Ethereum Spends $1.28 Per $1 of Fee Revenue, But Solana Pays Six Times More
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As the rivalry between the Solana and Ethereum ecosystem wages on, Ethereum is far closer to achieving economic sustainability.
On Nov. 1, Michael Nadeau, the founder of The DeFi Report, flagged a steep imbalance between the economic sustainability of Ethereum and Solana.
Citing data from Token Terminal, Nadeau found that for every $1 of fee revenue generated by Ethereum, the network paid an average of $1.28 in the form of newly minted ETH to stakers during 2024. In total, the network emitted $2.65 billion worth of ETH to generate $2.06 billion in revenue.
By contrast, Solana has paid out $3.26 billion and earned $428 million in fees year-to-date, equating to an expense of roughly $7.62 per $1 in revenue. With 87% of Solana fees generated in 2024, Solana’s inflation-to-revenue ratio was even steeper in prior years.
“An L1 becomes profitable from an on-chain perspective when its fee revenues are able to compensate the supply side of the network,” Nadeau said.
Meanwhile, Ethereum earned more in fee revenue than it emitted as inflation throughout most of 2023 and the first quarter of 2024, with revenue slumping following the fee reductions realized by Ethereum’s Dencun upgrade in March.
However, Nadeau acknowledged that a high inflation-to-revenue ratio is “necessary” for a network to bootstrap adoption. “Ethereum also had high inflation during its formative years,” Nadeau said.
The dynamics also mean that SOL stakers are enjoying higher returns than Ethereum validators.
Solana’s 2024 rise
The analysis comes as Solana is enjoying a banner year, with the network emerging as a hub for memecoin speculation. Solana’s memecoin ecosystem has exploded following the launch of PumpFun, a no-code token launchpad facilitating the creation of tens of thousands of memecoins each day, in January, according to Dune.
According to Messari, Solana-based DEXes hosted $1.7 billion in average daily volume throughout Q3, up 325% from $400 million in Q4 2023. The total value locked in Solana’s DeFi ecosystem is also up 280% over the same period, buoyed by the market cap of stablecoins on the network doubling and a 663% rise in the price of SOL.
The data highlights a shift towards DEX trading and DeFi use cases on Solana in 2024 while NFT activity has declined. Solana’s daily NFT volume has crashed 67% to $2.5 million in Q3 from $7.6 million in Q1 2024.
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