CoinDesk reports:
Ethereum, hailed as the world computer, continues to dominate in the blockchain network arena. According to data compiled by CoinMarketCap, Ethereum holds a leading position in the smart contract field with a market cap of $695 billion, capturing 62%, marking its highest level since 2024. Additionally, the network leads in revenue, accounting for 70% of Layer 1 revenue, and has doubled its DeFi Total Value Locked (TVL) since the beginning of the year.
DeFi TVL Falls Short
BNB Chain trails behind Ethereum in smart contracts with $85 billion, followed closely by Solana at $59 billion. DeFi TVL rankings for the second quarter saw BNB Chain with revenues of $5 billion and Solana with $4 billion.
However, these figures contradict the widespread narrative that Ethereum is losing its foothold in the industry, allowing ecosystems like Solana to capture some market share.
What Gives?
Synthetix Spartan Council member, known as Millie, commented, “Most crypto Twitter narratives are venture-driven; VCs can’t charge 2% carry and 20% performance fees to hold ETH, but they can to hold SOL.” Millie told The Defiant that activity on Ethereum is mostly focused on DeFi, while Solana’s activity is entirely seasonal and driven by meme coin speculation. Millie said, “Solana’s block space is saturated with meme coins, something any serious analyst would view with high skepticism.”
Solana Winning on Certain Metrics
Analysts point out that Ethereum is slipping in certain areas of the market while Solana is on the rise.
Mert Mumtaz, CEO of Helius Labs, told The Defiant that Solana has “several times” surpassed Ethereum in economic activity, highlighting higher MEV+ priority fee and validator income.
30-Day DEX Volume Market Share
His views are supported by Blockworks research, which indicates Solana is enjoying its most profitable months in block space. It is also narrowing the gap with Ethereum in decentralized exchange (DEX) trading volume.
While concerns about unsustainable trends like meme coins potentially fueling activity persist, Mumtaz remains dismissive, stating, “Patterns combining low fee activity with high transaction volumes are empirically proven.” “The source doesn’t matter.”
“Extremely Shocked” to See Ethereum Lose Dominance
Millie stated she would be “extremely shocked” to see Ethereum lose its dominance in smart contracts, revenue, and DeFi TVL. However, the network isn’t equally constrained across these three metrics.
Millie told The Defiant, “L1 revenue is tricky as the longevity of this meme coin activity remains unclear.” Nevertheless, regarding smart contracts and TVL, she sees “little opportunity” as the network has already optimized for chain readability, auditability, and openness.
She explained the latter is a crucial feature. Millie said, “Closed-source protocols carry less risk than open-source networks, but this culture also serves as a significant barrier to attracting TVL.”
Even Mumtaz remains skeptical about Solana’s ability to surpass Ethereum in capturing DeFi TVL.
According to DeFiLlama data, Ethereum’s TVL stands at $58 billion, while Solana’s is at $4.5 billion. In between, Tron ranks second with $7.7 billion, and BNB Chain ranks third with $4.8 billion.
It’s worth noting that despite users flocking to L2 in recent months, Ethereum continues to dominate in the L1 realm. Millie attributes this superficial discrepancy to whale activity.
She said, “L2s are still too permissioned for most ETH whales as they haven’t provided adequate resistance to scrutiny.”
She also elaborated on low gas fees being symptomatic of L2 capturing most of the activity, while whales continue trading on the base chain, especially in lending.
Millie said, “Whale movements like lending aren’t computationally intensive and aren’t time-sensitive.” “Additionally, when volatility is low, DEX volumes are also low, which in turn drives most gas fees.”