Ethereum (ETH 1.28%) has had an incredible run over the last three years, climbing 650% for investors who simply bought and held. But as the world of cryptocurrencies has become more competitive, other blockchains have outperformed Ethereum on many metrics.
One cryptocurrency that is leading Ethereum in some respects and still has a lot of growth ahead is Solana (SOL 2.93%). Developers continue to flock to the blockchain, investors are pouring money into new companies, and activity in decentralized finance and NFTs are booming. The market may not realize it yet, but this may be the blockchain we use more than any other in the future.
Solana's big advantage
The two advantages Solana has over Ethereum are cost and speed. An average transaction on Solana costs $0.00025, and on Ethereum, transactions averaged $2.27 as of yesterday, according to analytics firm Messari.
Users are noticing the usability advantages of Solana. According to Messari, there were an average of 490,000 active wallets on Ethereum over the last month, and there were about 750,000 active wallets on Solana.
If you think the future of the blockchain is using crypto to buy things or build businesses with smart contracts, Solana has a big advantage over Ethereum.
Solana's diversity
It's hard to nail down a single reason for Solana's growth because there's so much activity on the blockchain. Decentralized finance apps are booming, NFTs are now rivaling Ethereum NFTs in both volume and value, and new infrastructure tools are being added every day.
Solana is so easy to use that dozens of business models are being experimented with. Branding, fashion, music, and much more can be found on Solana. It's this experimentation that will drive innovation. And low costs allow entrepreneurs to experiment more with Solana. We see that with the activity growth highlighted above.
Upside resides with Solana
As of this writing, Ethereum has a market capitalization -- the value of all of the tokens -- of $160.2 billion, and Solana's market cap is $11.6 billion.
If you think about a cryptocurrency ecosystem like a mini-economy, I've shown above that Solana's economy is more active than Ethereum's. If that trend continues, I think it makes sense that the underlying cryptocurrency will also be more valuable.
From a risk/reward perspective, Solana has far more upside at about 1/15 of the value of Ethereum. If you missed out on Ethereum, Solana might have just as much upside over the next five years as Ethereum did the last five. If it can disrupt payment systems, music, fashion, and more, it could have more upside.
I think it's still early days regarding the potential of Solana for developers and users. The blockchain needs to improve and reduce outages, but there's the potential here for innovation that's not possible on other blockchains at scale today. That's why I think Solana is a great buy, and I'll continue accumulating it at today's prices.
