Better Buy: Solana vs. Ethereum

Over the past decade, Ethereum (CRYPTO: ETH) has been hands-down one of the single best crypto investments you could have made. In January 2016, Ethereum was trading for just $2. Today, it trades for $2,700. And it remains the second-largest cryptocurrency in the world, with a massive $325 billion market cap.

But Ethereum may be losing its way after a decade of dominance. Solana (CRYPTO: SOL) has emerged as the top rival to Ethereum and is now growing at a much faster pace. All signs are pointing to Solana eventually toppling Ethereum as the market leader, and that's why I think Solana is a better buy than Ethereum right now.

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Crypto market performance

Let's start off by comparing the performance of Solana and Ethereum over the past two years. Since Jan. 1, 2023, Ethereum is up a sparkling 124%. Not bad, right? But take a look at Solana's performance. Over that same time period, Solana is up 1,872%. It's not even close.

Ethereum / US Dollar chart by TradingView

As you can see from the chart above, in late 2023, the performance of the two cryptocurrencies began to diverge. Solana has been skyrocketing upward ever since. In 2023, Solana was up more than 900%.

Technical performance

So, what accounts for Solana's spectacular performance? Part of it can be explained away by the fact that Solana was pretty much left for dead after the implosion of the cryptocurrency exchange FTX in November 2022. Solana had ties with FTX founder Sam Bankman-Fried, so investors didn't want to touch Solana with a 10-foot stick. Solana had nowhere to go but up in 2023 after hitting rock bottom in 2022.

But that's only part of the story. It's important to note that, based on technical specifications alone, Solana is a superior Layer 1 blockchain. Long story short, Solana is cheaper, faster, and more efficient to use than Ethereum. It has a higher throughput capacity than Ethereum, and transaction fees are lower as well.

That's a powerful recipe for success, as Cathie Wood of Ark Invest has pointed out. In fact, in November 2023, she openly suggested that Solana had the potential to topple Ethereum as the market leader.

Notably, November 2023 is almost exactly when the performance of Solana and Ethereum began to diverge. Perhaps that was the "aha moment" for investors when they realized that Solana, not Ethereum, was the future.

Market share and mind share

If you check out the latest "Big Ideas 2025" report from Ark Invest, you can see that Solana is now outpacing Ethereum in nearly every possible metric that matters for Layer 1 blockchains. In terms of daily active users, revenue, transaction count, Total Value Locked (TVL), and developer adoption, Solana is now leading the way, not Ethereum.

Moreover, Solana has emerged as a key player in the world of decentralized finance (DeFi). That's important because it's one area where Ethereum has always been the clear market leader and the one area that accounts for so much of Ethereum's value.

Admittedly, Ethereum's lead in DeFi is still immense, but Solana has emerged as the clear No. 2. In fact, if you only look at one key metric -- 24-hour trading volume on decentralized cryptocurrency exchanges -- then Solana has already passed Ethereum.

Image source: Getty Images.

And it's not just market share that Solana is taking away from Ethereum. It's also "mind share." Solana has tapped into the current zeitgeist of crypto, and that has led to a torrent of new users and new activity.

In short, Solana has tapped into meme coin culture. Investors need a way to hold meme coins, trade meme coins, and create meme coins, and Solana has put in place a remarkable ecosystem that makes all that possible.

In many ways, the "killer app" for Solana has been Pump.fun, a meme coin platform that enables users to create thousands of new meme coins every single day. A single Solana blockchain wallet (Phantom) now gets more downloads every day than popular social media apps.

What is the future of Ethereum?

Notably, top developers at Ethereum are finally waking up to the realization that Solana is eating their lunch these days. They are complaining that their future roadmap for growth is "too unambitious," and some have warned about the need to adopt a new strategy to take on Solana.

Vitalik Buterin, the legendary co-founder of Ethereum, has weighed in on the issue. He's confident that Ethereum's slow, steady approach to growth based on an endless series of technical improvements is still the best way to go. He has openly complained about the "degen casino" approach to crypto that meme coin culture has popularized.

Buy Solana, not Ethereum

You don't need to understand anything about blockchain technology or the current crypto zeitgeist to understand how badly Solana is beating Ethereum right now. Just look at the charts. Would you rather invest in a cryptocurrency that is up 1,872% over the past two years or one that is up 124%?

Should you invest $1,000 in Solana right now?

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Dominic Basulto has positions in Solana. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.