- Solana is promoting the idea of ‘cheap block space’ against Ethereum’s ‘property-backed’ model, but is facing problems.
- Analysts expect Solana to capture about 30% of the SCP solutions market by 2030, but Ethereum will remain dominant.
The Solana token (SOL) could rise to $3,211 by 2030, according to VanEck’s ‘bullish’ scenario. However, the baseline assessment by analysts suggests reaching $335.
As of writing, the asset trades near $35. The token has demonstrated market-beating growth in recent weeks, though current quotes trade about 86.5% below the all-time high near $260 (November 2021).
Head of VanEck’s digital assets division Matthew Sigel and senior investment analyst Patrick Bush assessed Solana’s prospects in the developing space of smart contract platforms (SCP).
«The aim of smart-contract platforms is to support applications that give users the ability to participate in efficient, censorship-resistant economic activity, minimising the costs of participation by intermediaries», the researchers noted.
According to them, the total number of monthly active users across such blockchains is around 44 million, far behind traditional apps like PayPal (431 million). These figures do not compare with Facebook’s daily activity of 2 billion users.
The reason, they say, is the blockchain’s ‘clumsiness’ which hinders adoption by people who are not maximalists of decentralisation and libertarianism.
In their view, a breakthrough would require a ‘hook’ app capable of delivering it. The researchers allowed that the network could be the first to surpass 100 million users for a dapp, a scenario they modelled.
Why Ethereum is the “killer”?
Analysts noted that Solana’s developers, led by Anatoly Yakovenko, offered a different approach from the market leader — Ethereum. The idea was to push throughput by forgoing modularity.
Researchers believe the team drew on mobile-network know-how to build a network whose consumer throughput grows in line with Moore’s Law, as described in Moore’s Law.
«The potential of Solana starts with the founders’ track record of mixing radical experimentation with applied science to dramatically improve blockchain computations», the researchers said.
In promoting its mission the project has spawned “a number of exciting ideas”, from blockchain-smartphone to specialised NFTs, the researchers recalled.
They believe Solana advances the idea of ‘cheap block space’ against Ethereum’s ‘property-backed’ model.
But the road ahead is fraught with problems, the experts cautioned.
According to them, over the last 30 days the operating costs of 1977 nodes to keep the network running reached $11.8 million, while revenue from transaction fees amounted to only $1.26 million. Over that period SOL’s inflation stood at $52.78 million, but that model cannot be considered sustainable, Sigel and Bush warn.
They believe tokenomics challenges could worsen as user numbers rise.
Should Ethereum be written off?
The experts also pointed to another vulnerability of Solana — the size of its ecosystem.
Because of Rust as the programming language, the blockchain is limited in the number of potential developers — 2.2 million vs 17.4 million for Ethereum.
In November 2022 the blockchain lost one of its biggest sponsors—the bankrupt exchange—along with the affiliated Alameda Research, which hold a substantial amount of SOL that could be liquidated.
Scaling the blockchain has led to a string of technical glitches in the network, the experts noted. They said the current value of assets locked in the ecosystem (TVL) totals $408 billion out of a total of $48 billion (Ethereum — $22.6 billion).
«We are giving Solana and the team a huge credit for their vision and willingness to experiment, but the network architecture has led to undesirable outcomes that have affected technical stability», Sigel and Bush noted.
In the near term the blockchain will not surpass Ethereum in key metrics such as user numbers or TVL, they believe. Based on their forecast, analysts expect Solana to hold about 30% of the SCP-market by 2030, but Ethereum will remain dominant.
Under this forecast the maximum SOL price could reach $3,211, with a floor of $10. A conservative estimate stands at $335.
Finally, Solana co-founder Anatoly Yakovenko called Ethereum ‘bourgeois’, as the blockchain is not a harbinger of a genuine revolution.