Bank of America analyst Alaksh Shah said in a note this week that Solana could take market share from Ethereum thanks to its distinctive design.
Solana is the fifth largest cryptocurrency, with a market capitalization of $47 billion. But Solana’s size pales in comparison to Ethereum, which was worth $400 billion at press time.
This assessment gap is an opportunity for Solana, the memo said, as her differentiation “proves a success.” The note highlighted that solana offers low transaction fees, ease of use, and scalability relative to other cryptocurrencies.
Solana’s ability to deliver such innovations is driven by her proof of blockchain history, which has helped improve the performance of the stock consensus mechanism proofing, according to the note.
“These innovations allow 65,000 industry-leading transactions to be processed per second with an average transaction fee of $0.00025, while remaining decentralized and relatively secure,” Shah explained.
Since its launch in March 2020, solana has experienced “high adoption” with more than 50 billion paid transactions and more than 5.7 million NFTs, according to the note. There are currently more than 400 projects that have joined the Solana Network.
All of this growth has helped raise the price of Seoul by over 4,000% over the past year.
“Solana could become Visa for the digital asset ecosystem,” Shah said, explaining that its ease of use and low cost mean it is optimized for micropayments, gaming and NFTs.
While solana prioritizes scalability at the expense of being a less decentralized and secure blockchain, ethereum prioritizes decentralization and security over scalability. Ethereum’s lack of scalability has resulted in periods of network congestion and transaction fees that are sometimes higher than the value of the underlying transaction.
“Prioritizing Ethereum can improve it for high-value transactions, identity, storage, and supply chain usage.”
Shah explained, “But this eventually leaves room for Solana and other scalable blockchains to shrink the market share of Ethereum.