Unraveling the Differences: Bitcoin vs Ethereum vs Solana
Published September 24th, 2023
Navigating the vast ocean of cryptocurrencies can often feel like charting unexplored territories. With new digital currencies sprouting up daily, it's easy to feel overwhelmed. We compared Bitcoin, Ethereum, and XRP in another article. Now it’s time to compare Bitcoin Ethereum and Solana.
Bitcoin, Ethereum, and Solana are often sought after by crypto enthusiasts. The question of their differences often arises. So, what could be so different between Bitcoin, Ethereum, and Solana?
Bitcoin, epitomizing scarcity with a 1.74% inflation rate and a finite 21 million supply, remains the quintessential store of value in the crypto realm, offering unrivaled security and value retention. In contrast, Ethereum’s versatility is showcased by its capability to host a plethora of decentralized applications and innovations, underlined by its negative -0.25% inflation rate, due to substantial coin burning, indicating potential value appreciation and scarcity. Solana, while bearing a higher inflation rate of 6.325%, distinguishes itself with groundbreaking scalability and speed, enabling up to 65,000 transactions per second, thus presenting immense potential for high-demand applications and services. Each represents a different facet of the blockchain spectrum—Bitcoin as the gold standard of value, Ethereum as the versatile innovator, and Solana as the technological trailblazer—offering diverse opportunities in the evolving cryptocurrency landscape.
But fear is not! You've anchored at the right harbor. Welcome aboard as we set sail on a journey to demystify three of the most talked-about cryptocurrencies today: Bitcoin, Ethereum, and Solana.
Whether you're a seasoned crypto trader, a curious investor, or simply a digital explorer, this guide promises to shed light on the intricate nuances that distinguish these three giants.
So, grab your compass, and let's embark on this voyage of discovery, diving deep into the unique realms of Bitcoin, Ethereum, and Solana.
Introduction: Bitcoin, Ethereum, and Solana
Bitcoin
Bitcoin, conceptualized in a 2008 whitepaper by an anonymous person or group under the pseudonym Satoshi Nakamoto, was launched as an open-source software in January 2009. Heralded as the first decentralized cryptocurrency, Bitcoin emerged as a revolutionary response to traditional fiat currencies and the centralized banking system.
The technology behind Bitcoin is the blockchain—a decentralized and distributed ledger that records all transactions across a network of computers. Bitcoin's proof-of-work (PoW) consensus mechanism relies on miners who solve complex mathematical problems, ensuring the security and integrity of the network.
Over the years, Bitcoin has seen various historic events. In 2010, it was famously used to purchase two pizzas, marking its first known commercial transaction. More recently, Bitcoin has witnessed immense growth, achieving all-time high valuations, being accepted by various mainstream institutions, and occasionally facing regulatory challenges in multiple countries.
Read more about Bitcoin in our other article.
Ethereum
Ethereum was proposed in late 2013 by programmer Vitalik Buterin and development was crowdfunded in 2014, with the network going live on 30 July 2015. Unlike Bitcoin, Ethereum was designed as a platform to facilitate immutable, programmatic contracts and applications via its own currency, Ether.
Ethereum's underlying technology also operates on a blockchain but with a significant difference. Ethereum's blockchain is built to run smart contracts, self-executing contracts where the terms of agreement or conditions are written into lines of code. This gives Ethereum broader utility beyond just being a cryptocurrency.
Ethereum has seen several key events in its history. The DAO (Decentralized Autonomous Organization) hack in 2016 led to a controversial decision to hard fork the Ethereum blockchain, resulting in the split between Ethereum (ETH) and Ethereum Classic (ETC).
More recently, Ethereum has been in the news for its transition plans from proof-of-work to proof-of-stake (known as Ethereum 2.0) to enhance scalability and energy efficiency.
Read more about Ethereum in our article where we explore deeper intricacies of Ethereum.
Solana
Solana was founded in 2017 by Anatoly Yakovenko, who previously worked at Qualcomm. With a background in compression algorithms, Yakovenko introduced the Solana whitepaper, envisioning a high-performance blockchain that could cater to the scalability issues faced by other blockchains.
The core innovation of Solana lies in its unique consensus mechanism combining Proof of History (PoH) with the traditional Proof of Stake (PoS). Proof of History allows for greater scalability by creating a historical record that proves that an event has occurred at a specific moment in time. This reduces the time required to validate and agree upon the state of the blockchain.
