Solana vs. Ethereum L2s: The Battle for Blockchain Dominance

Solana’s co-founder, Anatoly Yakovenko, has once again stirred conversations in the blockchain community by openly criticizing Layer-2 (L2) rollups. According to him, Layer-1 (L1) solutions like Solana already offer efficient, cheap, and secure scaling without the complexities that come with L2s. 

Yakovenko argues that L2s rely heavily on L1s for data availability and are bogged down by intricate fraud proofs and multi-signature updates. He confidently states that Solana does not face such challenges, thanks to its well-separated execution and data layers built on an efficient base layer.

Storage Concerns and L2 Skepticism

Yakovenko didn’t hold back when addressing storage concerns. He called Solana’s annual data generation of 80 terabytes “measly” and dismissed the argument that L1s cannot scale due to storage limitations. He went so far as to advise against building unnecessary L2s, saying, “You can skip creating a valueless L2 and just launch a token.” His message was clear, many L2s lack substance and only complicate the ecosystem rather than adding real value.

Solana Competes With Ethereum L2s, Not Ethereum Itself

What’s even more interesting is Yakovenko’s assertion that Solana directly competes with Ethereum’s L2 solutions, not Ethereum itself. He emphasized that Solana’s architecture allows it to stand toe-to-toe with every Ethereum L2, arguing that ideally, there should only be one efficient L2 capable of parallel execution. “There is no point to multiple L2s … if a single L2 can handle parallel execution, then it can use up all the blobspace and run every use case,” he said. 

He also pointed out that L2s often act parasitically, perpetuating their language ecosystems at the expense of the L1.

Ethereum’s Strategy Faces Challenges

On the flip side, Ethereum co-founder Joseph Lubin believes in L2 scaling as the blockchain’s future. He praised projects like Linea and upcoming initiatives like MegaETH for delivering faster and cheaper operations. However, Ethereum’s strategy hasn’t been without issues. The March 2024 Dencun upgrade reduced transaction fees by 95%, benefiting L2s but causing Ethereum base-layer revenue to drop by 99% by year-end. Additionally, with over 140 scaling solutions and 60 roll-up networks on Ethereum, concerns about fragmentation and value capture are becoming louder. Some users have also criticized Ethereum for lacking permissionless characteristics, with KYC requirements and absent privacy tools raising eyebrows.

Ethereum Faces Key Support Test

Meanwhile, Ethereum’s price is hovering around a key support zone between $1,886 and $1,944, where 3 million addresses hold approximately 6.12 million ETH. At the time of writing, ETH is priced at $2,003 just above this critical level. On-chain data shows that 70.43% of ETH is “in the money,” while 29.08% is in loss. Remarkably, over 99.5% of ETH holders are at breakeven, which could lead to significant price reactions. 

A notable market shift is also the withdrawal of over 1.2 million ETH from exchanges in the last 48 days, with reserves falling from 18.15 million to 16.96 million ETH, according to Glassnode. This sudden decline in exchange balances could be a sign of strong holding sentiment and potential bullish momentum.