Ethereum Layer-2 Volumes Surge 70%—Can They Eclipse Solana?

Ethereum has long been the leading blockchain for decentralized applications (DApps), but its high transaction fees—often exceeding $4—have sparked criticism. In response, Ethereum’s layer-2 solutions have rapidly evolved to address scalability concerns, providing a more efficient way to interact with the network. In fact, Ethereum’s layer-2 volumes have surged by 70% over the past 30 days, prompting analysts to question whether Ethereum’s ecosystem can catch up to—and even surpass—Solana, which has seen significant growth in recent months.

Ethereum Layer-2s: The Key to Scalability and Growth

Ethereum’s base layer has always been challenged by scalability issues, limiting its ability to handle the growing demand for decentralized finance (DeFi) and other DApps. Layer-2 solutions, such as Arbitrum, Optimism, and Base, have emerged as key solutions to these challenges. By processing transactions off the main Ethereum chain and providing faster and cheaper alternatives, Ethereum’s layer-2 ecosystems have gained substantial traction, with volumes increasing by 70% recently.

Despite Solana’s impressive rise, Ethereum’s layer-2 networks are holding their ground, accounting for a larger share of the market when including both the base layer and the layer-2 solutions. According to data from DefiLlama, Solana captured 35.4% of decentralized exchange (DEX) volumes in November, a significant increase from 27.2% in October. On the other hand, Ethereum—including both its base layer and layer-2 ecosystems—remained ahead, accounting for 45.2% of market share in November, though it declined slightly from 50.1% in October.

TVL Battle: Ethereum vs. Solana

While Solana has seen tremendous growth, particularly in the DeFi sector, Ethereum continues to dominate when considering total value locked (TVL). As of November 2024, Ethereum’s base layer holds a massive $69.7 billion in TVL, far outpacing Solana’s $9.2 billion. Furthermore, Ethereum’s layer-2 solutions, including the rapidly growing Base and Arbitrum, have accumulated over $11.4 billion in TVL combined. Base, in particular, shows strong potential with its integration with Coinbase, especially in the growing memecoin sector.

Solana has undoubtedly secured its position as the second-largest blockchain by deposits, with several tokens and projects driving its growth. Memecoins, for instance, have become a key driver of adoption for Solana, with tokens like Pump.fun fueling liquidity pool creation on platforms like Raydium and Orca. These platforms collectively amassed $24.6 billion in volumes over the past week, highlighting the growing momentum behind Solana.

Solana Surpasses Ethereum in Fees

One of the more significant metrics for blockchain networks is the fees they generate. Analysts argue that capturing fees is crucial for a blockchain’s survival, as they help incentivize validators and stakers. Recently, Solana has outpaced Ethereum in terms of fees, making it the highest-grossing blockchain in this category. This development has led some to question whether Ethereum, with a market capitalization of $436 billion, is overvalued compared to Solana’s $116 billion market cap—a 73% discount.

However, this comparison doesn’t tell the whole story. Solana’s inflation rate, currently at 5.3%, is significantly higher than Ethereum’s, which impacts the long-term sustainability of Solana’s growth. The inflationary model could put downward pressure on Solana’s price, making Ethereum’s value proposition more compelling for some investors.

Ethereum’s Road Ahead: Fee Adjustments and Layer-2 Optimizations

Looking ahead, Ethereum is considering several improvements to its fee structure. These changes could include dynamic fee adjustments based on network usage, as well as optimizations in how layer-2 solutions, such as rollups, interact with the base layer. Such measures aim to reduce transaction costs, increase the efficiency of DApps, and ultimately drive up network fees. As Ethereum continues to refine its network, these improvements could help the platform maintain its competitive edge in the long term.

At present, Ethereum’s layer-2 solutions face challenges in competing with Solana, particularly in terms of user experience and seamless onboarding for new entrants. However, Base’s growing influence—thanks to its backing by Coinbase—suggests that Ethereum’s ecosystem will continue to evolve and gain momentum in the coming months.

While Solana’s growth trajectory remains impressive, particularly in terms of fee generation and transaction volumes, Ethereum’s layer-2 solutions are gaining ground. Ethereum’s base layer still maintains a clear advantage in TVL, and its layer-2 ecosystems, like Arbitrum and Base, are showing promising growth. As Ethereum continues to evolve its fee structures and layer-2 solutions, it has the potential to reclaim market share and possibly surpass Solana in terms of long-term sustainability and scalability.

For now, Solana’s growth appears poised to continue, with higher TVL and volumes likely to boost SOL’s price momentum. However, Ethereum’s innovations in layer-2 scalability, coupled with its substantial TVL advantage, suggest that the Ethereum ecosystem could catch up to—and perhaps even eclipse—Solana in the coming years. The race between these two blockchain giants is far from over, and it will be fascinating to see how they evolve over the next few years.