Solana vs Ethereum: Which Is More Future-Proof? (Breakpoint 2024)

0:00Hey, everyone. As you know, Solana is one of the ecosystems I'm the most interested in. I've been incredibly bullish. I love to see the vibrancy of what is happening in the space. Unfortunately, I couldn't make Breakpoint this year, but the stories have been amazing. I heard the talks are incredible, and we're really proud of Real Vision to give you talks from Solana Breakpoint 2024 in Singapore. I really hope you enjoy them.

0:37How are we doing, Breakpoint? How are we feeling, huh? All right. We're going to get right to it because we don't have a lot of time. So on my left, I've got Santiago from SRS, who is going to be the four candidate for is Solana more future proof than Ethereum? And on my right, in opposition, Avicel from Electric Capital, who is going to be opposing that. So to start things off, we flipped a hotel card in the back room and Avicel won the flip. So I'm going to give it to you first. The first thing that we're going to do is we're going to define future proof for you guys to make sure that we are debating the same points here.

1:14So, Avicii, I'll hand it over to you. All right. Valley of the beast. For the record, we have a lot of Solana. So, this is not an ETH Maxi coming into Solana breakpoint to argue for ETH. Okay. Kicking it off. Okay. Let's define future proof. I would assert that being future proof requires both being able to mitigate risks to not fail today and be able to evolve towards the future as things change over time. And Ethereum is the only crypto platform that has demonstrated the ability to do this. So maybe Solana will demonstrate it in the future, but it hasn't yet. So to make this more concrete, I think being resilient requires three things.

1:49The first is you need battle-tested technology. The second is that you need a large number and a variety of applications. And the third is you need a large number and variety of users. Ethereum has all three and is therefore the most future-proof platform. Let's start with the first. Battle-tested technology. Ethereum excels by being both decentralized and credibly neutral. It's the only smart contracting language that the U.S. government has acknowledged is sufficiently decentralized to be not a security. It survived a DAO hack. It survived a transition from proof-of-work to proof-of-stake. Major upgrades, a change to its economic model.

2:23Attempts from governments to take it down. And it has persisted since 2015. It is not the best technology ever invented, no doubt. But it turns out neither was JavaScript. And the internet runs on JavaScript. So it doesn't matter. What matters is that it has sufficiently escaped velocity with a network effect, and so it has turned into the most battle-tested platform. Second, let's talk applications. To be future-proof, you have to be able to have lots of applications. So, in effect, what you need is a robust market because you don't know what's actually going to work. You just need a lot of people trying to see what's going to work.

2:54Ethereum is clearly the most future-proof here. Per Electric Capital's developer report, we know there's almost 9 ,000 monthly active developers in Ethereum's open source ecosystem, and likely 20 ,000 to 30 ,000 working on closed source applications on top of Ethereum, things like custodians and wallets. This is 10x bigger than any other ecosystem. These developers have also created and established a number of data standards, so things like ERC-20, 721, ERC-1155, and that's a tremendous moat. So as developers and custodians and wallets and institutions snap to these standards, it further establishes this network effect.

3:27And this trend you see in thousands of developers having created so much tooling that ecosystems like Celo and Avalanche and Polygon have snapped to the EVM and moved over because of the significant network effects around Ethereum's developer ecosystem. So this tremendous network effect, I think, has led to the largest number of developers and the most significant network effects for any ecosystem, which makes it the most resilient and therefore the most future-proof. Third, let's talk users. The killer applications for blockchains all revolve currently around programmable money. Store value, moving money with code, capital formation clearly are the killer use cases.

4:02Ethereum excels at all of these. It has the greatest diversity of user types. It has the deepest liquidity from users. It has 250 million wallets, often has over a million daily active wallets, has hundreds of organizations from Microsoft to JP Morgan, which is running an ETH fork, to governments. It has 50 billion in TVL, 150 billion in stablecoins, has BlackRock, It has a billion dollars of treasures on chain. It has the most KYC users. And so whether you're looking at the raw number of users, you're looking at the different types of users from developing markets to DGENs, to global financial institutions, to governments, or the depth of liquidity on chain, Ethereum is clearly the most future-proof.

