-
A notable surge in activity puts analysts’ eyes back on Ethereum. Can the Ethereum network catch up to and surpass Solana?
-
As the market shifts, Ethereum contends with its high transaction fees, yet the rise of layer-2 blockchains presents a promising future for decentralized applications (DApps).
-
According to DefiLlama, Ethereum and its layer-2 ecosystem accounted for 45.2% of the decentralized exchange (DEX) market share in November, highlighting its significant impact.
The Ethereum network shows renewed potential amid rising layer-2 solutions but faces tough competition from Solana in DEX volumes and transaction fees.
Ethereum’s Layer-2 Growth: Can it Compete with Solana?
The Ethereum network has long been criticized for high transaction fees, which often exceed $4. However, the exponential growth of layer-2 blockchains has created a sustainable solution for decentralized applications (DApps) that require higher scalability. This ecosystem saw a 70% increase in volumes over the past 30 days, but can it match Solana’s success?
Comparing Market Activity: Solana vs. Ethereum
While Solana may have surpassed Ethereum’s base layer activity, it still falls short when considering Ethereum’s layer-2 blockchains. Solana captured 35.4% of the decentralized exchange (DEX) volumes in November, up from 27.2% in October, according to DefiLlama data. In comparison, Ethereum and its layer-2 ecosystem accounted for 45.2% of the market share in November, down from 50.1% in October.
In terms of deposits, Ethereum’s base layer has a clear advantage with $69.7 billion in total value locked (TVL), compared to Solana’s $9.2 billion. More notably, some of Ethereum’s layer-2 solutions, such as **Base** and **Arbitrum**, are already each at $3 billion in TVL. In total, the Ethereum layer-2 ecosystem has reached a TVL of $11.4 billion, according to DefiLlama data.
The Rise of Memecoins and Their Impact
There is no doubt that Solana has emerged as a major player, securing the second position in terms of deposits. However, Ethereum’s dominance remains unchallenged. Additionally, the impressive growth of Base, an Ethereum layer-2 solution founded and controlled by the Coinbase exchange, offers promising prospects, particularly in the memecoin sector. Memecoins have been a key catalyst for Solana’s adoption and growth, with several tokens surpassing $1 billion in market capitalization.
Pump.fun has significantly altered the creation of liquidity pools for new token launches, leading to a substantial increase in trading activity on platforms like Raydium and Orca, which collectively amassed $24.6 billion in volumes over the past seven days.
Solana Surpasses Ethereum in Fee Generation
Some analysts emphasize that capturing fees is crucial for a network’s survival, as stakers must be rewarded for their validation services, thereby creating incentives for long-term holding. The primary value driver for cryptocurrencies on smart contract blockchains is the payment for processing services, which supports their decentralization.
Evaluating Fee Structures and Future Trends
Solana recently surpassed Ethereum to become the highest-grossing blockchain in terms of fees, prompting investors to question whether ETH is overvalued at a $436 billion market capitalization, while SOL stands at $116 billion—a 73% discount. However, this simplistic analysis overlooks Solana’s higher inflation rate, currently at 5.3%.
Looking ahead to 2025, Ethereum is considering further fee structure adjustments, including dynamic fee changes based on network usage and potential optimizations in how layer-2 solutions like rollups interact with the base layer. These measures aim to improve the efficiency of decentralized applications (DApps), reduce transaction costs, and ultimately drive higher network fees.
Currently, Ethereum’s layer-2 solutions struggle to compete with Solana, which offers a more seamless experience for new entrants and token launches. However, Base is gradually gaining traction, benefiting from the Coinbase exchange’s continued influence on newcomers to the space.
Conclusion
For now, it appears Solana’s growth will not be hindered, paving the way for higher total value locked (TVL) and volumes, which should positively impact SOL’s price momentum. Ethereum’s adaptations and continued innovation in its layer-2 ecosystem will be crucial to maintaining its dominance in the cryptosphere as competition intensifies.