In its brief history, Solana has experienced significant attention and growth, especially with the rise of decentralized finance (DeFi) platforms and applications built on its network. A notable event in 2021 was when the Solana network faced intermittent instability and went offline for a few hours, prompting discussions about its robustness and the challenges of maintaining high throughput blockchains.
Tech Comparison: Bitcoin, Ethereum, and Solana Networks
In the ever-evolving realm of blockchain technology, understanding the inner workings can be akin to deciphering a complex puzzle.
Each cryptocurrency brings its unique technical architecture, strengths, and trade-offs. Bitcoin, Ethereum, and Solana, while all serving as flag-bearers in their respective niches, are underpinned by diverse technological foundations.
This section will journey through the labyrinth of their networks, delving into the bedrock of their design and operation. Summarized in the table below are the main differences between Bitcoin, Ethereum, and Solana.
| Technological Prowess: Bitcoin VS Ethereum VS Solana | |||
|---|---|---|---|
| Comparison | Bitcoin | Ethereum | Solana |
| Consensus Algorithm | Proof of Work (PoW) | Proof of Stake (PoS) | Proof of History + Proof of Stake |
| Smart Contracts Language | Has smart contracts but not designed for complex code | Solidity | Solana Programming Model (SPL) |
| Virtual Machine | N/A | EVM | Solana RunTime |
| Max Transaction Throughput | 7 TPS | 40 TPS | 65,000 TPS |
| Purpose | Store of Value | Blockchain world computer | Scalable Blockchain Platform |
| Basic TX fee cost | $1.2 - $30 | $0.50 - $15 | 0.000005 SOL or $0.0001 |
| Total Nodes / Validators | 45,780 | 941,156 | 1999 |
| Block Time | 10 Minutes | 15 seconds | 0.5 seconds |
| Security Rating (out of 10) | 10 out of 10 | 9 out of 10 | 6 out of 10 |
| Age(at the writing of this article) | 14 years, 8 months, and 20 days | 8 years, 1 month, and 24 days | 3 years and 6 months |
| Transaction Confirmation Time | 1 Hour | 3 Minutes | 1 Second |
| Innovations built on top of the network |
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| Downtime History |
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In the rapidly evolving landscape of cryptocurrencies, three titans have emerged with distinct technological footprints: Bitcoin, Ethereum, and Solana.
Each has carved a niche, presenting a unique approach to decentralized innovation. Let's delve into the technicalities that differentiate them and seek to understand which might hold an edge.
Consensus Mechanisms underpin the functionality of any blockchain, dictating how transactions are verified and added to the ledger. Bitcoin, the pioneer, employs Proof of Work (PoW), which, while robust, is energy intensive.
Ethereum, starting with PoW, is transitioning to a more scalable Proof of Stake (PoS) mechanism. Solana, on the other hand, brings the novel Proof of History into the mix with PoS, aiming for heightened efficiency and speed.
Smart Contracts and Virtual Machines are crucial in determining the versatility and utility of a network. Bitcoin offers rudimentary scripting capabilities, focusing more on being a digital gold.
Ethereum, with its Ethereum Virtual Machine (EVM) and the Solidity language, has become the de facto platform for diverse decentralized applications.
Solana, in contrast, harnesses its Solana Programming Model (SPL) and Solana Runtime, optimized for high-speed processing and scalability.
When it comes to scalability and transaction processing Solana exceeds both Bitcoin and Ethereum. Performance metrics also illustrate this display of leadership by Solana.
Performance Metrics such as transaction throughput and block times are pivotal for user experience. Bitcoin processes around 7 transactions per second (TPS) with a block time of 10 minutes.
Ethereum boosts this to 40 TPS and a 15-second block time. But Solana breaks the mold with a staggering 65,000 TPS and a fraction-of-a-second block time.
While all three networks have revolutionary innovations built atop them, ranging from Bitcoin's Lightning Network to Ethereum's rich DeFi ecosystem and Solana's advanced decentralized exchanges, they cater to different use-cases.
Bitcoin remains the uncontested store of value; Ethereum serves as the global decentralized computer, and Solana emerges as a scalable blockchain solution.
In terms of reliability, neither Bitcoin nor Ethereum has faced significant downtime, proving their resilience. Solana, while technologically advanced, has encountered multiple offline periods, indicating potential teething issues.
Our technological conclusion is that no single network can be labeled 'better' universally. Bitcoin remains the fortress of value, Ethereum is the playground for decentralized innovation, and Solana promises scalability like never before. Your preference will inevitably hinge on what you prioritize: security, versatility, or performance.
