Wednesday, February 21

Despite falling 2 times in 4 months, Solana continues to chase Ethereum

Against Ethereum, the Solana blockchain seems to be becoming a favorite of some big names in traditional finance. This is the case of Bank of America and JP Morgan. Bank of America’s head of digital assets said a few days ago that Solana could become the “Visa of the digital asset ecosystem.” Now, Nikolaos Panigirtzlou, an analyst at JP Morgan, warns that Ethereum will continue to fall until its update in 2023.

Panigirtzlou notes that the Solana blockchain has been absorbing some of Ethereum’s NFT volume since August. The market share of Ethereum NFTs has gone from 95% in 2021 to 80% in January 2022. Likewise, Ethereum’s participation in DeFi, which was close to 100%, is currently at 65%. . In addition, network congestion and high fees to operate on it point to a further drop.

The emergence of the Ethereum network in 2015 marked the arrival of smart contracts and decentralized applications, causing a revolution in the blockchain and crypto ecosystem. However, the high demand for the network, caused by the spectacular development of DeFi, dApps and NFTs, placed this blockchain at the limit of its capabilities during the past year. A situation that has caused more and more users and companies to use alternatives such as Polygon (MATIC) or Solana.

Panigirtzlou points out that if the Ethereum update is successful, the network could begin to recover. The radical change of JP Morgan in its forecasts is curious. In April 2021, Ethereum was highlighted as the cryptocurrency with the most potential, surpassing even Bitcoin. The firm assured then that the logical thing was for Ethereum to continue rising, but it did not count on the fact that such rapid growth could be counterproductive for the blockchain.

Delay in London 2.0

One of the causes of the declining use of Ethereum is the delay in its upgrade to Ethereum 2.0. The initial idea was to implement the update throughout 2022, but its co-founder, Vitalik Buterin, pointed out last December that it would take until 2023 to make the update effective.

What is Ethereum 2.0? Everything you need to know about the changes of this blockchain

Ethereum 2.0 is the update that promises to transform this blockchain into a much lighter, faster, more sustainable, scalable and accessible network. The update, also known as Serenity, will replace current Proof-of-Work (PoW) mining with Proof-of-Stake (PoS). A change that will eliminate the high electrical consumption required for the operation of mining and increase the processing capacity of transactions.

big competitors

Ethereum is losing market share mainly to other independent blockchains. That is, before those decentralized application protocols that use their own blockchains. Ethereum competitors that are gaining this market share are Solana, Terra, Binance Smart Chain, and Avalanche.

Ethereum, five years putting into practice the decentralized heart of Bitcoin

According to note issued by JP Morgan, “It is possible that the ecosystems of competitors grow so large that activity does not return en masse to the Ethereum network, even after its scaling is complete. “Ethereum is currently in an intense race to maintain its dominance in the application space and there is no clear winner,” Panigirtzlou stresses.

Solana has suffered two attacks in four months

The Solana blockchain is the one that has evolved the most throughout 2021, gradually taking ground from Ethereum. Solana is a decentralized blockchain built to enable easy-to-use and scalable applications for everyone. That is, an open source blockchain that facilitates the development of decentralized applications (DApps). On its website, Solana defines itself as the fastest blockchain in the world, with more than 400 projects, ranging from DeFi to NFTs. In the last year, Solana’s cryptocurrency, SOL, has grown by 3,513%. At press time, it is priced at $163,10.

However, I agree to remember that Solana also shows shortcomings. Last September, the Solana network was paralyzed by the massive arrival of transactions in a short time. The developers attributed the incident to the mass sending of transactions by bots. Which led the network to reach 400,000 transactions per second. The sudden increase in activity on the blockchain network caused Solana to fork, causing excessive memory consumption that eventually brought the network to a halt. This attack is known as a DDoS attack.

Losses of more than 11,000 million

Well, Solana suffered a similar attack again during the first days of January, causing an 18% drop in the price of SOL, the network’s native cryptocurrency. As a result, in just four days, Solana lost more than $11 billion in capitalization. At the close of this edition, Solana is listed above the $136. For its part, Ethereum does it above the $3,134, well below the high of 4,000 reached a few months ago.

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