In the DeFi world, Ethereum and Solana are both striving to capture the potential market by allowing their users to create the best projects on the Blockchain network. Ethereum, which was first introduced in 2015, is already regarded as an industry veteran. As of Feb 2022, its market cap is $296 billion and the current price of Ethereum is $2,476.17. Meanwhile, Solana Blockchain has grabbed the headlines of several media sources since its initial release. Many Solana Projects are launched and its Solana token price reaches $81.89. So, what's the difference between these two blockchains, and which is preferable for constructing DeFi projects? Let's see what we can find out on this blog!

1. A Brief Introduction Of Two Blockchain Networks

a. Ethereum Blockchain

Ethereum is the most frequently used blockchain system for creating and running DApps, Smart Contracts, and Tokens, with a white paper dating back to 2013. As you may know, Ethereum is the first public blockchain to have Smart Contract functionality, which allows for more transparent transactions, lower commission fees and eliminates the need for third-party interference. Bitcoin was the other main blockchain at the time, but its powers were limited to virtual currency issuance.

Ethereum has its own digital money, Ether (ETH). Aside from that, the blockchain hosts more than 460,000 coins (according to Etherscan) that follow the ERC-20 standard. Some top Ethereum crypto projects include Tether (USDT), Basic Attention Token (BAT), USD Coin (USDC), ChainLink (LINK), and Dai (DAI). Moreover, the recent growth in Non-fungible Tokens (NFTs) has also boosted Ethereum's appeal. While ERC-20 is a class of identical tokens, the ERC-721 standard forms the basis for non-fungible tokens. These are one-of-a-kind items that can be issued, sold, and bought in specialized NFT marketplaces. 

b. Solana Blockchain

Solana was brought into DeFi and Tech World as an “Ethereum Killer” thanks to its advanced technology and high scalability. This is mainly because this blockchain open-source platform addressed shortcomings of the previous one, such as low transaction speed, high fees, and scalability issues through a new Proof of History (PoH) consensus algorithm. Given that Solana can currently handle 65,000 transactions per second at an average transaction cost of $0.00025, this blockchain has delivered on its promise. Another accomplishment is the SOL token's rapid ascension into the top ten crypto market cap rankings. In February 2021, Solana was ranked only 42nd, and as of February 2022, it climbed to #8 ranking.

      Related: Do You Know: 8 Key Features Bringing Solana Blockchain To The Headlines?

2. Compare Some Factors To Find Out The Better For DeFi Projects

a. Smart Contracts

While Ethereum Smart Contracts are written with the Solidity programming language, Solana developers will use Rust to write Smart Contracts. Moreover, Solana is designed with parallel run-time allowing smart contacts to execute concurrently. As a result, thousands of smart contracts can be processed at the same time. Meanwhile, Ethereum’s EVM runtime is single-threaded, which means that smart contracts are queued and one smart contract changes the state of the blockchain at a time.

Compare Smart Contract between Ethereum and Solana blockchain.

Another distinction is that on Ethereum, data and code are linked, whereas in Solana, they are not. On Ethereum, a smart contract contains both the code and the data processed by the code. Smart contracts on the Solana blockchain contain only code and no data. The program receives all data as input.

b. Consensus Mechanism

In terms of mechanism, Ethereum's Proof-of-Work (PoW) mechanism is used to achieve consensus. However, there are some issues with the Proof-of-Work (PoW) mechanism, one of which is that it consumes a lot of power and energy, making it inefficient and resulting in higher gas fees. As a result, Ethereum is currently migrating to the Proof of Stake (PoS) consensus algorithm, which is 99.95% more energy efficient. This change will not only make the blockchain more environmentally friendly, but it will also lower technical barriers for anyone to stake, enable better decentralization, and provide stronger support for shard chains – a critical upgrade in scaling the Ethereum network.

Solana blockchain, on the other hand, employs a completely novel technology known as Proof of History (PoH), which is combined with Proof of Stake (PoS). And the combination is, no doubt, better for DeFi projects development. PoS applications can process and approve transactions more quickly, more scalable, and use less energy. The same can be said for PoH. Despite the fact that PoW is still a popular consensus model, some projects have already begun the transition from PoW to PoS. (just like Ethereum itself).

c. Scalability

With 400ms block times and sub-second finality, the Solana network is one of the fastest chains in blockchain technology. Solana's network claims to be capable of processing 65,000 tps, which is accomplished by PoH, Tower BFT, and Turbine. Although some Ethereum Layer 2 chains support such speed, they cannot do so at the scale that Solana can in addition to the weight of being a Layer 1 Protocol.

d. Transaction Cost

Running projects on Solana is relatively inexpensive, with an average cost per transaction of $0.00025. In comparison, the cost of performing a transaction on Ethereum is typically between $20 and $70 per transaction, depending on network congestion. According to many businesses, high cost always equates to high quality. They believe that if they pay a lot of money for transactions, each transaction, as well as their funds, will be secure. However, it is impossible to deny that the transaction cost for building DeFi projects on Solana is quite appealing. As a result, while the blockchain world awaits Ethereum 2.0, Solana has a great opportunity to rise to the top.

3. DeFi Projects On Ethereum And Solana

When it comes to dApp development, Ethereum is the undisputed leader. On the Ethereum Ecosystem, until Jan 2022, there were roughly 3000 DApps and 50,81k daily active users. One of the most common use cases for this blockchain is DeFi projects, such as decentralized exchanges, asset tokenization platforms, KYC and identity solutions, cryptocurrency lending and borrowing dApps, and payment solutions. Some outstanding platforms can be Uniswap (a protocol for trading and automated liquidity provision), Aave (Decentralized Finance Platform showing liquidity protocol), etc.

let's take a look at the statistics of DeFi projects on the Ethereum ecosystem

Although it is relatively new to the public when compared to Ethereum, Solana has grown its ecosystem to 400 projects in less than a year and a half. Almost all projects on Solana are related to the development of NFT and DeFi: there are 116 DeFi apps and 193 NFTs running on this blockchain. Top 4 DeFi projects built on Solana are Serum - the DEX, Raydium - the Automated Market Maker, Oxygen - the Decentralized Bank, and Saber - the Stablecoin Hub.

4. Final Thoughts: Building DeFi Projects On Ethereum And Solana

To sum up, having their own competitive advantages, both Solana and Ethereum blockchain are suitable for DeFi Projects Development. There is no “one-size-fits-all” solution for every company and every project. Therefore, after being equipped with some basic information, you can choose the right one, depending on your projects’ requirements. 

Please contact us if you want to build Top Solana DApps or Best Ethereum Projects. SotaTek is a leading Outsourcing Company in Vietnam with over 6 years of experience collaborating with many global clients of various sizes, including small start-ups, medium-sized businesses, and large corporations. Our Blockchain experts can provide you with extensive knowledge of languages and platforms. Once you put your trust in us, you can be confident that the final DeFi projects will be fault-tolerant, and transparent to meet your strict requirements. Now, it's time to join the DeFi wave and outrun your competitors!