Solana vs Cardano: Which Could Overtake Ethereum First? | The Motley Fool (2024)

There's no doubt thatEthereum(ETH 0.35%) is bringing more real-world utility, as opposed to pure financial speculation, to the nascent industry by being the first blockchain with smart-contract functionality. The issue, however, is that when the network's demand peaks, fees can be high. What's more, Ethereum can only process about 15 transactions per second (TPS) right now, hardly enough to reach mainstream adoption.

But there are other blockchains working to address Ethereum's issues. Solana (SOL 10.99%) and Cardano (ADA 0.97%), for example, are two so-called "Ethereum killers" that have real potential to become more prominent in the crypto market.

Which has a better shot at passing Ethereum first?

The case for Solana

Launched in early 2020 by two former Qualcomm engineers, Solana has produced an outstanding return of greater than 3,700% (as of this writing) in its more than two years of existence. And this is after the price of SOL dropped 87% from its all-time high of $260 in November last year. Today, Solana is the ninth-most-valuable cryptocurrency, with a market cap of $12 billion.

Solana uses a proof-of-stake (PoS) consensus mechanism, which means that token owners can lock up their holdings in order to validate transactions on the blockchain. But what makes Solana special is something called proof of history, an innovation that eliminates the need to include time stamps on blocks, speeding up processing times. Solana can process 50,000 TPS with virtually zero cost.

This type of speed, coupled with low fees, makes Solana a potential disruptor to the financial services industry, particularly in payments. In February, Solana Labs, the governing body that works to advance the network, launched Solana Pay. This service completely bypasses the traditional card system dominated by Visa andMastercardby letting merchants connect directly with customers, allowing for transactions to settle instantly with fees that are fractions of a penny.

However, Solana does not come without risks. The blockchain has experienced five outages so far this year, the most recent caused by a consensus failure. This is the issue with cryptocurrencies, as software bugs can undermine the technology. In a separate issue, hackers were able to steal $8 million from various Solana wallets.

The potential for Solana, nonetheless, is still massive. If developers are able to make the network more secure, the blockchain's remarkable speed and low costs make it a promising crypto. And this could allow its value to overtake Ethereum in the future.

The case for Cardano

Another popular Ethereum killer is Cardano, which was established in 2017 by Ethereum co-founder Charles Hoskinson. Despite falling 85% from its peak price in September 2021, in its less than five years of existence, it has produced a return of more than 1,700%. And as of Aug. 22, Cardano was the eighth-most-valuable cryptocurrency with a market cap of $15 billion.

Like Solana, Cardano utilizes a PoS system. But Cardano differs from other major cryptos in its development process, employing a phased approach based on academic research. There are five different stages of Cardano's roadmap, each focused on implementing a key feature of the network. For example, the current phase, called Basho, is all about improving scalability and interoperability. And by introducing a Layer-2 solution known as Hydra running on top of the main network, Cardano could one day process a whopping 1 million TPS. The next and final phase, called Voltaire, will bring about a better governance structure to Cardano.

In addition to Ethereum and Solana, Cardano is one of the most popular blockchains for attracting developers, and this bodes well for its future because it means that smart and talented people are working on its advancement. Coupled with the cautious and deliberate phased approach that I just discussed, Cardano could be a breakthrough crypto when it comes to real-world utility.

In fact, there are currently over 1,000 various applications being created on Cardano, with a lot of growth being seen in the world of non-fungible tokens. Furthermore, numerous enterprise solutions are made possible by Cardano's capabilities. Cardano can be used for credential verification in the education sector, as well as tracking supply chains for agriculture businesses.

For those who believe inCardano's future, its token could be a good buy right now.

The winner

Based on the information I laid out above, I have to say that I believe Solana has the chance to overtake Ethereum before Cardano. I think disrupting financial services, specifically payments, looks to be crypto's biggest potential use case at the moment. And despite its security risks, Solana's lightning-fast processing speeds and incredibly low fees give it sizable upside.