4:37So in summary, being future-proof requires being able to avoid critical risks and failing today and being able to evolve into the future. This requires evolving across the technology on both the supply side of the market with developers and on the demand side with users. Ethereum has demonstrated far better than any other chain that it can survive risks and evolve across all three of these dimensions and is therefore the most future proof. Boom. 30 seconds back to you, Santi. All right, Santi. Let's see it. Thank you. I definitely agree. Look, the purpose of blockchains is very clear. It is their asset ledgers.

5:08And the killer use case is to transact and exchange financial assets. And I think the best way to do that is in a low latency, single share state machine, period. Why? Because you reduce arbitrage. And you hear Anatoly say time and time again, it is NASDAQ on the blockchain. And I appreciated this at Perify when we were investing in DeFi. I mean, that is the killer use case. And Solana is that single shared state machine and far superior than Ethereum. And so if you believe that and you extend further into the future, then you see a path towards Solana being more future-proof, because that is the killer use case of blockchains.

5:48There are some interesting applications beyond that, you know, the coordination aspect of governance and whatnot. But the vast majority of the killer use case of blockchains will be to transact and exchange financial assets. And so therefore, Solana is just purposely built for that and therefore more future-proof. Now, of course, in this argument, you could say, okay, MEV is a problem. And Avicu might say that. I think you could, I would argue that MEV is a problem for every chain. You know, just users and dApps don't have that much agency to control MEV today. But I would argue that there are mechanisms that are being developed that will solve, I mean, like toxic MEV in Solana.

6:31And therefore, you know, will improve the user experience. And so, and by the way, Ethereum also and other chains also have a huge MEV problem. So that's from first principles, you have to sort of believe that. The second argument is, you know, from a consumer standpoint, an integrated experience that Solana delivers is vastly superior than the current fragmented state of Ethereum. You know, you have USDC on Solana. In Ethereum, you have 10 different flavors of USDC. And so you can imagine a consumer, just the amount of headspace that that requires. It's so confusing to think about 10 different versions of USDC across Arbitrum, StarCore, Skrull, and the many other L2, L10s, L100s that will exist in Ethereum.

7:23And so to me, I think the state of the industry is one where we've built infrastructure for the last 10 years. the most important thing right now is there is excess supply. There's not enough demand for block space. And I think we're entering the consumer application of chains that will really stress test and prove where users actually can transact, where they enjoy. And I think clearly, if you take a look at the last year, it's very evident that that is happening more in Solana than it is in Ethereum. And I think that that is the most important thing. I think you time and time again hear the criticisms of Solana, which is, oh, you know, there's higher hardware requirements.

8:04And it's, you know, from a decentralization and security standpoint, that's problematic. You know, only very few people can run a validating node. I think we tend to think of the trilemma as like binary. The more important thing is when you think about there is sufficient decentralization, there is sufficient security on Solana. the most important thing then becomes throughput because that is what delivers the best experience for the consumer. And so if you actually invert, you say, okay, if consumers are going to continue to flock because they like the puck mean coins or they're using a deep end application, then that translates into more demand for block space, more fees, and at a unit economic level for a validator, it will be vastly more profitable than in Ethereum because it's purely predicated where the demand is for block space.

8:53And that today is in Solana and will continue to be, is my thesis. And so that is really the core of my argument. I think we have a little bit more time, but I'll keep it short because I think we've been in a state of the industry where it's highly philosophical. We haven't really hit, I guess, mainstream adoption. But I think my thesis is that over the next year or two, or perhaps even sooner, it will be very evident the have and the have-nots as we kind of reach escape velocity, and likely it's going to be deepened. And again, the more future-proof chain is one that will be able to attract users and delivers the best consumer experience to transact financial assets.

9:39And that very clearly, while there are more developers in Ethereum. I think you have to sort of put it into context. It's just been around longer. But from my portfolio, it's just not only from a user perspective, from a developer perspective, are you going to build on one of the tens or twenties of L2s? Or are you going to build on the chain that is quite simply the fastest and the cheapest and where most users are? And I think the answer is very clear. And therefore, it is just more future proof. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet.

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11:12Great, great arguments. Okay, so you guys both have, if I can summarize crudely for both of you, Santiago, you're under the impression that the place where you're going to have the more future-proof blockchain is going to be the place where it's easier to transact and easier to build these types of applications, whereby most of Avicro's arguments have been around the staying power of Ethereum and the mode that it has developed. So Avicro, I want to give you an opportunity quickly to respond to Santiago's points, and then Santiago will give you a time to rebuttal before we switch sides. Great. I think that it fundamentally comes down to whether or not you think the network effects matter.

