Bank of America analyst says Solana could take market share from Ethereum. Noting that Solana is optimized for micropayments, gaming, and non-fungible tokens (NFTs), the analyst expects that "Solana could become the Visa of the digital asset ecosystem."
Bank of America on Crypto, Ethereum and Solana
Bank of America (BOFA) analyst Alkesh Shah published a cryptocurrency research note this week arguing that Solana could take market share away from Ethereum.
The Bank of America analyst described that Solana "produces a blockchain optimized for consumer use cases by prioritizing scalability, low transaction fees, and ease of use," citing Lily Liu, a member of the Solana Foundation. .
Its ease of use and low cost make the crypto optimized for micropayments, gaming, and non-fungible tokens (NFTs). With over 50 billion transactions settled since its launch in March 2020 and $10 billion in total value locked, Shah said:
Solana could become the Visa of the digital asset ecosystem.
Solana is the fifth largest cryptocurrency with a market capitalization of around $46 billion. Ethereum is the second largest cryptocurrency with a market capitalization of nearly $400 billion at the time of writing, according to data from Bitcoin.com Markets.
Noting that Solana's differentiation from Ethereum is "proving successful," Shah noted that the valuation gap provides an opportunity for Solana. Its Proof-of-History blockchain helps improve the performance of its Proof-of-Stake consensus mechanism, the Bank of America analyst opined, noting:
These innovations enable the processing of an industry-leading ~65,000 transactions per second with average transaction fees of $0.00025, while remaining relatively decentralized and secure.
Meanwhile, the Ethereum blockchain prioritizes decentralization and security, at the expense of scalability, Shah described, adding that Ethereum's scalability issue has led to periods of network congestion and sky-high transaction fees.
Emphasizing that other scalable blockchains could reduce Ethereum's market share, Shah explained:
Prioritizing Ethereum could optimize it for high-value transactions and identity, storage, and supply chain use cases.
Coinbase cryptocurrency exchange recently foretold that "ETH scalability will improve.โ However, "as we welcome the next hundred million users to crypto and Web3, the scalability challenges for ETH they are likely to grow.โ
Last week, a JPMorgan analyst explained that the introduction of Ethereum's Merge and Layer 2.0 speed up transactions and could significantly reduce power consumption. However, another JPMorgan analyst indicated that Ethereum could lose its decentralized finance (defi) dominance due to scaling issues.
Meanwhile, Solana is not without problems. Last week, news from Bitcoin.com reported that Solana's network experienced "degraded performance due to an increase in high compute transactions... This leads to increased load and transaction processing times, and some failed transactions."
Do you agree with Bank of America that Solano will take market share from Ethereum and become the Visa of cryptocurrencies? Let us know in the comments section.
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