While bitcoin is still the world’s number one crypto-currency in terms of market capitalization, there are plenty of reasons to think that other crypto-currencies could eventually overtake it. Before the crypto-currency market’s decline this year, conventional wisdom was that bitcoin was an inflation hedge and a long-term store of value. Some even called it “digital gold.” But those assumptions are now very much in question.
So which crypto-currencies could replace bitcoin at the top of the crypto-currency hierarchy? Right now, the two best prospects are Ethereum and Solana. Both of these cryptos offer more utility than Bitcoin, and both are innovation leaders in the blockchain industry, with promising growth prospects.
Ethereum stands out as a leader in innovation. The most prominent developments of recent years, including smart contracts, decentralized applications (dApps) and non-fungible tokens (NFTs), were born on the Ethereum blockchain.
By almost any measure, Ethereum is the dominant force in the blockchain industry. For example, Ethereum is the leading player in the NFT market, with an estimated 80% share. In areas such as decentralized finance (DeFi), blockchain gaming, and metaverse, Ethereum dwarfs all other blockchains in the world.
And with The Merge, a massive system upgrade, Ethereum is only getting stronger. The current complaint about Ethereum is that it is too slow and too expensive. This is largely because it is based on a proof-of-work consensus mechanism. With The Merge, Ethereum is moving to a proof-of-stake consensus mechanism, which reduces transaction fees and increases transaction processing speed. Eventually, when Ethereum 2.0 is complete, it should be able to handle 100,000 transactions per second. In contrast, bitcoin can currently only handle five to ten transactions per second.
The path to market dominance is more complicated for Solana, as it is a direct rival to Ethereum. Both are layer 1 blockchains offering users the same functionality and utility. Ethereum has smart contracts, and Solana does too. Ethereum allows for the creation of NFTs, as does Solana. The main selling point is that Solana can do everything Ethereum can do, but faster and cheaper. Solana is already capable of processing 65,000 transactions per second, and the transaction fees are close to zero.
While Ethereum has gotten bogged down in all the technical steps needed to become a proof-of-stake blockchain, Solana is in the midst of innovation. Solana has launched everything from a new payment network for merchants (Solana Pay) to a brand new mobile crypto platform (Solana Mobile). In 2023, Solana plans to launch Saga, the first-ever “cryptographic phone“.
At the same time, Solana is making serious inroads into blockchain and Web3 gaming. More than any other crypto, Solana is taking steps to build a recognizable brand for early crypto adopters. When you can layer that brand experience on top of a super fast, super cheap blockchain, it’s a very powerful value proposition.
How soon could Ethereum or Solana dethrone Bitcoin?
It may be an imprecise analogy, but you can look at what’s happening in the crypto-currency industry as similar to what happened in the tech industry a generation ago. Up until the 1980s, IBM was the biggest name in the tech industry, then Microsoft and Apple came along. The rest, as they say, is history.
In many ways, Bitcoin is the IBM crypto of today, Ethereum is the new Microsoft and Solana is the new Apple. There is definitely room for all three to coexist. The only real question is who will sit at the top. Large institutional investors might prefer Bitcoin, while mainstream investors might prefer Ethereum and Solana.
Right now, Ethereum is about half the size of Bitcoin in terms of market capitalization and Solana is only 3%. So a lot would have to change for either of them to overtake Bitcoin. But again, look at what happened with IBM, Microsoft and Apple in the technology industry. Microsoft was launched in 1975, and it took almost two decades for Microsoft to overtake IBM in market capitalization. Then, after that, it took almost two more decades for Apple to surpass Microsoft in terms of market capitalization. So it’s clear that this isn’t going to happen overnight and there will be many twists and turns along the way.
But Ethereum and Solana now offer too much utility to be ignored. And they are both innovation leaders, which makes them long-term plays if you believe in the future of the crypto industry. If you can handle the volatility of crypto, you can put these two cryptos in your wallet and hold them forever.