11:48More users, more developers, more activity, more institutional adoption, more liquidity, more support for custodians, more support from governments, are pretty deep moats to try to overcome as a second player. And so I think the best technology doesn't necessarily win. The internet shows us as the history of technology shows us. And so, you know, people may not like it, but the reality is Ethereum has got the most network effects and it's not going anywhere. I think network effects are vastly overstated. And so our first mover advantages, like what are network effects in open source systems? It's just I think it's the first mover advantage is vastly overstated and vastly overrated.

12:30I think the more important aspect, like take Deepin, for example, I think that's where you'll see probably the most clear modes. you have already Helium, and you're going to see other projects that are, you know, like Dawn, for instance. And so you can think about, like, if you're a user, it's very, like, Deepin is the application where you have the most amount of kind of, like, concretely usage, right? And so if you're using a Helium mobile plan, you already have a wallet that's loaded with Solana. And so probabilistically, are you going to want to go to another chain, or are you going to use the variety of other Deepin applications that are going to be deploying in Solana?

13:04I think the answer is like pretty clear right at that point there's really no reason to go elsewhere and so you can envision to me that's it's really hard to like place a oh there's moats at the moment there's more tbl on ethereum um i would say that that's like vastly overrated um because we haven't really seen mainstream applications but as i said you know we're entering a consumer phase of this industry and it's going to be very clear where the best technology will win and and the the first mover advantage of Ethereum is going to be less and less relevant. And that will be very evident in the next year or two.

13:37All right. Well, with the time we have left, we're going to do a switch sides. Steelman. Steelman, the Solana side. Okay. I would assert that if you think about these things through the proper venture lens and startup ecosystem lens and early technology lens, what you should be looking at is not the Y intercept, but the slope. So I would assert that Solana is becoming more future-proof more quickly than Ethereum, and that's what matters. So first, let's consider the technology. Just like Ethereum, Solana is now battle-tested. Survived outages, DDoS attacks, the FTX collapse, which sucked liquidity out of the system, SVB collapse, the Japanese yen crisis, and much more.

14:15And so it's shown that it can survive tremendous stress to the system and cross that first threshold to say it has some staying power. And so if we look forward, the question is, which of these ecosystems is becoming more resilient more quickly. Now to assert that because Ethereum has made some bad technical decisions, it's creating technical debt, which is going to cause it to be less resilient going forward. So first, for example, the EVM is fundamentally busted. It's unscalable. The memory model for solidity is busted. It's a patchwork of hacks. It's so much a patchwork of hacks that actually teams like Monad are creating an entire new chain to try to fix this problem.

14:48The thing about scaling via L2 is also may not be future-proof because it breaks one of the most interesting aspects of running in shared L1 space, which is atomic composability of transactions. And so if we want composability, but not just interoperability, we could use centralized databases. Why using L1? It's for the composability. And so sharding is actually anti-future proof because it breaks what makes Ethereum so special. So what we have on the technology is an excellent start, but fundamentally not scalable and taking an approach to scaling that's breaking what makes it special. Meanwhile, Sonos tech is much more scalable and much more future proof.

15:21Second, if we look at developers, I would assert that quality matters much more than quantity. Solana is now effectively a top three ecosystem in developers, despite launching years after Ethereum, and having only gone through one bull market rather than two. I would also assert that 20k developers for Ethereum is a drop in the bucket compared to the 3.5 million Rust developers in the world. I would also assert that Rust has some key properties that make it uniquely well suited for smart contracts, such as type safety, piled for performance. So Solana has this robust ecosystem of companies. And if you look at the slope instead of the Y-intercept, you realize that the company is making decisions in 2024 about where to build, such as Visa or Stripe, or choosing Solana instead of Ethereum.

15:59I would also assert that when we think about being future-proof, we need to think not just about DeFi, but where the use cases will be going forward. So if you look at Fortune 1000 company, yes, financial services are very important and prominent, but so are energy, so are telecommunications, healthcare. These are all massive industries in the GDP that need blockchain technologies. And Solana is clearly leading in these new verticals, with projects like Helium and so many other deep-ended projects people here know. So about being future-proof, Solana is winning in the new use cases and industries that are at least as big as finance.

