Translation: Plain Language Blockchain From the discussion on X, many people seem to be missing the core debate behind the religious battle of Ethereum vs Solana. The fundamental discussion here is not just Ethereum vs Solana, but how do we scale blockchain for mass adoption. In coming to a conclusion, I think the jury is still out and the question of which side to choose is not as simple as it seems. This is good because we are still in the early days!
1. What is the significance of L1s other than Ethereum? To better understand the context of the Ethereum vs. Solana debate, I wanted to briefly review the value propositions of other major L1s to help us map out the L1 scaling solution map. Recently, I conducted 6 AMAs with major L1s and zkSync to discuss the role of L1s in the L2 era. The main question discussed was, what is the purpose of Alt L1s when Ethereum's L2 can bring fast transactions and low-fee scaling capabilities while maintaining Ethereum's security advantages? Unsurprisingly, the most controversial issue is whether Ethereum has won the L1 competition. Sanket of Polygon and Alex of zkSync believe that Ethereum has largely won the L1 competition, while the teams of Solana, Avalanche, and BNB Chain do not agree. Near's position is more complicated: Ethereum will continue to dominate, but other L1 solutions will flourish in areas that Ethereum is not designed to excel. Near's value proposition was previously unclear, but its recent partnership with Polygon to scale Ethereum at the data availability level is consistent with the above point. In the podcast, Bankless said that Near will migrate to Ethereum L2 solutions, but this is inaccurate. While Near exists as an independent system, it also helps Ethereum expand through Near’s data availability and storage capacity. In fact, Near can also provide fast final confirmation for L2, such as Arbitrum first settles to Near and then settles to Ethereum, while maintaining the security guarantee of Ethereum + Eigenlayer and providing decentralized Sequencer functions for L2.
Eigenlayer's resettlers re-execute transactions to ensure the honesty of the Sequencer. The core proposition of the Avalanche chain is that it uses a modular design for expansion, and anyone can seamlessly build their own child chain. Structurally, the Avalanche chain is between Cosmos and Polkadot. It contains P chain (for verification), C chain (smart contracts), and X assets (for sending and receiving funds). When it comes to the BNB chain, it was originally launched to solve Ethereum's high gas fees. However, even with gas fees as low as less than $0.5 (which has sacrificed a certain degree of decentralization), the cost of BSC is still not low enough for many use cases, such as high-frequency trading. To this end, BNB launched the data availability layer of opBNB L2 and Greenfield on BSC to solve this problem.
Do these scaling solutions sound complicated? That’s the norm in the world of modular blockchains. And it’s at the heart of the Ethereum vs. Solana debate.
The assumption here is that a single blockchain must make trade-offs among the three key aspects of blockchain technology: security, scalability, and decentralization. A blockchain can only achieve two of them. Ethereum focuses on security and decentralization, resulting in high gas fees and slow transaction speeds. Therefore, it outsources scaling to the execution layer and data availability layer.
However, Solana has great ambitions to solve the blockchain trilemma with a single modular design, can this be achieved? 2. In Defense of Solana The idea of Solana is to integrate all the advantages, such as cheap and fast transactions, fast final confirmation and low latency. In fact, this can eliminate the need for cumbersome cross-chain bridges, and the cost is much lower than the current best L2 solutions can provide. Judging from the current $0.69 fee for a single exchange of Arbitrum at the time of writing, it is not good enough... We urgently need L3!
Now, all of these advantages require powerful hardware, which makes running a validator node expensive (here’s a calculator). In fact, Lido has exited the stSOL staking business on the Solana network due to high development costs. In addition, there is criticism about the distribution of SOL, with 48% allocated to insiders/VCs. Finally, Solana lacks a second product customer (Solana only has one blockchain software client, meaning that a program needs to be modified to take away property rights). Mainly because of the above characteristics, the Ethereum community (note, most of my assets are held in Ether) claims that Solana is less decentralized than Ethereum. This is a sensitive topic, but I am currently neutral:
Ethereum L2 is not truly distributed (Sequencer is centralized);
Hardware prices will always fall, which is good for Solana in the long run;
Solana will launch Firedancer, a second validator node to decentralize the network;
It can also be said that the future expansion of Ethereum depends on venture capital supporting protocols such as L2 and DA.
In fact, according to the Nakamoto coefficient, Solana performs better than Ethereum. It reflects the sensitivity of a blockchain to the number of entities that control 33% of the equity, reflecting its decentralization and security. The higher the value, the stronger the network's ability to resist manipulation. Solana is 22, while Ethereum is only 2.
