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Will Solana Beat Cardano as the Top Threat to Ethereum?

By Rick Munarriz – Updated Nov 3, 2021 at 5:55PM

Key Points

  • Cardano has been more valuable than Solana, but that changed with Cardano retreating over the past month and Solana on fire.
  • Cardano and Solana are positioning themselves as viable replacements for Ethereum with their ability to process more transactions at a lower cost.
  • Ethereum's shift to proof of stake in the coming months may eat away at some of the advantages of its rivals, but this is still a market with room for many winners.

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Solana and Crypto are both worth roughly $68.5 billion right now. The flippening junior could be more interesting than the flippening itself.

For all the talk about the "flippening" -- the moment that Ethereum (ETH 1.54%) bulls believe that their crypto of choice will top Bitcoin (BTC 1.01%) in terms of market capitalization -- there's an equally interesting race to watch just a couple of notches below.

Cardano (ADA 1.65%) and Solana (SOL 2.10%) are neck-and-neck these days as the fifth- and sixth-most valuable cryptocurrencies on the market. Commanding market caps of roughly $68 billion apiece on Wednesday morning, they're not aiming for the Bitcoin truck. They're going for the box of toys that Ethereum is hauling. 

If you don't appreciate the Toy Story reference, allow me to be more clear. As Ethereum bulls are setting their sights on Bitcoin given the former's lead in providing a broader range of real-world applications and functionality, Cardano and Solana are setting their sights on Ethereum. Both smaller tokens can process more transactions per second than Ethereum, and they can do so at a lower cost. In short, the hunter is being hunted. 

A delighted person on a PC celebrating a winning move.

Image source: Getty Images.

To infinity and beyond

For most of the past year, Cardano has been the largely uncontested frontrunner in this race against Solana to potentially catch up to Ethereum. A lot has happened over the past few weeks. Cardano was one of the rare crypto denominations to actually decline in October. In a red-hot month with most digital currencies including Bitcoin and Ethereum posting double-digit percentage gains, Cardano tumbled 13% in October.

There were no major negative developments keeping Cardano from October's crypto party. The correction can be fairly labeled as a "buy on the rumor, sell on the news" pullback. Cardano was a big winner over the summer on expectations that the Alonzo "hard fork" would make its blockchain more accessible for smart contracts and other decentralized apps. By the time the transition was completed in mid-September, many investors cashed out of their outsize gains.

With Cardano taking a breather last month, Solana started to sprint. Solana was already gaining momentum with its blockchain attracting developers of decentralized finance applications and non-fungible token marketplaces. There are now more than 200 decentralized apps -- or dApps -- running on Solana. It may seem like a small number compared to the nearly 3,000 dApps leaning on Ethereum, but it adds up. Assets deposited in decentralized finance protocols running on Solana's platform recently topped $10 billion. 

You've got a friend in me

Fellow Fool contributor Zhiyuan Sun suggested buying Solana on the dip three weeks ago. It was a brilliant call. Solana is up more than 50% in that time, hitting an all-time high this week. With Cardano still catching its breath, Solana briefly overtook Cardano in market cap -- the flippening junior, one might say -- on Tuesday. Both tokens are going back and forth at $68.5 billion in market capitalization as of Wednesday morning.

The good news is that you don't have to choose. I own roughly equal amounts of Bitcoin and Ethereum. I don't have to play favorites. I also owned some Cardano until four weeks ago, disappointed by the market's reaction to its blockchain's evolution. I won't hesitate to return to Cardano, and Solana is on my short list of cryptocurrencies to buy next.

Cardano and Solana don't have to catch up to Ethereum to win -- especially if Ethereum keeps rolling. In fact, with Ethereum shifting to the more cost-effective and eco-friendly proof-of-stake model in the coming months it should close the gap on its current shortcomings.  

It's a race, but it's more like a marathon. All of the crypto crossing the finish line after going the distance will get medals, and that means that there will be many winners along the way. What are you waiting for? A final Toy Story reference? Wind the frog! 

Rick Munarriz owns shares of Bitcoin and Ethereum. The Motley Fool owns shares of and recommends Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.

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