According to crypto banking firm Sygnum, Solana is not expected to surpass Ethereum in the medium term, in part because the blockchain’s revenue remains heavily dependent on memecoins.
Solana has not yet demonstrated “convincing signs” of being able to surpass Ethereum as the preferred blockchain for institutional use, according to crypto banking group Sygnum, which cited concerns over the volatility of Solana’s revenue due to its heavy reliance on memecoins.
In a blog post published on May 8, it was stated by Sygnum that current sentiment surrounding Ethereum “remains poor,” while market attention has been directed toward Solana’s “transaction volumes and its recent leadership in fee generation.”
However, it was stated by Sygnum that the medium-term outlook will be determined chiefly by the platform preferences of traditional financial institutions for delivering their product offerings, rather than by prevailing sentiment.
It was further noted that “convincing signs indicating Solana as the preferred option have not yet been observed, as Ethereum’s security, stability, and long-standing presence continue to be highly valued.”
It was argued by Sygnum that institutions may opt for Ethereum instead of Solana, as the latter’s revenue generation has been perceived by the market as “less stable,” given its significant reliance on the memecoin sector.
According to the company, this factor will place constraints on potential outperformance, as it could be argued that the variation in valuation is already reflected by the disparity in revenue sources.
Another contributing factor identified by Sygnum is Solana’s tokenomics, which was described as “a comparable issue” to the criticism directed at Ethereum, where reduced transaction volumes on the mainnet have resulted from decreased costs for its layer 2 networks.
It was stated by the company that although Solana is currently ahead of Ethereum in terms of market share for layer-1 fee generation, the majority of these fees are directed to validators and do not contribute to increasing the value of the Solana token.
Sygnum stated that, in terms of revenue, Ethereum still surpasses Solana by a factor of approximately 2 to 2.5 times.
It was argued that Solana’s tokenomics are considered “easier to modify” compared to Ethereum’s scaling strategy. Nonetheless, it was noted that Solana “does not appear inclined to enhance token value,” as evidenced by the community’s rejection of a proposal to reduce SOL’s inflation rate in March.
Solana May Advance with Emphasis on Stable Revenue Streams
It was observed by Sygnum that Solana—often referred to by some as an “Ethereum killer” with the potential to rival the network’s market share—could achieve certain gains against the second-largest blockchain.
It was stated by the company that Ethereum maintains a dominant market share in “use cases that are demonstrating traction,” particularly those backed by governments, regulatory bodies, and traditional financial institutions—such as tokenization, stablecoins, and decentralized finance.
However, it was further noted that Solana has made advancements in the total value locked within its decentralized finance protocols, and should it expand into “more stable revenue sources” like tokenization and stablecoins, additional ground could potentially be gained on Ethereum.
Sygnum further remarked that Solana continues to receive robust support, even as the Ethereum Foundation shifts its focus toward layer 1 and acknowledges “the need to revise its go-to-market strategy.”
However, a boost in sentiment could be provided to Ethereum, as the blockchain’s “two-year stretch of underperformance relative to Solana has been temporarily halted” following the foundation’s strategic shift.
