Solana faces challenges in its development—will the balance of power between Ethereum and Solana shift?
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Solana faces challenges in its development—will the balance of power between Ethereum and Solana shift?
As modular blockchains mature, the balance of power between Ethereum and Solana will undergo a major shift.
Navigating Web3 tides with focused insightsArticle by: TechFlow Asher Zhang
Recently, Solana's strategic shift toward Layer2 has sparked widespread discussion. What profound impact will this move have on Solana itself? Why is Solana making this decision? And how will Solana compare with Ethereum in facing similar challenges?
Application-specific chains are booming—Solana cannot stop apps from leaving
Blockchain technology is maturing, and the next critical phase lies in breakthroughs for blockchain applications. In previous articles, we highlighted two key directions for application innovation in this bull market: Meme platforms and DePIN—one advancing further from DeFi by integrating its full feature set. The reason these platforms currently host mostly meme projects stems largely from inherent limitations in today’s blockchain application ecosystem. That said, I am particularly bullish on AI-related DePIN projects, which align with major future trends. DePIN builds foundational infrastructure, while Meme platforms build upward toward a unified DeFi framework. The breakout of blockchain applications into mainstream adoption may be closer than we think. So what happens when blockchain applications go mainstream? And how will this affect public blockchains?
In my view, during their early stages, blockchain applications primarily rely on public chains. But as they grow and accumulate large user bases and significant wealth, they are highly likely to evolve into application-specific chains. Once an application gathers substantial users, transaction fees generated on-chain become considerable—but the application itself struggles to capture this value. Driven by economic incentives, blockchain applications will consider building their own dedicated chains. This allows them to internalize fee revenue, channel it back to their native tokens, thereby strengthening token value and increasing user stickiness.
The idea of blockchain applications launching their own chains isn't theoretical—it's already happening. dYdX, a decentralized exchange focused on derivatives, especially perpetual futures contracts, decided to build its own dedicated chain using the Cosmos SDK. Beyond dYdX, many other projects are leveraging Layer2 solutions to create customized chains. NFT brands like Azuki and ApeCoin have built their dedicated chains on Arbitrum. Other chains built using the OP Stack include Base, opBNB, Zora Network, and DeBank Chain.
As mentioned above, while blockchain applications initially grow by relying on the robust foundation of public chains, once they reach a certain scale, building dedicated chains driven by economic incentives has become a clear trend. Although Solana attracted many users during this cycle thanks to its superior performance, as blockchain applications mature, most high-performing projects will eventually opt to build their own chains. If Solana sticks to its current model, it will struggle to retain top-tier projects in the long run. This is precisely why Solana may need to consider a Layer2 strategy now.
Is a Solana Layer2 feasible? SOL might have to follow ETH’s path
Solana offers better performance than Ethereum, but it has suffered multiple outages. Relying solely on Layer1 performance advantages can no longer sustain the massive scalability demands brought by an influx of future applications. For blockchain projects, capturing value for their native tokens is paramount, making the demand for dedicated chains hard to suppress. Moreover, for new developers, modular blockchains significantly reduce development costs. Overall, Solana’s shift toward Layer2 and modular architecture appears inevitable—but this transition also brings significant challenges, potentially placing Solana in a situation similar to Ethereum’s.
At the beginning of this bull market, many projects migrated to or launched on Solana to achieve higher performance, fueling Solana’s explosive growth. Meanwhile, constrained by performance issues, Ethereum underperformed during this period. Its Layer2 strategy further diluted its value capture capability—even the approval of Ethereum ETFs failed to provide strong support for ETH. However, with advancements in Layer2 and modular blockchain technologies, deploying applications has become much easier, and value capture capabilities continue to improve, making the advantages of modular blockchains increasingly evident. Another important point: earlier Layer2 booms caused liquidity fragmentation, but recent progress in cross-Layer2 interoperability projects promises to break down these silos. This indirectly attracts more developers and projects. As a result, we’ve seen far fewer high-profile projects migrating to Solana recently—this is one of the key challenges Solana must now confront.
Regarding Solana’s consideration of a Layer2 strategy, DeFi analyst Ignas noted that Solana is at a pivotal turning point—attempting to shift from a monolithic blockchain to a modular architecture. This transformation could redefine Solana’s position within the crypto community, hinging on whether the concept of “network extensibility” gains acceptance. During this bull market, ETH sits between BTC and SOL. If Solana adopts an L2 expansion model similar to Ethereum’s, SOL could effectively become the new ETH. However, if Solana faces issues like liquidity fragmentation, its standing may become uncertain. Additionally, speculators might shift focus toward “network extensibility” tokens within the Solana ecosystem rather than SOL itself, potentially hindering SOL’s price appreciation.
The balance of power is shifting—Ethereum may be poised for resurgence
In the first half of this bull market, Solana clearly outperformed Ethereum. But as modular blockchains mature, the dynamics between Ethereum and Solana are set to reverse dramatically.
In prior articles, I suggested that Ethereum’s breakout may arrive in the first half of next year. My reasoning includes:
First, cross-chain interoperability challenges are nearing resolution. For example, Optimism is integrating ERC-7683 to enable Superchain interoperability with other Ethereum L2s at the application layer; Polygon is developing AggLayer to enable one-click trading across chains; others include Caldera’s Metalayer, Avail Nexus, and Hyperlane. Vitalik himself has stated that people will soon be surprised at how non-issues cross-L2 interoperability problems have become.
Second, Ethereum’s Pectra upgrade is expected in Q1 2025, combining the Prague (execution layer) and Electra (consensus layer) updates. This will be a major milestone for Ethereum. One of Pectra’s most significant changes involves account handling. Under the proposed upgrades, EIP-3074 enables traditional wallets (externally owned accounts, or EOAs) to interact with smart contracts—for instance, enabling batch transactions. These improvements will pave the way for broader Ethereum adoption.
If Solana shifts toward a Layer2 strategy now, it would mark a complete reversal in competitive positioning against Ethereum. Solana’s previous lead would erode rapidly, while Ethereum enters its long-awaited spring.
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