By nearly any yardstick, Ethereum (ETH 2.03%) is one of the most important cryptos in the world. It ranks No. 2 with a market capitalization of nearly $200 billion, second only to Bitcoin. If you look at the size and scope of the overall Ethereum ecosystem, it's truly impressive.

Many of the most important blockchain innovations of the past few years, including smart contracts and non-fungible tokens (NFTs), originated on the Ethereum blockchain. And now with the upcoming Merge system upgrade, it's almost impossible to imagine any other crypto surpassing a new-and-improved Ethereum.

But is it really impossible? The annals of tech history are filled with examples of upstart companies that overcame similar types of insurmountable odds to become market leaders. And there are plenty of cryptos in the wings, just waiting for a chance to take on and surpass Ethereum. Two of the best are Solana (SOL 7.04%) and Avalanche (AVAX 5.48%). Both have the potential to dwarf Ethereum one day.

Performance metrics

Solana and Avalanche are alike in that they both have superior performance metrics compared with Ethereum, which is still considered by many to be relatively slow and expensive. Even after the Merge, Ethereum could lag behind.

In contrast, Solana and Avalanche are capable of much faster transaction processing than Ethereum, as well as much lower transaction costs. While Ethereum is still only capable of processing about 15 to 20 transactions per second, Avalanche has processing speeds of close to 4,500 transactions per second. And Solana is even faster, at 65,000 transactions per second.

Young professional looking surprised after viewing smartphone.

Image source: Getty Images.

These performance metrics are so impressive, in fact, that a number of mainstream media publications have already referred to Solana and Avalanche as "Ethereum killers." Over time, developers and users will migrate to these blockchains, which are easier and cheaper to use. We've already started to see this in areas such as NFTs and blockchain gaming, where greater speeds and lower costs are starting to lure users.

Moreover, if you look at the important total value locked (TVL) metric, which is a popular way to measure how much faith investors have in a particular ecosystem, Solana and Avalanche rank in the top six of all blockchains.

However, if Solana and Avalanche are ever going to dwarf Ethereum, something else has to happen. And that something else is called network effects. In the tech industry, this is one of the most powerful concepts for understanding the competitive landscape of an industry. It explains why some companies are dominant in an industry, despite relatively minor differences in technology from rivals. The network effect in the tech industry is simple to understand: The value of any business increases as more people use it. 

The classic example is the social networking business. The more of your friends and family who use a particular social network, the more valuable it becomes. This is what explains the remarkable rise of Meta Platforms (META 0.14%), back when it was still called Facebook. But Facebook was not always the powerhouse we know today. From 2005 to 2009, the most powerful social network in the world was actually Myspace, and Facebook was just something a bunch of college kids used. 

By 2007, Myspace was worth $12 billion, having increased nearly 20 times in value in the span of just 24 months. Myspace appeared to be so dominant that nobody could imagine any other social network being anything other than a niche network. If you were on social media back then, you were almost definitely a friend of Myspace founder Tom Anderson, the "default friend" everyone got when they signed up.

But by 2009, Facebook started to surpass Myspace, first in the U.S. and then worldwide. And the rest is history. Facebook now dwarfs Myspace, which lives on as an entertainment and music website.

The future of Solana and Avalanche

So could we see the same type of phenomenon today in the blockchain market? There are a lot of "ifs" to consider, but it is not out of the question. Right now, Ethereum is approximately 20 times more valuable than Solana and 40 times more valuable than Avalanche. That's a lot of ground to make up.

It all comes down to the strength of network effects in the blockchain world and whether Solana and Avalanche can continue to grow their developer ecosystems and user base faster than Ethereum's. If they can, then they might be able to increase the value of their respective blockchains significantly within a relatively short time. One day, they might be able to dwarf Ethereum, a feat that today seems almost impossible.