Ethereum will become the global financial backbone. 5 reasons why SOL cannot surpass it

Author: ryanberckmans; Compiler: Block unicorn

Ethereum is the core blockchain for L2 and L1 applications in the new global financial system, and no other chain will be able to match it.Mert (CEO of heliuslab, OG of the Ethereum community) once suggested that Solana could transform into a core blockchain, but here are five reasons why Solana will never be a core blockchain.

Four years ago, Ethereum turned to focus on becoming the core blockchain of the new global financial system for L2 and L1 applications. Ethereum's core blockchain strategy is increasingly being seen as a top L1 strategy and a smart move - although it is still in its early stages, if you look closely, signs are already emerging, such as imitation is the sincerest flattery and L2 is dominating.

Solana has performed well this quarter in terms of decentralized finance (degen) and meme growth, as well as SOL price. However, I think Solana’s leadership has begun to see the trend that L2 is about to cannibalize the market share of alternative L1. Now, they seem to be suggesting that Solana can also transform into a core blockchain like Ethereum.

But Solana is fundamentally unsuitable as a core blockchain for L2 or world-class L1 activities. I will explain why in detail below.

First, let’s explore that Solana’s leadership seems to be gradually acknowledging that Ethereum’s L2 core blockchain strategy is excellent, and Solana may transform and pursue becoming a core blockchain.

Initially, Solana claimed that it would become so fast and cheap that the whole world would use a single Solana chain. This was their “monolithic” period, which was the concept they pushed until it became a liability (because there is no single entity that can actually serve the entire world), after which they shifted their marketing strategy to the concept of “integration.”

Then, in the middle of this year, Solana admitted that L2 was the right path. Several reasons prompted the change, including: Solana leadership noticed that some of its flagship applications began to build custom L2 application chains on Solana - this was due to the common reasons why customers prefer L2 (i.e. control and customization, while being part of a whole and not having to run consensus themselves). Earlier this year, a well-known Solana community member wrote a passionate post calling for Solana to adopt L2 - the Solana community was outraged because they did not agree with this view before their leadership admitted the inevitability of L2. In addition, a major Solana development team switched to scaling to build SVM L2 on Ethereum (from Solana L1 applications to Ethereum L2). As a result, Solana leadership began to lean towards L2. (It’s worth noting that rather than admitting that Ethereum was right all along about L2, Solana is claiming that their L2 is not L2 but is actually “network scaling”, which is a huge marketing gimmick. This is similar to Solana’s recent concept of “True tps”, which they had to invent because they have been inflating Solana’s tps (transaction processing capacity) for years on many information sites, including by factoring in 80% (!!) consensus overhead. Many sites still claim Solana’s tps is 3000, but it’s actually around 750tps. They invented “True tps” to counter the long-reported “False tps”. My point is that serious on-chain investors should look carefully at Solana’s statements when doing their due diligence - many of them don’t stand up to scrutiny.) Fast forward to this month, and now Solana’s leadership is starting to talk about how they can simply pivot to Ethereum’s backbone strategy (but they can’t pull it off, here’s why).

So why is Solana now leaning towards Ethereum’s core blockchain strategy? Why now?

It’s because everyone is finally starting to realize that the world needs many new chains (thousands of them), and L2 is generally much more cost-effective than replacing L1 (which is why Coinbase, Kraken, Sony, and EVE Online, etc. choose L2), so being a core blockchain on L2 is the top strategy.

So can Solana pivot to being a core blockchain? No, Solana can’t pull it off (here’s why).

In fact, Solana is in a serious dilemma in terms of its technical and economic strategy. What exactly is Solana facing?

1. Solana will not be fast or cheap enough to meet even a fraction of the world’s upcoming demand.

2. Solana is not decentralized enough to attract truly “whale” capital.

3. Solana cannot become a competitive global backbone chain for L2.

4. Solana bundles consensus and execution together, which is more expensive and slower than just doing execution. This is why the most scalable L2 chains only need to do execution without dealing with consensus, and are able to benefit from the composability network effects of overall trustlessness, making them faster and cheaper than Solana very quickly. See MegaETH.

This needs to be emphasized again because it is crucial: not only will Solana not become a backbone, it will soon no longer even be the fastest or cheapest chain.

To some people (including many investors), Solana may look like the best choice in all aspects - a better version of Ethereum. But the truth is far from this. Soon, Solana will have nothing to offer on a technical and economic level.

Five reasons why Solana will never become a global core blockchain

1) Solana lacks true client diversity and it is difficult to achieve it in the foreseeable future.

