Fueled by the wealth-making craze of Meme, the public chain battle in 2024, can SOL subvert ETH?

introduction:

From $20 last year to breaking $200 again, SOL is gradually approaching its all-time high. In addition, as the center of this wave of wealth creation in MEME coins such as BOME, WIF, and SLERF, SOL has undoubtedly made investors look forward to its trend this year. But although the name of the former ETH killer has been mentioned again, the rightful owner of the post-Cancun era might as well give in. Now that the bull market is back, given the choice between the two, ETH or SOL?

In Buffett's value investing logic, buying stocks means buying companies. The fundamentals of a company/project are the primary factors that investors need to pay attention to, such as operating conditions, financial status, market prospects, and management capabilities.

In the investment market in the crypto world, prices fluctuate frequently, and opportunities and risk factors have doubled. Looking at SOL from the perspective of mining project value, we find the following three problems.

Q1. In the SOL ecosystem, as an ordinary investor, you cannot participate in the verification of block production.

Conceptually, SOL proposes a new blockchain architecture (PoH, Proof of History). With PoH, SOL solves the time-consuming and laborious situation of verifying transactions on the chain. There is no need to communicate with each other multiple times, and each node can independently complete its own verification stage. In SOL, the transaction process is executed by the Leader and Validators. Among them, the leader is responsible for generating PoH sequences through hash functions, providing global consistency and verifiable time lapse; creating new blocks and processing transactions. Verifiers are responsible for verifying the validity, execution results and status changes of transactions.

Normally, it is difficult for ordinary investors to become leaders/verifiers and participate in block verification. On the one hand, because both are generated by the PoS consensus algorithm, validators need to hold a certain amount of SOL as pledge. The more they hold, the greater the chance of being selected as a validator. On the other hand, it is because the ultra-high performance of SOL is based on the high-configuration hardware of the node.

In SOL, the complete path to execute a transaction is as follows:

1. The leader receives transactions from users and generates a continuous, irreversible time series through PoH to ensure that all transactions have a certain order.

2. After the transaction is processed, the leader updates the system state and packages these changes into a block. A block contains a series of transactions, execution results, and status changes.

3. Afterwards, the leader signs the state of the block and broadcasts it to the validators in Solana.

4. After the verifier node receives the block, it verifies it twice.

5. When enough validators complete the verification of the same block (reach consensus), the block will be added to the chain.

As the saying goes, a man relies on his clothes and a horse relies on his saddle. SOL, known as the "fastest smart contract blockchain", needs to rely on the powerful hardware facilities of the nodes to completely complete the above-mentioned set of block verification processes. For example, a fast CPU and a large amount of RAM are used to keep the system high-performance. The official minimum configuration recommendation is an AMD Ryzen 3950x CPU and 32GB of RAM. In terms of RAM alone, the 32G configuration is already the configuration level for professional enthusiasts or workstations, and is usually suitable for companies, governments, and research institutions.

In addition, nodes also need to be equipped with fast SSDs and large-capacity storage devices, high-speed network connections, and high-performance GPUs, etc. This undoubtedly contributes to the formation of giant whales and oligarchs for the "pure performance public chain" that sacrifices decentralization.

This is why most of SOL’s verifiers are institutions. This method of achieving vertical expansion at the expense of equipment costs is also the root cause of SOL being criticized for being overly centralized. From the perspective of value investment, decentralization has always been the core narrative of the blockchain world. The value of SOL's divergence ultimately lies in whether it can open up new opportunities in the encryption world.

But it is undeniable that the popularity of MEME in the SOL ecosystem is mainly due to SOL’s low transaction fees.

In addition, after the Cancun upgrade, market sentiment was not satisfied, and there was a certain difference in the investment space between the two in terms of currency prices, causing a large amount of funds to shift to SOL. Market data shows that after the Dencun upgrade, ETH fell below $3,800, while SOL rose to the highest level in more than two years.

The co-founder of Glassnode said that SOL has been rebounding strongly since the end of 2022, and now the SOL/ETH ratio has been soaring, and the value of SOL is increasing relative to ETH. He predicted that the SOL/ETH pairing could peak at 0.76, or even higher.

So, what is your choice on this question?

Although Q2.SOL has fast transaction speed, its system stability is insufficient and it once became a "chain of downtime".

SOL's most recent outage occurred on February 6 this year and lasted nearly 5 hours.

Here, Runpao Finance has compiled all the downtime events and duration of SOL since its launch in 2021. Among them, 2022 was the year with the most frequent downtime of SOL, with a total of 14 large and small events. Subsequently, SOL introduced QUIC, and the downtime events were alleviated. See the figure below for details.

The end of the universe is Tieling, and the end of the public chain is TPS. Because it directly affects transaction fees and user ecology.

