The article compares the economics of Ethereum and Solana through data analysis, revealing Ethereum's advantages in fees, value accumulation, and on-chain profitability, while noting Solana has yet to achieve on-chain profitability and relies on inflation and token incentives.
Author: @JustDeauIt
Translation: Plain Language Blockchain
Regarding Ethereum vs. Solana, the timeline is filled with many misconceptions. It's time to cut through this noise with a data-driven approach.
This is why I created this amazing dashboard that compares the economics of these two networks in the following areas:
Market Entry Strategy
Value Accumulation
Total Economic Value
Cost of generating $1 in fee revenue
Network Fundamentals
Performance and Valuation
It combines both quantitative and qualitative analysis.
Next are some key points and the final dashboard link via @tokenterminal 👇
1. Network Costs
Currently, the cost of trading on Arbitrum is about 50% cheaper than on Solana. In fact, the costs of trading on the earlier L2s are even lower.
2. Shifting to Total Network Fees:
Key Points:
The total fees for Ethereum and top L2s are close to $20 billion. 97.5% of fees come from L1 (with top L2 fees at $479 million). Solana's historical total fees are $495 million, with 87% generated this year.
The trend favors Solana, as in the past 90 days, the network fees generated by Solana accounted for 41% of Ethereum's total fees (excluding MEV). As for why to include L2, they create demand for ETH and settle transactions on L1. If these two economic ties are broken, we will no longer consider them.
3. Protocol Revenue
Next is protocol revenue (burned tokens that create value for non-stakers):
Key Points:
64% (or $12.4 billion) of Ethereum's historical transaction fees have been burned, accumulating value for ETH token holders.
50% (or $247 million) of Solana's historical transaction fees have been burned (just 2% of Ethereum's).
Currently, L2s have no value accumulation mechanism for token holders.
4. Supply-side Fees (paid to validators)
Key Points:
Ethereum has paid $7 billion (36%) in historical fees to supply-side validators (with $400 million so far this year).
Solana has paid $247 million (with $212 million so far this year).
How is Solana closing the gap? Through token incentives/inflation. Solana has issued $3.2 billion in incentive payments year to date, while Ethereum has issued $2.3 billion.
5. Compare total economic value (network fees + MEV + token incentives)
Key Points:
In the past 90 days, Ethereum's total economic value was $1.03 billion (58% from token incentives).
During the same period, Solana's total economic value was $1.19 billion (79% from token incentives).
When focusing on actual economic value (fees + MEV), Ethereum ($431 million) surpassed Solana ($254 million) during the same period.
Over 51% of Solana's actual economic value comes from MEV (measured through Jito fees), while Ethereum is at 29% (measured through Flashbots fees).
6. Cost to generate $1 in revenue
Key Points:
Here, we measure the spending of token holders (token incentives) to generate $1 in fees.
*Token incentives = costs for unstaked token holders, income for stakers/validators.
To date, Ethereum has paid $2.65 billion in token incentives to generate $2.06 billion in network fees (spending $1.28 for every $1 in fees generated).
During the same period, Solana paid $3.26 billion to generate $428 million in fees (spending $7.62 for every $1 in fees generated).
From an on-chain perspective, an L1 becomes profitable when its fee revenue can compensate the supply-side of the network without relying on token incentives/inflation.
Ethereum achieved this for most of 2023 and the first quarter of 2024. However, after the EIP-4844 network upgrade, fees dropped, leading to slight inflation (annualized at 0.4% based on Q3 inflation).
Solana has yet to achieve on-chain profitability, with a current inflation rate nearing 5% (which is necessary in early stages—Ethereum also had high inflation during its early formation).
Above is a brief overview of some data-driven and qualitative insights available in the dashboard shared at @tokenterminal.
If you want to view and draw your own conclusions, you can access the link here: https://tokenterminal.com/terminal/studio/dashboards/11974884-5d10-4e90-91be-ffc77ddb105b
Feel free to comment and discuss.
Article link: https://www.hellobtc.com/kp/du/11/5509.html
Source: https://x.com/JustDeauIt/status/1851993593193337064
