Sygnum claims Solana’s superiority over Ethereum in the areas of tokenization and stablecoin issuance

What’s new? Recently, there have been signs that even conservative financial institutions may prefer the scalability of the Solana blockchain to the stability and security of the Ethereum network, analysts at Swiss crypto bank Sygnum said in a new report. They are referring to those companies that are considering launching their own platforms for tokenizing real-world assets (RWAs) and issuing stablecoins based on existing open blockchains.

Sygnum report

What else is known? The bank cited statements from companies in the traditional financial sector indicating that Solana may become a more preferred option in tokenization. Experts believe that in the long term, this situation could become a serious challenge for Ethereum.

For example, the senior executive of the payment company PayPal, Jose Fernandez da Ponte, said at the Solana conference that “Ethereum is not the best solution for payments.” Another payment company, Visa, has integrated Solana for settlement in Circle’s USDC stablecoins, noting the blockchain’s high throughput and low fees.

Investment firm Franklin Templeton, which issues its own exchange-traded funds based on bitcoin and Ethereum and manages trillions of dollars in assets, announced the launch of a tokenized fund on Solana. Financial conglomerate Citi is also considering Solana for international payments.

However, Sygnum recalled that for now, the market capitalization gap between native ETH tokens and SOL is still very large: $222 billion as of October 4. Nevertheless, SOL’s exchange rate against ETH is up 300% since last October and 600% since the beginning of 2023. But Ethereum could also be poised for a “sharp reversal” after two years of significant declines and negative sentiment, the report says.

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The bank’s analysts also noted that much of Solana’s revenue relies heavily on the issuance and trading of meme tokens. Ethereum, on the other hand, continues to dominate the RWA and stablecoin tokenization markets with shares of 81% and 49%, respectively. Solana’s share in each of them does not exceed 3%.

If we compare Ethereum to bitcoin, the former is clearer for traditional investors, according to Sygnum, because it is easier to value:

“Ether derives most of its value from economic activity on the network and from the resulting revenues. [It] is more akin to an equity investment where growth, profits and cash flows are evaluated – this is more relatable for traditional investors than the digital gold concept.”

In addition, the risks of ETH being recognized as a security by the US regulator SEC have been significantly reduced since it allowed spot exchange-traded funds based on the asset to trade on July 23 this year and closed its investigation into the ecosystem.

That said, such risks remain for SOL, as many executives in the crypto industry are also saying.

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In conclusion, Sygnum analysts write that in order to successfully compete with Ethereum Solana needs to “shape future technological cycles and become the birthplace of groundbreaking decentralized applications that capture the market’s imagination and drive widespread adoption.”

Earlier, Edward Snowden, a former CIA and NSA employee and one of the creators of the anonymous cryptocurrency Zcash criticized Solana for being too centralized, saying that “anything significant” created on the network could easily be destroyed “if states begin moving toward it.”