Brandon Potts of crypto venture capital firm Framework Ventures explained the difference between ETH and SOL’s growth paths: “Ethereum is looking for an impenetrable security model. They’re looking for more settlement layers, more high-value transactions, if you will. But with SOL, they’re looking for high speed, low latency, high performance, low cost. So I’m not trying to pit these two against each other, but they’re starting at two extremes.”

SOL wants to build a decentralized payment trading platform that can compete with Visa and Nasdaq, and its pursuit of high-performance TPS must be at the expense of system security.

This is also the main reason why SOL has frequently experienced downtime in the past.

Different from the Ethereum PoS consensus mechanism, on SOL, the leader's vote is actually implemented through the process of validators confirming the blocks generated by the leader. Consensus voting is treated as a transaction event, and the transaction sequence published contains node voting Vote, and these votes account for more than 70% of SOL TPS. In addition, SOL will announce the leader of each cycle in advance, eliminating the process of exchanging voting information in consensus voting and avoiding the consumption of bandwidth resources due to dissemination and verification. This means that leaders may be subject to premeditated DDoS attacks, making the SOL network potentially risky in terms of security.

Another point is that there is a key component shared by all nodes in the Ethereum network - the global transaction pool.

The global transaction pool serves as the temporary storage area for pending transactions and is the "temporary storage point" before transactions are packaged into new blocks by miners. The global transaction pool will sort transactions according to certain rules. Importantly, the global transaction pool will filter illegal transactions, such as duplicate transactions and junk transactions, to ensure effective management of transactions. Its essence is actually a buffer for data, used to improve the availability of the public chain.

In the SOL network, according to the complete transaction path given above, the leader assumes the main task in the transaction, and the verifier is responsible for the secondary verification of the block. This means that when encountering a traffic peak, the leader They usually face greater work pressure and are prone to the risk of downtime.

SOL is faced with the dilemma of security and availability, what is your choice?

Q3. SOL’s new narrative has mixed results. What’s the future?

According to data from blockchain analysis platform Artemis, the weekly transfer volume of SOL stablecoin reached 364.7 billion US dollars, surpassing the 152.99 billion US dollars of the Ethereum network, becoming the blockchain with the largest weekly stablecoin transfer volume. The transaction volumes of other top chains such as Tron and BNB Chain were 101.57 billion US dollars and 22.75 billion US dollars respectively. This means that SOL is becoming more and more influential in the Web3 field.

The co-founder and CEO of Real Vision said in an interview that Solana’s price will rise to between $750 and $1,000 and will eventually become the third-largest coin in the cryptocurrency space.

SOL's current biggest competitive advantage comes from the fact that transaction fees are far lower than Ethereum, but there is a large development gap compared to Ethereum in terms of ecological scale. Especially after the Cancun upgrade, Ethereum transaction rates dropped by more than 10 times. Considering factors such as cost and volatility risk, existing Ethereum projects will not be migrated. How to get rid of the low availability of SOL has become a key turning point.

This has to mention Firedancer, which SOL is currently actively promoting.

Firedancer is a new validator client for the SOL network. Its main goal is to improve the speed, reliability and diversity of validators of the network. It is a long-term solution to SOL's past network outage problems, and TPS will be further improved. Based on Firedancer's further improvement of SOL performance, payment giant Visa is also actively expanding its services to SOL and is currently testing the service of completing stablecoin settlement through SOL. This will be an important step in the integration of traditional payment systems with the emerging digital currency field.

Therefore, Firedancer, which is planned to be launched in the first half of 2024, is bound to become a positive driver for the development of SOL.

In addition, at the ecological level, Solana DePIN (decentralized physical infrastructure network) also shows relatively positive development momentum. DePIN is regarded as a highly potential investment area in the SOL ecosystem and is the preferred blockchain platform for many DePIN projects, covering projects in multiple fields such as computing, storage, communication technology, and data collection.

The current overall valuation of the Web3 field is less than US$40 billion, and according to the Messari report, the total available market for DePIN is currently approximately US$2.2 trillion, and is expected to reach US$3.5 trillion by 2028.

Of course, potential risk items also need to be focused on.

1. The FTX bankruptcy event has entered the claim stage, and its liquidated crypto assets include a large number of SOL tokens. The market may face continued selling pressure.

2. The frenzied market triggered by Meme tokens has a stimulating effect on the price of SOL currency. In addition, the bear market cycle in the crypto world is over, and benefits such as halving are coming one after another. The profit-taking of giant whales' positions will become an uncertain factor.

So, the last multiple choice question, what is your choice?

Conclusion:

How to define a killer public chain? This is by no means an answer that a fanatical Meme can give.

SOL and ETH, two public chains with different directions, will eventually return to the level of competition for the original demand of "users".

The word "disruption" has been used to describe many innovative technologies, but only technologies that pass the implementation test can be truly recognized.

In the crypto world, the "killer public chain" should depend on whether the chain can quickly, conveniently and accessibly use the application. Creating something that really brings disruptive changes to life is the key to the problem. #Solana⁩ #公链之争