Ethereum and Solana are very similar blockchains targeting the same user base, but Ethereum was the pioneer, while Solana is a fourth-generation blockchain. Solana aims to address issues faced by the original smart contract platform, resulting in superior performance and higher throughput, though there have been instances where its reliability has been scrutinized.
Ethereum to big to fail, but is Solana more efficient?
October 19th, 2023
In terms of energy efficiency, it’s noted that for each confirmed transaction on Bitcoin, a ridiculous 5 billion Joules of energy is expended, due to its proof-of-work consensus algorithm. In comparison, a similar transaction on Ethereum consumes 144k Joules of energy. Meanwhile, on Solana, the energy consumption is just 658 Joules, which is less than what is used in a typical “Google search.”
The substantial energy consumption of Bitcoin primarily stems from its consensus algorithm, which mandates miners to use electricity while running hardware, competing to solve cryptographic puzzles. Successful miners add the valid block of transactions to the chain in exchange for a 6.25 BTC reward, along with transaction fees from the block.
The proof-of-work consensus algorithm typically demands more energy and resources compared to the alternative systems employed by Solana and Ethereum. Notably, Ethereum transitioned to a proof-of-stake system in September 2022. This system relies on validators who do not need to operate expensive hardware but must stake a minimum of 32 ETH. As of October 18, there were over 978,000 validators on Ethereum, while Solana had over 1,970 validators securing and validating transactions.
While energy efficiency is a crucial metric, especially for protocols on smart contract platforms, activity remains a critical factor. Currently, Ethereum stands as one of the most active smart contract platforms, particularly when examining metrics like the total value locked (TVL) by decentralized finance (DeFi) protocols. Ethereum manages over $20 billion of DeFi assets, whereas Solana trails at around $320 million.
This might explain whilst industry players acknowledging the benefits of Solana, they emphasizes that Ethereum and its virtual machine (EVM) cannot be dismissed. Nevertheless, in the developer’s assessment, this advantage also makes the EVM inflexible and challenging to scale over time. Fluctuating transaction fees can also significantly impact the virtual machine, making it a less attractive option for payment companies.