Decentralization Showdown: Bitcoin vs Ethereum vs Solana
Decentralization, the essence of blockchain technology, represents the distribution of authority and control across a vast network of participants rather than concentrating it on a singular entity.
It promises enhanced security, censorship resistance, and democratization of power. As Bitcoin, Ethereum, and Solana navigate the crypto waters, each brings its flavor of decentralization to the table.
This section delves into the decentralization ethos of these three giants, comparing their approaches, strengths, and potential vulnerabilities in this foundational blockchain aspect. In the table below we illustrate important factors that influence decentralization in blockchain networks.
| Decentralization: Bitcoin VS Ethereum vs Solana | |||
|---|---|---|---|
| Comparison | Bitcoin | Ethereum | Solana |
| Consensus algorithm | Proof of Work | Proof Of Stake | Proof of History + Proof of Stake |
| Governance | None, the last upgrade was in 2021 | Ethereum Improvement Proposals | Solana Improvement Proposals |
| Central Entity Influence | None (fully decentralized) | Ethereum Foundation has influence but no full control |
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| Censorship Resistance | Ultra-High (due to decentralized nature) | High but there is still some, 29% of all blocks being OFAC compliant | Medium to high, it still has a relatively small number of validators online |
| Total Nodes / Validators | 45,780 | 941,156 | 1999 |
| Total Down time in its history | 0 | 0 |
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Bitcoin, the pioneer, proudly flaunts its decentralized ethos. Built on the Proof of Work consensus mechanism, it's not just the robustness of its security that stands out, but its vast network of 44,878 nodes. This expansive reach is emblematic of its decentralized nature.
Moreover, with no central authority dictating terms or any major governance upgrades since 2021, Bitcoin remains staunchly autonomous. Furthermore, its ultra-high censorship resistance—where most nodes don't filter or censor transactions—reaffirms its position as a fully decentralized bastion.
On the other side, Ethereum, although boasting a whopping 931,926 nodes—vastly outnumbering Bitcoin—demonstrates a slight centralized inclination.
The Ethereum Foundation, while not wielding complete control, does have a noticeable influence on the network's direction. Its transition from Proof of Work to Proof of Stake showcases adaptability, yet also hints at the presence of a guiding hand.
Additionally, the fact that around 29% of its blocks are OFAC compliant indicates a degree of transaction censorship, making it slightly less decentralized than Bitcoin.
Solana, the newer entrant, is an intriguing study. Utilizing a unique combination of Proof of History and Proof of Stake, it's designed for rapidity. However, when it comes to decentralization, it showcases some vulnerabilities. With only 1,999 nodes, its network is considerably smaller.
The Solana Foundation, akin to Ethereum's counterpart, holds sway, but what truly raises eyebrows is the substantial control by venture capitalists over the Solana supply. This concentration of power, coupled with its history of several downtimes, somewhat dims its decentralization credentials.
In conclusion, Bitcoin appears to reign supreme in the decentralization spectrum. Ethereum, despite its vast network, has certain central influences casting shadows on its fully decentralized claim.
Solana, while technologically advanced and efficient, has clear central influences and a smaller node count, placing it a notch below in the decentralization ladder.
As the crypto universe continues to evolve, these dynamics might shift, but for now, Bitcoin retains its decentralized crown.
Tokenomics 101: Breaking Down Bitcoin, Ethereum, and Solana
Tokenomics are economic factors that influence the price and value appreciation of cryptocurrencies. Bitcoin was created to be disinflationary. Supply and inflation control was one of the foundational paradigms upon which Bitcoin was built.
Now that Bitcoin laid the groundwork for tokenomics, other cryptocurrencies adopted the ethos of supply control using mathematically trusted systems.
Together, different tokenomic factors influence the appreciation and value retention of Ethereum and Solana. Naturally, the cryptocurrencies with the best tokenomics will appreciate to faster degrees and retain their value, than cryptocurrencies with less great tokenomic factors.
In the table below we compare Bitcoin, Ethereum, and Solana to see which has better tokenomics.
