one fail swoop with a couple of missteps.”
Ethereum, like Bitcoin, currently uses the energy-intensive proof-of-work consensus protocol but is moving away from PoW mining to PoS validation. This shift is meant to cut Ethereum transaction fees immensely and potentially “kill off all the parallel chains currently feeding off the crumbs of a super-expensive Ethereum transaction cost which are driving users to find alternatives,” according to Forbes.
The average fee on Ethereum, known as gas, rose by 2,300 percent since late June, Coindesk reported. Ethereum fees more than doubled to $56 in the past two weeks alone, according to data provided by the blockchain analytics firm Glassnode. The seven-day moving average of the mean transaction fee has hit a record high of $52.
If Ethereum takes too long to go proof of stake, will it be eaten alive or will it remain the king of smart contract blockchains? “As the second biggest brand, Ethereum will remain the dominant smart contract platform until further notice, unless something goes horribly wrong with the proof-of-stake fork,” Chambers predicted, writing for Forbes. “The fork could go horribly wrong.”
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