Bank of America digital asset strategist Alkesh Shah predicted that Ethereum competitor Solana could become the “Visa of the digital asset ecosystem” in a January 11 research note.
The Solana network was launched in 2020 and has since become the fifth largest cryptocurrency with a market capitalization of $47 billion. An order of magnitude faster than Ethereum, it has been used to settle over 50 billion transactions and mint over 5.7 million non-fungible tokens (NFTs).
Critics argue, however, that its speed comes at the expense of decentralization and reliability, but Shah thinks the pros outweigh the cons:
“Its ability to deliver high throughput, low cost, and ease of use creates a blockchain optimized for consumer use cases such as micropayments, DeFi, NFTs, decentralized networks (Web3), and gaming. “
He went on to suggest that Solana is taking a slice of Ethereum’s market share due to its low fees, ease of use, and scalability, while Ethereum could be relegated to “use cases high-value transaction and identity, storage and supply chain,” Shah wrote, as quoted by Business Insider.
“Ethereum prioritizes decentralization and security, but at the expense of scalability, which has led to periods of network congestion and transaction fees sometimes exceeding the value of the transaction sent.”
Visa processes an average of 1,700 transactions per second (TPS), but the network can theoretically handle at least 24,000 TPS. Ethereum currently runs about 12 TPS on the mainnet (more on layer two), while Solana claims a theoretical limit of 65,000 TPS.
Shah concedes that “Solana prioritizes scalability, but a relatively less decentralized and secure blockchain has tradeoffs, exemplified by several network performance issues since its inception.”
Solana has experienced more than its fair share of network performance issues over the past few months, such as Binance’s recently confirmed withdrawal issues on Jan. 12, delayed performance reports on social media on Jan. 7, and what appeared to be a DDos attack on January 12. 5, though Solana denied that was the case.
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This came less than a month after a previous attack on Dec. 10, with reports of network congestion caused by a mass kickoff associated with an Initial December Offering (IDO) on the decentralized exchange. based in Solana, Raydium.
In an interview with Cointelegraph on Dec. 22, Austin Federa, head of communications at Solana Labs, said that the developers are currently working to resolve network issues, particularly with regards to improving transaction measurement.
“The Solana runtime is a new design. It does not use EVM [Ethereum Virtual Machine] and a ton of innovation has been done to make sure users have the cheapest fees possible, but there’s still work to be done on runtime.