| Tokenomics: Bitcoin vs Ethereum vs Solana | |||
|---|---|---|---|
| Comparison | Bitcoin (BTC) | Ethereum (ETH) | Solana |
| Inflation Rate Yearly | 1.74% | -0.25% | 6.325% |
| Max Supply | 21 Million | Infinite | Infinite |
| Circulating Supply | 19.494 Million | 120 Million | 412 Million |
| Total Supply | 19.494 Million | 120 Million | 558 Million |
| Percent Circulating Supply of Max Supply | 100% | 100% | 73.8% |
| Projected Circulating Supply Inflation rate (2024) | 0.9% | -0.25% | 8.25% |
| Projected Circulating Supply Inflation rate (2025) | 0.9% | -0.25% | 7.62% |
| Projected Circulating Supply Inflation rate (2026) | 0.9% | -0.25% | 7.08% |
| Projected Circulating Supply Inflation rate (2027) | 0.9% | -0.25% | 6.61% |
| Projected Circulating Supply Inflation rate (2028) | 0.45% | -0.25% | 6.20% |
| Coins Burnt Yearly | N/A | 969,000 ETH from transaction fees | |
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As tokenomics refers to the economic model of a token, it can significantly influence an asset's long-term viability and value. In this analysis, we explore and contrast the tokenomics of Bitcoin (BTC), Ethereum (ETH), and Solana, enabling informed decisions based on individual risk tolerance, time horizon, and objectives.
Starting with the yearly inflation rate, Bitcoin represents a deflationary asset with a modest 1.74% inflation rate, signaling the potential for sustained value appreciation. Ethereum, intriguingly, presents a negative inflation rate at -0.25%, largely owing to its coin-burning mechanisms.
Solana, with a relatively high 6.325% inflation, might raise concerns regarding value dilution, albeit it could also indicate a more aggressive approach to network security and development incentives.
The concept of Supply Limits is pivotal. Bitcoin's capped supply at 21 million coins makes it a scarce, and potentially premium asset, a digital gold in the crypto universe.
Ethereum and Solana, with no maximum supply, could raise eyebrows regarding inflation and value preservation. However, it’s paramount to consider that an infinite supply might offer more flexibility and sustainability for network growth and development.
Circulating and Total Supply metrics elucidate the availability and future issuance of the coins. Bitcoin's circulating and total supply are identical at 19.494 million, which is 100% of its max supply, reflecting absolute transparency and predictability.
Ethereum’s and Solana’s circulating supplies are notably less than their total supplies, emphasizing future issuance and potential impact on market dynamics.
The Projected Circulating Supply Inflation Rates from 2024 to 2028 indicate a diminishing inflation trend for Bitcoin, which could augment its value proposition.
Ethereum maintains its negative inflation trajectory, which might accentuate its scarcity. Solana, despite a decreasing trend, maintains higher inflation projections, necessitating a thorough evaluation of its impact on value.
The Coin Burn Mechanisms of Ethereum and Solana introduce deflationary pressures, potentially bolstering value. Ethereum burns a substantial quantity of ETH from transaction fees, enhancing its scarcity. Solana’s burn mechanisms are also noteworthy and contribute to value retention.
Lastly, the diversity in Coin Use Cases can significantly influence investor preference. Bitcoin, predominantly a store of value and a medium for transaction fee payments, appeals to those seeking wealth preservation.
Ethereum, with its multifaceted utility, caters to a wider audience seeking value storage, liquidity provision, validation participation, and utilization in its expansive ecosystem. Solana’s versatility in transaction facilitation, staking, collateralization in DeFi, and validator operation, albeit requiring substantial holdings, offers varied avenues for engagement and value realization.
In conclusion, discerning the optimal investment is contingent upon individual preferences, risk appetites, and investment goals. Bitcoin, with its scarcity and proven resilience, stands as a premier choice for value preservation.
Ethereum’s multifunctionality and deflationary characteristics make it a versatile and potentially appreciating asset. Solana’s high inflation might be a concern, but its diverse use cases and advanced technology can offer substantial rewards, particularly for early adopters and those with a more aggressive risk profile.
Value Retention: Bitcoin vs Ethereum vs Solana Compared
One of the fundamental use cases for cryptocurrencies is that they retain their value as opposed to fiat currencies that eventually go to zero. Cryptocurrencies like Bitcoin are supposed to hold their value since they are designed to be great stores of value.
The question then becomes: How well does Ethereum and Solana hold up against Bitcoin in storing value?
Let’s analyze price appreciation and value compression in Bitcoin, Ethereum, and Solana and compare the three.
Bitcoin
Bitcoin started like most altcoins, young and feeble. Through time, it grew into the titan we know today, which holds value better. In the image below we can see that it went up 1896% since the beginning of the bull run.
Bitcoin proceeded to fall 76% from the top to the bottom of the bear market. Anyone buying after 15k would have lost money if they sold at the bottom of the bear market.
Ethereum
Ethereum is the second in the showroom next to Bitcoin, it always makes extravagant moves. Sometimes it steals the show, sometimes it lets Bitcoin lead. Ethereum went up 5463% since the bottom of the bull run.
