Sygnum Bank posits that Solana’s scalability and increasing institutional adoption could establish it as a significant long-term competitor to Ethereum.
Solana’s increased adoption by significant institutions such as Visa and PayPal underscores the blockchain’s scalability and low costs, positioning it as a contender to challenge Ethereum’s dominance in real-world asset tokenization.
Simultaneously, the “finternet,” an ambitious initiative that is supported by the key figures responsible for India’s UPI system, aims to unify financial systems worldwide by integrating blockchain technology.
Financial institutions may be in direct competition with Ethereum if they employ real-world asset tokenization platforms and stablecoins on the Solana blockchain, according to a recent report by Swiss-based crypto bank, Sygnum. Solana’s incorporation into high-profile financial products, alongside its scalability, has the potential to position the blockchain to “seriously challenge” Ethereum’s dominance over time.
The emergence of this observation coincides with the growing interest of numerous significant financial institutions that have initiated experiments with Solana’s blockchain technology. Sygnum observes that even institutions that have historically been conservative are beginning to view Solana as a viable alternative, favoring its scalability over Ethereum’s widely recognized stability and security features.
A PayPal executive expressed his apprehensions regarding Ethereum’s suitability for large-scale payment processing during a Solana event, stating that “Ethereum is not the ideal solution for payments.” This statement is consistent with the sentiments of other companies, including Visa, which recently integrated Solana into its payment infrastructure to facilitate USD Coin (USDC) settlements. Visa cited Solana’s “high throughput” and “low costs” as the primary reasons for the move.
This trend reaches beyond the realm of payment processing. Franklin Templeton, a trillion-dollar asset manager, has disclosed its intention to establish a mutual fund on Solana, indicating an increasing level of institutional interest in the blockchain’s applications beyond the cryptocurrency sector. Furthermore, Citi, a global financial behemoth, disclosed that it is investigating Solana as a potential solution for cross-border payments. This could potentially expand Solana’s presence in the global finance sector.
Sygnum’s report also emphasizes that Ethereum continues to dominate the real-world asset tokenization and stablecoin markets, despite the encouraging news for Solana. According to on-chain data, Ethereum has a market share of 81% in tokenization and 49% in stablecoin issuance, while Solana remains significantly behind with less than 3% in both categories.
Additionally, Sygnum cautions that certain volume metrics of the Solana network are exaggerated, despite the fact that it has attracted attention for its rapid price appreciation and performance against Ethereum. The issuance and trading of memecoins generate a substantial portion of Solana’s network revenue, which may induce an exaggerated sense of expansion.
The bank also emphasizes its apprehensions regarding the centralization of Solana’s network. Edward Snowden, the renowned whistleblower, recently expressed his dissatisfaction with Solana’s centralized structure, cautioning that “anything significant” constructed on the network could be susceptible to disruption if governments or other powerful entities target it. Ethereum may lose its appeal to advocates of decentralization, who regard it as a more secure and decentralized alternative, as a result of these concerns.
Sygnum’s report emphasizes a substantial growth in the price of Solana in comparison to Ethereum. The Solana-to-Ether price ratio has increased by 300% year-over-year and by 600% since 2023, as per the bank’s analysis. This exceptional performance has attracted the attention of investors seeking alternatives to Ethereum, which has experienced a significant period of underperformance over the past two years.
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