Solana Overtakes Ethereum in Profitability for the First Time

Solana surpasses Ethereum in profitability with over $2M in economic value as Ethereum’s value drops post-peak due to EIP-4844 launch.

For the first time, Solana has surpassed the Ethereum mainchain in profitability, according to Leon Waidmann, an on-chain analyst. Waidmann’s statement, shared on X, highlights this milestone while also noting that the comparison does not account for Ethereum’s value as fuel and means of payment across various Layer 2 (L2) networks.

🔎 For the first time ever #Solana is more “profitable” than the #Ethereum Mainchain! pic.twitter.com/HqkUcNNLpm

— Leon Waidmann | On-Chain Insights🔍 (@LeonWaidmann) May 15, 2024

Ethereum v Solana: Comparing Economic Values

A chart from Blockworks provided by Waidmann illustrates the total economic value derived from transaction fees and miner extractable value (MEV) for Solana and Ethereum from February 14 to May 12, 2024. 

Ethereum’s highest value reached $40 million in late February. From mid-February, Ethereum experienced rapid growth in economic value, peaking at around $40 million. Following this peak, Ethereum saw a gradual decline with intermittent spikes, stabilizing between $10 million and $15 million by April. The economic value further decreased in the last two weeks leading up to May 12, ending at just under $2 million.

Solana’s peak value was significantly lower than Ethereum’s peak but reached notable highs during the same period. Solana started with relatively low values in mid-February, similar to Ethereum’s early stages but on a smaller scale. 

A steady increase was observed through March, with several peaks aligning with Ethereum’s declining phase. The values stabilized somewhat higher than Ethereum’s during April, and towards the end of the period, Solana overtook Ethereum, closing at over $2 million on May 12.

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Industry Reactions and Opinions

Toghrul Maharramov, a contributor at Scroll ZKP, noted that the MEV captured by Ethereum didn’t drop significantly, but the fees decreased due to the launch of EIP-4844. Austin Federa, a strategist at the Solana Foundation, mentioned that while Ethereum’s Layer-1 (L1) activity decreased, the activity on L2 networks increased.

the economic activity of Ethereum the L1 has decreased, while the activity on L2’s has increased. The narrative was that the L1 would remain just as strong the L2’s would rise, which is not what we’ve seen https://t.co/cP0OSH56dE

— Austin Federa | 🇺🇸 (@Austin_Federa) May 14, 2024

This contrasts with the initial expectation that L1 would remain strong alongside the rise of L2s. Emmanuel Awosika, a technical writer and researcher for Ethereum R&D, added that the purpose of rollup scaling was never to redirect revenue to L1, as some might believe. He emphasized that having a valuable native token is crucial for rollups using it for data availability, settlement, and consensus.

Broader Market Implications

Dan Smith of Blockworks argued that L2 activity should perhaps be measured by a different metric, as Ethereum derives value from being a gas asset on other chains. He noted that Ethereum probably needs to generate enough base fees to offset issuance to remain sustainable, though identifying its growth story is challenging. 

This development comes amid a pre-market surge in GameStop (GME) stock, triggering a 3,914% spike in a Solana meme coin of the same name within two days, according to The Crypto Basic. The original GameStop stock, experiencing a surprising rally, led investors to turn to crypto meme coins with similar names, including the Solana-based GameStop coin.

As of today, Solana (SOL) is priced at $143.86 with a 24-hour trading volume of approximately $2.37 billion, representing a 1.60% decline in the last 24 hours and a 2.60% drop over the past seven days. With a circulating supply of 450 million SOL, Solana’s market cap stands at $64.61 billion.