Solana, Avalanche, Cardano: Which Is the Best Ethereum Competitor?

Which is the best investment: Solana (CRYPTO:SOL), Cardano (CRYPTO:ADA) or Avalanche (CRYPTO:AVAX) right now?

| More on:
crypto blockchain

Image source: Getty Images

Ethereum (CRYPTO:ETH) competitors, or “Ethereum Killers,” Solana (CRYPTO:SOL), Avalanche (CRYPTO:AVAX), and Cardano (CRYPTO:ADA) are certainly making waves in the crypto market. Each of these tokens has seen incredible surges in recent years, as investors look for the “next big thing.”

Each of these layer-1 networks provide a base blockchain network upon which vast ecosystems can be built. For crypto investors looking for the next Ethereum, these three cryptocurrencies are among the most-discussed options.

Let’s dive into what makes these Ethereum alternatives attractive right now.

Why do investors need an alternative to Ethereum?

Let’s start by discussing Ethereum.

Ethereum is the second-largest cryptocurrency, sporting a whopping $365 billion market capitalization. This token represents the largest ecosystem of decentralized finance (DeFi) projects in the world.

This size has led to network slowdowns and very high fees relative to other crypto networks.

Accordingly, there are currently two schools of thought around Ethereum. On the one hand, given how entrenched Ethereum is in the DeFi space, some argue that Ethereum is simply too large to go away. Plus, this network’s update to Ethereum 2.0 should lower fees over time and pick up speeds dramatically. I tend to agree with this view.

On the other hand, other networks are gaining market share rapidly due to their fee and cost structure. Solana, Avalanche, and Cardano are three great examples. These networks are all proof-of-stake options already and are growing their own ecosystems accordingly. I can also understand this argument as well.

Meet Ethereum’s strongest challengers

So, what makes each of these networks unique?

Well, Cardano is unique in that this network separates its computational layer from its transaction settlement function. In plain speak, by separating transactions and the computations that go into validating these and putting them on the blockchain, Cardano is able to do multiples of Ethereum’s existing volume.

Avalanche is an optimized network, working on building out its dApp ecosystem, luring developers in with transaction speeds up to 6,500 per second, and transaction fees around one-tenth of Ethereum.

Solana is perhaps the cheapest and fastest of the group. Utilizing a unique proof-of-history variation of proof-of-stake validation, Solana has the ability to do a breathtaking 50,000 transactions per second. Most transactions can be done at a fraction of a penny. Accordingly, Solana’s meteoric rise last year was primarily a result of these two factors.

Bottom line

These smart contract platforms are all unique. Indeed, each provide their own investment thesis, and I can understand the bull case behind all three.

Personally, I’m invested in Ethereum and Solana, as I think these are the two networks that could be long-term winners in the smart contract proof-of-stake driven future. That said, Avalanche and Cardano do provide an attractive option for investors interested in DeFi right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald owns Ethereum and Solana. The Motley Fool owns and recommends Ethereum.

More on Investing

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

Paper Canadian currency of various denominations
Bank Stocks

1 Magnificent Canadian Dividend Stock Down 28% to Buy and Hold for Decades

This top Canadian dividend stock is underperforming its large peers this year, but a turnaround could be on the horizon.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

hand stacks coins
Investing

Secure a Wealthy Future With These 3 Canadian Stocks

These Canadian stocks have the potential to appreciate substantially over time and may also enhance returns through dividend payments.

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

analyze data
Investing

3 Blue-Chip Stocks Every Canadian Should Own

These blue-chip stocks are backed by large-cap companies with well-established businesses, solid fundamentals, and a growing earnings base.

Read more »

dividends grow over time
Stocks for Beginners

The Smartest Growth Stock to Buy With $2,000 Right Now

Do you have $2,000 to invest for the long term? These three TSX stocks have and will continue to deliver…

Read more »