DataDrivenInvestor
Oct 12
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It’s not even close.
Bitcoin and Ethereum are the Apple and Android of Cryptocurrencies, so it’s hard to see any meaningful competitors.
Like any new technology, both have had their criticisms.
Bitcoin is Digital Gold, and Ethereum is internet money used to purchase digital assets and interact with smart contracts like NFTs and Decentralised finance.
There is a long-held belief that the perfect Blockchain still doesn’t exist, and Cryptocurrency founders like Charles Hoskinson believe that a Blockchain requires four significant factors for mass adoption.
It needs to have the following:
There were three categories.
But the echo warriors who drive their fuel-guzzling cars and have Christmas lights on throughout December — insist that something that provides billions of dollars of output should cost nothing in energy.
Ironic.
Ethereum is secure; it has smart-contract technology allowing for scalability and decentralised applications to build on top of their technology, which is brilliant for growth and network effects.
Recently Ethereum moved to a proof of stake consensus for validating payments and is now 99.5% less energy intensive.
Ethereum is incredibly slow in transaction speed and has high user fees depending on the congestion of the network. It only manages between 9–15 transactions per second.
I once paid over $150 for a transaction on Ethereum buying NFTs. Yuck.
Bitcoin is the most secure network. It is also the most well-known and most popular Cryptocurrency if you measure it by market cap.
Its downsides are that it’s slow, uses up more energy, and mining practices governments criticise, resulting in a ban on mining in some countries.
You can’t build anything meaningful on top of Bitcoin because its base layer isn’t expressive enough for NFTs or Decentralised finances.
It’s serving a purpose as Digital Gold, slowly eating into Gold’s market share by 20% during the last cycle, according to Goldman Sachs.
Charles Hoskinson, Ethereum and Cardano Founder, once described Ethereum as hotel California and Bitcoin as Blind, Deaf and Dumb.
“Bitcoin serves its purpose as Digital Gold even though mining expenses remain an issue.
And Ethereum is like the Hotel California; you can check in but can’t check out.”
(referring to their staking mechanism for ETH 2.0)
I tend to take everything this maths and sinister marketing genius says with a pinch of salt.
Hoskinson usually uses any negatives around the two leading blockchains, Bitcoin and Ethereum, as an opportunity to promote his new shiny Blockchain, Cardano.
This article isn’t about Cardano.
Solana is like a low-cost fighter jet and is the fastest Blockchain, in terms of transactions per second, in the world.
It can verify 65,000 transactions per second at less than a penny each.
As of September 2022, it’s processed over 100 billion transactions at an average cost of $0.00025.
Its Blockchain technology records every transaction that’s ever occurred, like a long-running receipt.
This proof-of-history mechanism verifies the data’s integrity without needing a middle person, and it’s how it manages its speed and transaction volume.
The cutting-edge technology and its record-keeping clock speed up the Blockchain and are lightyears faster than Bitcoin and Ethereum, that struggle to scale beyond 9–15 transactions per second.
For context, Visa, at its peak, does 65,000 transactions per second which are why Solana often gets compared to the Visa of Cryptocurrencies.
Solana is also designed to host scalable applications like NFTs and Decentralised Finance tools and has recently been picking up market share against Ethereum.
It’s been picking up speed mainly because the processing fees are significantly lower than Ethereum, which offers the same solution, but has a first-mover advantage.
Investors are attracted to Solana because the market cap is smaller, allowing for a more significant upside with even the slightest buying pressure.
Like all the other new technologies, Solana has its downfalls, predominantly security.
An essential factor that hackers have exploited.
Unlike Bitcoin and Ethereum, the most secure networks with their respective proof-of-work and proof-of-stake networks, Solana’s high-speed fighter jet has shown its unsteady security.
While the Solana network is secure, it has been susceptible to bridging hacks from linking them to other networks.
The most famous was the recent Wormhole bridge attack that cost them $320 Million.
Wormhole supports the bridging of tokens between Ethereum and Solana, which saw 120,000 ETH tokens removed from the platform and distributed between the hacker’s Solana and ETH wallets.
The attacker exploited a vulnerability on the Solana side of the Wormhole bridge to create 120,000 Wrapped Ethereum tokens for themselves.
A bridge like Wormhole takes an Ethereum token, locks it into a contract on one chain, and then on the chain at the other side of the bridge, it issues a parallel token.
Wormhole tweeted the details:
Ethereum Co-founder Vitalik Buterin doesn’t think bridges will be around for much longer, but the moto at Solana is to:
“move fast and break things.”
Solana is Ethereum’s close competitor in terms of use cases and currently has a market cap of 11 billion, which is 7% of the Ethereum market cap.
Solana’s market cap is 2.9% of Bitcoin’s.
Its previous all-time highs were 77.9 Billion, but significant economic issues have seen the whole Cryptocurrency space decline in value along with the stock market.
Solana is the 9th most popular Cryptocurrency in terms of market cap, but it is making significant inroads into NFTs (Non-Fungible Tokens), the technology that is expected to commercialise Cryptocurrency.
With low fees on Solana and growing popularity in the NFT community, they are making increasing inroads into Ethereum’s market share.
Newly launched Solana-based NFT marketplace Magic Eden is doing around $3 million a month in trading volume vs More established Ethereum-based platform Opensea, which has approximately $300 million a month in trading volume.
Here are some possible outcomes from a 1000-dollar investment if your Solana reaches the below market caps.
Returns are based on a $1000 investment.
These are some speculative figures comparing Solana’s market cap to other competitors. It doesn’t mean that they will happen.
I believe over a long-term time horizon, and as we move into a more digitally immersive world, one of these big players will commercialise Cryptocurrency for the masses.
No one knows which one, so your best strategy may be diversifying into all three Bitcoin, Ethereum, and Solana.
We’re so early that it may end up being neither of the three. Either way, play with money you can afford to lose.
If you want to read more of my takes on Web3, consider becoming a member. Your membership fee directly supports the writers you read. I’ll earn a small commission if you sign up using my link CLICK HERE.
This article is for informational purposes only; it should not be considered financial, tax or legal advice. Consult a financial professional before making any significant financial decisions.
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