16:28Third, if we look at users, I think we can look at history to understand why slope matters much more than why Intercept. Google was not the first search engine. Facebook was not the first social network. In fact, MySpace had 50 million users when Facebook got off the ground. And so what matters is building the right thing and growing quickly. Solana has hit 5 million daily active wallets. More users on Solana use NFTs than on Ethereum. More Solana users are playing with meme coins and culture than on Ethereum. Solana on many days has more stable coin volume and DeFi volume than Ethereum, thanks to low fees and faster throughput.

16:58And so the TVL may be lower, but I would argue that having lots of idle capital sitting on chain is not the right way to look at this. We should be looking at this through a lens of capital efficiency. The Ethereum ecosystems actually have a misguided focus on TVL, which shows that it's not future proof because the future of DeFi is about volume and capital efficiency, not idle capital. So when it comes to users, yet again, Solana has shown that the Y-intercept does not matter. It's actually slope that we should be paying attention to. In summary, if we look at the key dimensions on technology, applications and developers, and user activity, we see that Solana has caught up and actually has a much steeper slope.

17:32And so over the next four years, its growth in slope will actually overtake Ethereum's. That's it. All right. Good stuff. Santiago? Yeah, thank you. I think concretely, like, there's two reasons why I think Solana might not be more or future-proof. The first one is liveness. Hopefully, Fire Dancer gets announced relatively soon. But again, if you take the most important thing is from a user-centric standpoint, that is the most important thing for being future-proof. If there continues to be liveness issues, then I think it would degrade trust both from developers and users as well, just degrading the user experience.

18:06So I think no one can disagree that more client diversity provides more guarantees, more assurances for developers, and improves the user experience. And so if there would be a catastrophic bug or, you know, I think there's less Lindy, and I would agree with Avichol, there's just certainly less Lindy with Solana. And so hopefully FireDance can deliver on that. But if it weren't or it doesn't for whatever reason, then I think we ought to just kind of go back to the drawing board and really reassess. Because there is going to continue to be more and more competition. There are other high throughput chains that are well capitalized, well resourced.

18:40And so I think there's, you know, as this industry continues to grow, it will just attract more competition. So it's important to really lean into that. And the second issue is, I think, toxic MEV. You know, obviously, there's a lot of criticism on Solana, you know, Pump.Fun and MemeCoins. When you have more diversity and more assets that are being launched in these chains, it lends itself to a lot of MEV. The MEV that is most important, like there will always be MEV. And I think it's important to make that distinction. The one that is most problematic is sandwiching attacks. It is front running attacks because that really degrades the user experience.

19:19And so if you are a user aggregator, if you're a BlackRock, if you're a financial institution, if you're a PayPal, you really look to that and say, you know, I'm not really sure I want to deploy somewhere like Solana because it has a lot of toxic MEV. I'm less concerned around that. I think, as I said in my opening, every chain has a problem with this. I just think that because Solana is attracting more of these type of assets, particularly meme coins, it's just become more important for Solana to really deliver on solving toxic MEV. There's projects that are trying to build this, but if for whatever reason, the current state of affairs is just not going to fly.

19:57I think it's just more and more important to really focus on solving toxic MEV. And again, like MEV will continue to be like it's going to be a thing with these chains. There's always going to be arbitrage opportunities. It's just this toxic MEV. And so it's really important for Solana to solve that. And I think if that doesn't happen, then it might just really, you know, be problematic and not be as future proof as I think it will be. So that's really it. I mean, I'll yield my minute to Avicu if he wants to refute, but, you know, I'll keep it left curve, I guess. Anything else, Avicu? Otherwise, I'll close this out.

20:33I rest my case. All right. Well, thanks, everybody, for joining us. I guess I'll use my minute. There is a poll. Yeah. There's a poll. Hopefully next year in break when we have a real-time poll. We have live voting. I'd love to know. But yeah, anyways, there's a poll on Twitter, so please go vote. Go to Santiago. What's your both Twitter handles? I am at BennyBitcoins. I also retweeted it. Please vote on the poll and see who won. Driver of the day or debater of the day. All right. Thank you all. Enjoy Breakpoint. Thanks. Thank you.

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