HomeDeFiSolana surpasses Ethereum on DEX

Solana surpasses Ethereum on DEX

It is not the first time it happens, but the fact that the volume of trades on decentralized exchanges on Solana has exceeded that of DEX on Ethereum always makes headlines.

Ethereum not only has existed since 2015, but has been dominating the world of DeFi uncontested for years now. 

Solana instead landed on the crypto markets just under four years ago, but has transaction fees that are far lower.

Solana’s Overtake on Ethereum

It should be noted, however, that in terms of key metrics Solana has not yet surpassed Ethereum. 

By market capitalization SOL (the native cryptocurrency of Solana) is around 75 billion dollars, just surpassed by BNB with 78. ETH, the native cryptocurrency of Ethereum, is still on another level, with 386 billion dollars. 

For TVL (Total Value Locked on DeFi protocols), Ethereum surpasses everyone with its 46 billion dollars, with Solana in fourth place with only 3.7 billion, surpassed also by Tron as well as BSC. However, the majority of TVL on Tron is due to USDT, while in the Solana ecosystem it is due to DEX.

It is no coincidence that the overtaking occurred precisely on decentralized exchanges, especially in terms of daily trading volumes. 

Moreover, even among DEXs, Uniswap still dominates in terms of TVL, although now a portion of its trading volumes does not occur on Ethereum but on layer-2 solutions like Arbitrum.

Using as a reference the trading volumes per chain, in the last seven days Solana has exceeded 21 billion dollars, while Ethereum stopped at 19.

However, it should be added that there have been more than 6 billion dollars in trading on Arbitrum, so overall the Ethereum ecosystem with its layer-2 still surpasses the Solana ecosystem.

Note that in third place in this ranking there is BSC, with 12 billion, and in fourth place Avalanche with 4. 

The reason for the overtaking

There are two reasons that have led to this overtaking. 

The first, simply, is the much lower fees on transactions. 

In fact, it is no coincidence that the fifth chain by trading volume on DEXs is Arbitrum, the main layer-2 solution for Ethereum that enables transactions at very low costs. 

Solana still has lower costs, so it’s not surprising that it’s the preferred chain at the moment.

However, there was another reason behind this boom. 

The boom of memecoins played an important role.

Many memecoins are now being launched on low-cost chains, such as Solana or even Base. Moreover, anyone can list their new token on a decentralized exchange, so DEXs are the ideal place to launch new memecoins. 

It was a real boom, with some truly colossal proportions. 

Now that the temporary boom of memecoins seems to be fading, it is possible that Ethereum will return to dominate this ranking, even though Arbitrum has now become a strong competitor. 

The historical volumes

However, the situation changes if historical volumes are taken into consideration. 

On a monthly basis, in March Ethereum still dominates with over 51 billion dollars so far, while Solana is at about 45. 

In February, even BSC had surpassed Solana, with 25 billion dollars compared to 22. 

In January, for example, Arbitrum had almost caught up with Solana, both at 22 billion, so it is evident that the overtaking of the last week is due to a perhaps temporary boom, largely driven by memecoins. 

In November 2021, at the peak of the bubble, DEXs on Ethereum recorded a record of $107 billion in monthly trading volumes, followed by $74 billion on BSC. 

They were numbers far superior to the current ones, so it seems that there is still room for growth for DEX. At that time Solana didn’t even make it into the top 10, so in just over three years it has come a long way. 

Even Arbitrum has grown a lot, because back then it was under 4 billion, while in the first 20 days of March 2024 it is already over 18. 

The prices of SOL (Solana) and ETH (Ethereum)

Interestingly, both ETH and SOL are currently priced 34% below their all-time high. 

However, in the last seven days ETH is losing 20%, while SOL is gaining 12%. Also since the beginning of the year SOL is performing better, with a +68% compared to the +42% of ETH. 

The key point to understand these differences actually lies in the bear market of 2022/2023. 

ETH in 2022 has dropped less, and in 2023 it immediately recovered together with BTC. 

Instead SOL lost much more in 2022, and especially in 2023 it recovered only in October, when the entire crypto market restarted. 

Although in some ways it may seem that Solana is challenging Ethereum, in reality for now it is still the latter that dominates, even on DEX (especially thanks to its second layer).

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".