Client diversity means that the chain is run by multiple independent programs in parallel. This is very helpful to prevent attacks (multiple independent development teams and programming languages) and accidents (multiple code bases, because bugs are usually confined to a single code base).

User diversity is a necessary condition for a global core blockchain (now Solana only has MEME to support the survival of the network).

a) To achieve client/user diversity, no single program can hold a majority of validators’ stake, which requires at least three independent chain clients and a balanced stake distribution between them. In addition, a detailed PDF protocol specification and an upstream research community are required. The protocol specification determines the "definition" of the chain, as well as the correctness and reliability of this definition. This ensures that all clients are working towards the same rigorous goal.

b) Currently, Solana has only one production client (agave rust). Solana is working hard to develop a second client (firedancer), but because there is no real protocol specification or research community, and the agave rust client is highly optimized and deeply dependent on the underlying hardware, development progress is difficult and delayed, which also increases the difficulty of extracting the protocol specification from the low-level design and re-implementing it in a new client.

c) Firedancer is still a long way from being able to run 50% of the stake in production as an independent code base, and it may take years.

d) Even if Solana puts Firedancer into production in the future, it still won’t have client diversity. To do that, they need at least a third production client (so that no one client has more than 50% of the stake), a balanced stake distribution between them, and all three clients must be 100% original code bases, no code overlap, overlapping development teams, overlapping code dependencies/libraries, and use different programming languages.

Ethereum already has four production chain clients that meet these criteria, and has for several years.

2) The second reason Solana will never become a global backbone is that its chain requires very high bandwidth (recommended upload speed is 10Gbps), which adds significant real-world centralization risks.

The core purpose of a global core blockchain is to minimize all forms of risk, so burdening it with extremely high bandwidth requirements is not feasible.

High bandwidth requirements are hard to get around, and while you can buy a high-powered computer and take it anywhere, 10Gbps upload speeds are nearly impossible to get in many areas (especially outside of corporate data centers or via VPN connections).

The global backbone must be able to run anywhere. The threat of being able to run the backbone anywhere at any time (and even the possibility of bypassing data centers entirely in the future) is a key part of risk mitigation.

Today, Solana recommends an upload speed of 10Gbps, and this will increase in the future. Therefore, for Solana, the bandwidth problem will only become more severe over time.

3) Solana is at high risk of future downtime: Solana has stalled multiple times in the past and lacks Ethereum's protocol-level fallback mechanism to continue generating blocks even if it cannot be "finally confirmed."

When the global core blockchain carries 200 countries and $100 trillion in assets, it is particularly important to maintain stable operation, including never going offline.

4) Solana lacks economic decentralization: only about 2% of its initial token offering (TGE/ICO, initial token offering and initial market public offering) was publicly sold, and about 98% was allocated by insiders.

Ethereum achieved widespread distribution through a seven-year PoW high inflation mechanism after the initial 80% public sale, because miners had to sell almost all ETH to pay for mining costs.

Economically and operationally, Solana has a high degree of concentration, which increases systemic risk and reduces its applicability as a global core blockchain.

5) L2's zk-proof aggregation enables the L1 global backbone to not sacrifice decentralization for scalability under any circumstances.

Although Eth L1 (layer 1 network) is not focused on execution expansion, in the future, L2/L3 (layer 2 and layer 3 networks) around the world, and even thousands of chains, will be able to complete settlement on Ethereum through zk aggregation.

While Solana focuses on L1 execution expansion, this is a burden on the needs of decentralization and public trust neutrality for the global core blockchain.

Conclusion

Therefore, Solana will never be the core blockchain of the new global financial system.

In my opinion, Solana will not even become “a” core blockchain, as its market share will decline year by year, and it will be at a disadvantage compared to Ethereum (L1+L2) in key metrics such as non-native application funding or major enterprise integration. The reason is that the world has a better chance of choosing Ethereum L2 or L1 on the chain than using Solana or other chains. Don’t take my word for it, just look at the choices of existing and upcoming enterprises and governments such as Coinbase, Kraken, Sony, Visa, the City of Buenos Aires, etc.

Any enterprise or government that seriously considers going on the chain will find these key factors mentioned above, which will be deeply considered by enterprises and governments around the world as they invest or build in the future.

Ethereum will become the core blockchain of the new global financial system. No other chain can compare, including Solana. L2 is eroding the market share of alternative L1 and promoting ETH to become a circulating currency, which will bring huge value accumulation to ETH.

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