However, decentralization is a range of concepts. If you really care about decentralization, you should hold and save Bitcoin. I also hold it as an insurance against the failure of Ethereum, fiat currency or other adverse events. In practice, I think the most important point in DeFi is to control your assets yourself. I hope that neither the Solana Foundation nor the government can freeze or confiscate my funds. In fact, I trust holding SOL on the Solana network more than holding Ethereum on Coinbase Base (it has nothing to do with the price). Unfortunately, Ethereum's high gas fee pushes people to L2, but the security and decentralization of L2 are affected. Bitcoin on the Bitcoin network>Ethereum on the Ethereum network>SOL on the Solana network>Ethereum on the Coinbase Base In addition, the discussion on decentralization is dominated by Western English-speaking countries. However, the success of Tron and BSC in non-Western countries, as well as the Farcaster social network in the West, shows that some scenarios require moderately decentralized blockchains. Not everyone can afford a simple currency exchange fee of $18, and Ethereum and L2 networks are currently networks for the rich. In short, I look forward to seeing the diversification of blockchain application scenarios.
Although I trust DeFi on the Ethereum mainnet more for large-scale lending and staking, or holding expensive NFTs, I am more comfortable trading contracts and conducting micro or non-financial transactions on Solana. Solana seems to be suitable for most dApps such as GameFi, Metaverse, P2E, Derivatives, Options, etc. This is precisely why Solana developed the Solana phone and dApp store. STEPN is a good example, and I look forward to seeing more consumer-oriented applications launched on Solana to verify my views on Solana. So TVL is not a perfect indicator for measuring the Solana ecosystem. Ethereum holds the most assets because it is a value storage blockchain. But these assets are only passively stored in smart contracts to generate income, while Solana emphasizes capital circulation rate-the transaction volume per unit TVL amount. With its high scalability and low transaction fees, Solana can achieve rapid circulation and circulation of funds. This capital circulation rate proves the efficiency and attractiveness of Solana's infrastructure to users and investors. 3. Modular and monolithic future: why not have both? To be fair, Solana is not necessarily the only monolithic blockchain. Near and Algorand (as far as I know) are also examples of this, and Fantom is also moving towards a monolithic scaling design.
However, things get more interesting here, as NEAR is a blockchain that is both monolithic and modular, providing data availability to Ethereum's Layer 2. Algorand, on the other hand, provides co-chains for private permissioned blockchains. The above bipolar framework is an oversimplification, and I recommend following Justin, who shares great (and often controversial) insights on this issue. He prefers execution sharding or formal Roll-ups for scaling.
Some people like Tyler Reynolds have changed their mindset and believe that a single blockchain is the right answer.
But as you can see, there are multiple solutions for scaling blockchains and the community is still divided on which solution will dominate. Therefore, my main points are:
There are various different approaches to scaling blockchains, each with its own trade-offs. However, being a pragmatic person, I want to maximize returns by investing in solutions that are likely to dominate in the near future and have higher growth potential.
Especially in the current environment, Ethereum transaction fees are too high during busy periods, and the use of Layer 2 solutions is not cheap and brings some disadvantages to the user experience. I hope that the Ethereum community will be able to improve and simplify the user experience in the near future, but we are not there yet.
Therefore, I cannot ignore Solana's huge potential to scale through a monolithic design. If they succeed in attracting more developers, decentralized applications (dApps), and users, the growth opportunities will be impossible to ignore. If you read my blog, you will know that the ecosystem I focus on must have the following three conditions: 1) technological innovation; 2) currency issuance opportunities; 3) a compelling story. Solana meets all three conditions. It provides a unique expansion vision and has successfully attracted a large group of believers and critics. Criticism is a useful measure of attention because it shows that even skeptics care about Solana. Finally, Solana's ecosystem has been hit hard in the bear market, and even NFT projects such as DeGods and yOOts have left Solana. It's like a country that has been destroyed by war and is rebuilding. This provides opportunities because only a few dApps can attract user attention and capital inflows. In a world where we often discuss Windows vs Mac and Android vs iOS, it is easy to get caught up in such polarized discussions. But as an investor, the question should not be to choose one or the other, but to allocate a portion of funds in the portfolio to find a comfortable balance that also includes other L1 solutions. Personally, I think Solana’s vision is compelling enough to warrant some investment allocation. Taking an extreme stance goes against my belief in keeping an open mind and constantly re-evaluating my views as new information emerges. Maybe my views are wrong, so please point them out in the comments. I also value hands-on exploration and believe that Solana should be tried before dismissing it based solely on the opinions of those who don’t like it. I am also very bullish on Ethereum, and most of you are probably the same. This is why I even skipped the “Defending Ethereum” part of the blog, because Ethereum’s value proposition is strong, but it doesn’t mean I won’t consider investing in other Layer 1 solutions.
