Analysis
Blockchain Battle: Ethereum vs Solana
Ethereum and Solana are kings of smart contract right now.
The founder of Solana, Anatoly, and Justin Drake from the Ethereum Foundation held a debate. It showed the difference between how Solana and Ethereum view blockchains.
So we'd thought we give an update on the blockchains different philosophically.
Ethereum views L1 wars as the winner takes most. Whereas for Anatoly, blockchains are more like back-end systems that are likely to change every 4-5 years.
This informs how they choose to build their chains as well:
- Ethereum optimizes for maximum decentralization and security. This is due to their long-term view that focuses more on monetary premium, infrastructure, and so on.
- Solana, in contrast, optimizes for a better user experience by creating a fast and cheap monolithic L1. They focus more on the short-term and seek to build products that attract a lot of users.
The strengths and weaknesses of both ecosystems come from their optimizations:
- Solana VM was considered more suitable for engineers to build dApps. But Ethereum VM has the advantage of being early.
- Gas fee, transaction speed, and throughput are better on Solana. But since it is difficult for normal users to run their nodes, they are sacrificing decentralization.
- Ethereum is scaling via L2s. But they are fragmented and create a poor user experience. This can be solved by using a shared sequencer and pre-confirmations. But this is a long-term project that'll take years.
- In contrast to Ethereum, Anatoly views "monetary premium", "sell-pressure as network cost", and "economic security" as misleading concepts. The tokenomics difference between $SOL and $ETH is partly because of this.
If you want to know more about technical choices and trade-offs made by both teams, listen to the whole debate here.
That was a lot of theory. Let's analyze the current state of both chains. I like to back my analysis with numbers.
So, here are some metrics.
The above chart compares TVL for Ethereum and Solana. Despite the chatter on CT, Ethereum still secures the majority of value in the crypto space. Compared to ETH's $116B in TVL, Solana "only" has $8.9B.
However, TVL doesn't tell the whole story:
These numbers seem to imply that Solana is a lot more active than Ethereum. But this is usually countered by the following points:
- Ethereum has transferred a lot of its activity to L2s.
- Solana counts activities as transactions that Ethereum doesn't.
- A large chunk of activity on Solana comes from bot transactions with little intrinsic value.
So, a good proxy for checking actual economic activity on both chains is DEX trading volumes. Using that metric, Ethereum actually takes the lead. In May, Ethereum had $65.7B whereas Solana had $35.3B.
There's one caveat about the DEX trading volume numbers. It doesn't include Pump.fun activity on Solana. Last month, the majority of memecoin degeneracy happened there.
Also, Ethereum collects more fees and revenue than Solana. This is kind of expected since Solana is known for its low fees.
Metrics from Google trends are a good proxy for understanding retail sentiment. Ethereum still has the lead across web and YouTube searches.
In conclusion, both Solana and Ethereum are doing well. Ethereum has the incumbent advantage. It has a huge lead in TVL. But Solana is attracting most of the new activity. Solana has a gigantic lead in the number of transactions.It'll perform well in this cycle.
In the very long-term, Ethereum seems to be better positioned. But they need to ship a lot of tech like pre-confirmations and shared sequencers. Before that happens, Solana has the opportunity to capture market share.
I always think tribalism's done. If you don't have a preference, you can always get exposure to both.
Sponsored by Everclear
Everclear: The Future of Blockchain Interoperability
As we enter the modular era, the blockchain grows increasingly divided into independent layers (execution, settlement, consensus, and data availability).
While this has scaled the blockchain, it has also led to fragmentation, spreading liquidity thin and complicating the user experience.
But there's a solution on the way.
Everclear (formerly known as Connext) aims to solve all this through Chain Abstraction and the Clearing Layer.
You shouldn't worry about which chain you're on and what the underlying tech behind it is.
Think of Uber.
You want to go from point A to point B, Uber handles all the complexities behind the scenes for us. Everclear works similarly. It simplifies cross-chain transactions, shifts complexities to third parties, and enables a more user-friendly experience.
Key benefits:
- Intent-based Bridges and DEXs. Protocols like Uniswap and 1inch can share liquidity, thereby reducing costs.
- Token issuers. We can see new tokens everywhere due to unified liquidity, regardless of the supported bridges.
- Chains and AppChains. New chains can access liquidity and simplify onboarding.
Start testing these features today! Everclear's testnet is already live, with the mainnet launching in early Q3. $NEXT will be Everclear's native token.
Look, we all want crypto to become more mainstream. But to do that, it must be easier for non-technical people to use.
Chain Abstraction can help to eliminate many of those barriers, and Everclear is key to making this become a reality.
Protocols
Breakout dApps: Polymarket and HyperLiquid
Want to catch gems before everyone else?