However, it proceeded to fall 80.5% from the top of the bull market. Anyone buying above 900$ would have lost money if they had capitulated at the bottom of the bear market.
Solana
Solana is like that crazy friend you have, who goes to parties here and there, and then you see him making money moves the next day. The life of Solana is of volatility in both directions, the negative and the positive.
When it comes to making gains, Solana was the king of gains. It appreciated 43,415% in the bear market. Though, Solana wasn’t very good at retaining a lot of that value. Solana lost 96.67% of its value at the bottom of the bear market from the top.
BTC vs ETH vs SOL
It is clear to us from the images above, that Bitcoin is the supreme leader when it comes to retaining value as a cryptocurrency. Ethereum is the second best, and Solana the third. The difference in percentage from Bitcoin losing 76% to Ethereum losing 80% is a price difference of 20%.
What’s even more crazy is that the price percentage difference between losing 96% and losing 80%, the difference between Solana and Ethereum’s performance is 518%. The conclusion is that Solana is absolutely terrible at retaining value, while Ethereum is better, and Bitcoin is the best.
This can also be inferred using data from the tokenomics section. Solana has 6-8% inflation while Bitcoin and Ethereum have sub 2% inflation.
When it comes to outperforming, Ethereum and Solana outperformed Bitcoin by great margins. Considering that Ethereum and Solana outperformed Bitcoin during the bear market, the Ethereum dominance and altcoin dominance went up as a result.
The opposite held true during the bear market.
Since Bitcoin dropped 76%, Ethereum dropped 80% and Solana dropped 96%, the Bitcoin dominance also went up during this period of time.
Related: The Bitcoin Dominance Explained
Final Thoughts: Bitcoin, Ethereum, or Solana - Which Holds the Future?
In the intricate universe of blockchain technologies, Bitcoin, Ethereum, and Solana stand as remarkable entities, each presenting unique technological frameworks, designs, and innovations.
From Bitcoin’s pioneering stature to Ethereum’s multifunctionality and Solana’s breakthrough speed and efficiency, each harbors distinct capabilities.
The technological architectures of these cryptos are fundamentally divergent. Bitcoin’s solid and proven Proof of Work mechanism, although energy-intensive, has served as a symbol of robust security and decentralization, whereas Ethereum, seeking scalability, is transitioning to Proof of Stake.
Solana combines Proof of History with Proof of Stake to deliver unmatched transaction speeds, a testament to its innovative stance.
Bitcoin remains a paragon of value preservation, owing to its scarcity induced by its capped supply. It’s the digital gold in the crypto realm, a stronghold of value.
Ethereum, with its diverse utility and adaptability, remains the epicenter for decentralized applications and smart contracts, while its negative inflation rate, induced by coin burning, hints at potential value appreciation. Solana, with its relative infancy and high inflation rate, seems risky, but its technological prowess and versatile use cases signal considerable potential.
Ethereum and Solana, with their advanced smart contract capabilities, are clearly designed to foster a diverse range of decentralized applications.
They are platforms for innovation, whereas Bitcoin primarily serves as a store of value. Solana, with its impressive transaction throughput and minimal block time, is poised to cater to high-demand applications and services, yet its multiple periods of downtime reveal the challenges it needs to overcome.
The decentralization ethos of Bitcoin is unwavering. Its expansive node network, absence of central authority, and high censorship resistance underscore its decentralized credentials.
Ethereum, despite a more extensive node network, experiences some degree of central influence from the Ethereum Foundation, and its level of transaction censorship is noteworthy. Solana’s decentralization is hindered by the substantial control exerted by venture capitalists and its fewer nodes.
The scrutiny of tokenomics elucidates Bitcoin’s unrivaled position in value retention, with Ethereum following suit and Solana lagging due to its inferior value retention capability, highlighted by its high inflation rates.
However, the multifaceted utility of Ethereum and the technological innovations of Solana offer varied opportunities for engagement and potential rewards, especially for those with a higher risk tolerance.
In summation, each crypto asset holds a piece of the future, albeit in different aspects. Bitcoin is the fortress of value, an unrivaled store of value, Ethereum is the hub of decentralized innovation and versatility, and Solana is the harbinger of technological advancements and scalability in the blockchain sphere.
Investment preferences will vary, hinging on individual goals, risk appetites, and the value placed on security, versatility, performance, and decentralization.
As the crypto ecosystem continues to mature, the landscape may shift, but the unique value propositions of Bitcoin, Ethereum, and Solana ensure that each will play a significant role in shaping the future of decentralized technologies.