Nov 6, 2024
6thtrade
Solana has gained attention for its association with meme coins, but it’s also attracting interest from financial institutions looking to build on the network. Though newer than Ethereum, Solana doesn’t face the same limitations around transaction throughput and low fees.
An outsider might see Solana as a platform for meme coins and Ethereum as the choice for institutional projects. While BlackRock’s CEO Larry Fink has championed tokenization on Ethereum — even launching a tokenized fund on the network — Solana has made waves this year due to the popularity of pump.fun, a protocol enabling users to quickly create meme coins. Yet, this does not mean Ethereum monopolizes institutional interest. According to Hadley Stern, Chief Commercial Officer at Marinade Finance, a Solana-based protocol, institutional interest is growing across both platforms. Stern, a former Fidelity Digital Assets president, noted that the number of traditional finance products currently under development on Ethereum and Solana is still relatively low.
Stern’s insights come as financial giants like Franklin Templeton, Citibank, and Société Générale launched Solana-based projects at Breakpoint, Solana’s biggest yearly conference. The level of institutional interest there impressed many attendees, including Tristan Frizza, founder of the Solana-based derivatives platform Zeta Markets. Frizza remarked on the exciting projects institutions are now pursuing on Solana.
At first glance, Ethereum might seem like the obvious choice for financial institutions due to its established position as the oldest and largest smart contract blockchain with a strong developer community and a leading role in the DeFi ecosystem. According to Bitwise Chief Investment Officer Matt Hougan, using Ethereum can be a safe choice for institutional developers aiming to tokenize assets. However, Ethereum comes with uncertainties, especially around transaction fees. Leah Wald, CEO of Sol Strategies, observed that these high and unpredictable fees may deter institutions planning for the long term.
For projects that demand high transaction volumes, like real-time payments or trading, Solana could offer a better fit. Unlike Ethereum’s complex layer 2 solutions for scalability, Solana’s low fees and high throughput are inherent to its design, making it an appealing option for certain institutional projects.
However, Ethereum does benefit from greater regulatory clarity in the U.S., where the recent approval of spot Ether funds is seen as a positive signal for institutional investors, while a similar fund for SOL may still be years away.
Additionally, Solana’s technical innovations often go under the radar, according to Frizza. While Ethereum has a vast developer community, builders on Solana are increasingly recognized for creating impactful products that extend beyond Solana’s ecosystem. Frizza sees this focus on usability and scalability as key for attracting more users to the platform.
Stern echoed this, noting that while meme coins themselves aren’t novel, the fact they’ve flourished on Solana highlights the platform’s technical strengths and active developer community. Stern remarked that the Solana Foundation takes an engaged but non-controlling approach, allowing for growth and innovation across a broad range of projects and products on the platform.
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