Tracking metrics is the best way to spot protocols they pop off. Here are two protocols that have come to my attention because their numbers were going off the chart:
#1 Polymarket
What is it? It is the largest prediction market on Polygon PoS. It allows people to place bets on any event in the world. You can bet on sports, politics, pop culture, and more.
And they have been gaining a lot of traction! The numbers are hitting all-time highs:
- It had 19,553 new accounts in May alone.
- In 2024, the TVL grew from $9.6M to ~$24.7M .
- Monthly active traders grew from 4097 in January to 13,597 in May.
Prediction markets have two main utilities:
- 1. Make money. If the bets you make come true, you get money. Browse around the platform and you can find many events that you can use to make moolah.
- 2. Get probabilities of events. Prices on the prediction market indicate the probability of an event. Many times, these probabilities will be better than "expert takes." Experts only stake their reputation. But claims on prediction markets are backed by real money.
This is a crypto application with a popular real-world use case. And they aren't using token incentives or point program gimmicks – just organic growth.
There are many ways for Polymarket to become more popular:
- They can introduce points programs and token incentives.
- It could become integrated into other websites and social media such as Farcaster.
- Right now, the team is responsible for creating betting markets on Polymarket. This needs to become permissionless.
Once the US presidential election moves closer, we are likely going to see Polymarket gaining traction.
#2 HyperLiquid
What is it? It is high-performance L1 optimized for DeFi. It offers many advanced trading options and low fees. Technically, it supports 20k orders/second with low latency.
Hyperliquid DEX is its flagship dApp. It is a fully onchain order book perp exchange. Every order, cancel, trade, and liquidation happens transparently on-chain with block latency <1 second.
And recently, their metrics were posting big numbers:
- It has ~$2.2B in all-time deposits.
- Around $2.4B in total notional liquidations.
- In 2024, TVL grew from ~$58M to ~$525M. That's 9x growth.
User Vaults is one of their most notable features. You can automatically copy the vault manager's trades by depositing them into the vault. This is basically copy-trading.
On May 29th, Hyperliquid launched the L1 phase of its points program. 700,000 points are going to be distributed weekly for four months.
You can try the protocol here.
🚀 DeFi Catalysts
IntentX is updating its tokenomics. Protocol revenue will be used to build Protocol-owned-liquid and buyback & distribute $INTX to stakers.
Karak Network has added support for Arbitrum. Users can now restake stablecoins, LSTs, and more from the Arbitrum network.
StarkNet announced plans to settle on both Bitcoin and Ethereum. For that, Bitcoin needs to adopt OP_CAT.
Illuvium will officially launch on July 25th. It is a highly anticipated gaming project.
dYdX launched a mobile app for Android users. This should increase its adoption since it'll be an additional way to access the chain.
TrueFi has expanded to Arbitrum. It is a modular infrastructure for onchain credit. And has been live since November 2020.
MakerDAO is voting on onboarding Etherfi's weETH into SparkLend. This will increase utility for weETH.
Penpie has decided to transition 50% of the vePENDLE voter rewards currently distributed in wETH to PNP tokens for vlPNP voters.
RISC Zero is bringing validity proofs to Optimism's OP Stack. This is improving the technical layer of the Optimism ecosystem.
Plume Network will launch its incentivized testnet soon. It is a modular L2 focusing on RWA. You can sign up for it now.
🚀 New Launches
Term Structure is a platform for peer-to-peer lending and borrowing with fixed interest rates. It is live on the mainnet.
3Jane is a derivatives protocol that unlocks novel derivatives yield sources by collateralizing restaked ETH. And it is live on EigenLayer.
Pac Finance launched its 2.0 upgrade. It introduced Pac ReLend. It'll enable depositing and borrowing receipt tokens of other major lending protocols.
Smart Wallet from Coinbase is here. It has features like easier onboarding, smooth cross-app portability, and more.
📰 Industry News
Uniswap Foundation postponed the voting on enabling the fee reward for UNI stakers. They haven't given any timeframe either.
Phantom has released support for Bitcoin. It has rich features like rare sats management and rich ordinals metadata.
Velocore DEX on Linea was exploited. 700 $ETH was moved off Linea. And the DEX was still vulnerable. So, Linea paused its chain to prevent further loss.
DMM Bitcoin, a Japanese cryptocurrency exchange, lost around $305 million worth of Bitcoin in a hack. They're raising money to fill the gap.
Matter Labs, the team behind zkSync, tried to trademark the term "ZK". But after the community backlash, they dropped the applications.
🐦⬛ X Hits
- Vaneck 2030 ETH Price Target
- Less bullish numbers on the macro side.
- It feels good to see actual revenue being generated from crypto protocols.
- We mentioned the importance of M2 in the past. Well, guess what.
- Positive ongoing BTC ETF flows
😂 Meme
Until next time,
Edgy
Today's email was written by Edgy, and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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