Is Solana an ‘Ethereum killer?’

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Solana has been a trending topic due to the successive weeks of price increases seen by its SOL token. At the time of writing, SOL traded at around $207, which is an 11,400% surge from less than $2 back in January. At its present worth, Solana sits among the top 10 cryptocurrencies by market capitalization with about $60 billion, claiming the sixth spot from Dogecoin (DOGE), according to Cointelegraph Markets.

One of the likely catalysts of this bullish momentum is funding from investors led by Andreessen Horowitz and Polychain in June. Solana secured $314 million, which will be used to further its technology in the decentralized finance (DeFi) arena. Notably, the investment took the form of SOL coin purchases rather than traditional equity shares.

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Another key reason for Solana’s SOL price boom is the announcement of its fourth hackathon event slated for Oct. 8. Hackathons are targeted at developers whose projects are entered into a competition for a chance to win cash prizes and seed funding opportunities. This was perceived as a positive move for Solana, as it could help achieve wider adoption of its technology.

So, with Solana making headway, pundits can’t help but compare it with a similar programmable blockchain: Ethereum. Many have gone as far as to say that Solana could be an Ethereum killer, competing with Polkadot, Avalanche and Binance Smart Chain.

What is Solana?

Solana is a layer-one blockchain network that can implement smart contracts. Founded in 2017 by Anatoly Yakovenko, a former Qualcomm senior staff engineer manager, Solana is billed as the solution to the scaling issues of Bitcoin and Ethereum. Two years after its founding, Solana was able to land $20 million in a Series A funding round led by Multicoin Capital.

While Bitcoin (BTC) is widely accepted as a peer-to-peer form of money, Ethereum, on the other hand, is the platform for turning almost everything peer-to-peer. Solana is in the same league as Ethereum, with its smart contract capabilities and layer-one infrastructure, but it brings along several other propositions.

Ethereum is still the top choice for building decentralized applications (DApps) and deploying smart contracts, but it can’t be denied that it’s plagued with legacy issues that it’s trying to refine over time. Due to a lack of scalability, users occasionally face notoriously high gas fees. Although its transition to proof-of-stake (PoS) is already in motion — and is estimated to reduce such fees through an increased transaction throughput by applying shard chains — it isn’t expected to be fully merged to Ethereum’s mainnet until late 2021 or 2022. This is because the Beacon Chain that will coordinate all the shards is still under testing despite going live in December 2020.

On the other hand, Solana already has a PoS structure baked in as its consensus mechanism. However, the key innovation is in its proof-of-history (PoH) protocol. Under a PoS system, it may be difficult for validators to find chronological order in incoming blocks of transactions. PoH’s way around this is by establishing a historical record that cryptographically verifies the passage of time between two events.