Original title: Should SOL be trading at a 68% discount to ETH?

Original source: The Defi Report

Original compilation: Golem, Odaily Planet Daily Golem

Editor's note: "That season seems to be coming", people have not dared to call the name of the copycat season on social media, because they have experienced too many disappointments. But on May 8, after a lapse of 3 months, when BTC stood above $100,000 again, mainstream altcoins also rose collectively, among which ETH performed the most eye-catching, and the topic of "what happened to Ethereum skyrocketed by 40% in 3 days" even topped the Douyin hot list, and Nick Tomaino, the founder of 1co nfirmation, even released a bold statement that ETH will eventually surpass BTC.

However, the price increase does not mean that the fundamentals of ETH have undergone significant changes. There are still doubts about Ethereum in the market and discussions about whether its biggest competitor, Solana, will surpass it. In January 2023, the trading price of SOL was 97% lower than that of ETH, and now the price of SOL is still more than 90% lower than ETH, with ETH's market cap still over three times that of SOL. Does SOL really have the potential to surpass ETH?

Researchers from The DeFi Report believe that fundamentally, even if SOL cannot surpass ETH, its price should absolutely not be more than 90% lower than ETH. Past analyses have primarily compared these two networks based on metrics such as fees, DEX trading volume, stablecoin supply and trading volume, and total TVL. This issue of The DeFi Report focuses on comparing the actual value that ETH and SOL token holders can obtain, with statistics showing that the actual value received by SOL token holders is 3.6 times that of ETH, leading to the conclusion that the current market valuation of ETH is higher than that of SOL. Odaily Planet Daily has compiled the full text as follows.

Actual value that token holders can obtain

Solana

The actual value that Solana token holders/stakers can obtain = Jito Tips earned by the validators and shared with the stakers (MEV). This does not include newly issued SOL, base fees, priority fees, or MEV earned by MEV hunters.

The 475 million dollars of Solana in the above image is the net value after Jito charges a 6% fee to all validators running Jito Tips routers and block engines. If you hold SOL, you can stake it to trusted validators/LSTs, such as Helius (hSOL), which charges $0 in commission to stakers. In this case, SOL stakers can receive 94% of the MEV generated by Jito (95% of Solana's stake is running on Jito).

Ethereum

The actual value that Ethereum token holders/stakers can obtain = MEV + the priority fees earned by validators and shared with stakers. It does not include the new ETH issuance, base fees, block fees, or the portion of MEV retained by MEV hunters and block builders.

The estimated 134 million USD for Ethereum in the above figure has deducted the 10% fee charged by Lido (the most trusted liquid staking provider on Ethereum).

Solana is a combination of Nasdaq and DTCC

The TVL of Ethereum is 6.6 times that of Solana, and the supply of stablecoins is 10 times that of Solana. However, in terms of the actual value gained by token holders from the beginning of the year to date, Solana token holders have gained actual value that is 3.6 times that of Ethereum. This is because the execution capability and circulation speed of the network determine the actual value, allowing validators and token holders to monetize the TVL.

In traditional finance (TradFi), Nasdaq is responsible for execution power and liquidity speed, while DTCC (Depository Trust & Clearing Corporation) handles custody/settlement. Ethereum is increasingly resembling DTCC (custody + settlement/accounting for L2 transactions), while Base and other L2 platforms are beginning to look like Nasdaq (processing execution/speed). Solana is becoming more like a combination of the two.

Integrating Nasdaq + DTCC into a single solution means that SOL holders can receive 100% of the value generated by execution/speed services, while ETH holders can only receive about 10% of the value (by burning ETH obtained from the L2 platform). Although Ethereum has these assets, they are circulating on L2, and the current question is whether ETH token holders will ultimately receive this value—whereas Solana does not have this issue at the moment.

In addition to some innovative LSTs on the Sanctum platform, Solana validators can earn 100% of the priority transaction fees from user transactions (not shared with stakers). Jito aims to change this situation, and the DAO currently has a governance proposal to update the fee router, which will include priority fees in addition to the MEV that is currently routed and paid to stakers. According to Jito, this proposal is expected to be implemented in the coming months.

If we add the priority fee (after deducting the tip router fee of $372 million), the data so far this year is as follows:

It is currently unclear how strongly the validators are willing to share priority fees, but we hope to add this information so that you can understand how future data may change.

Actual Yield Rate

The following chart converts the above data into annualized actual returns (in SOL and ETH):

If we include the priority fees of Solana, Solana token holders receive an actual annualized yield of 3.31%:

Total Return Rate (including issuance/network inflation)

By staking assets, token holders can earn newly issued supply/issuance (to incentivize validators/stakers to provide services). This is a key difference between crypto networks and traditional companies, as shareholders in companies cannot avoid equity dilution.

The "issuance yield" of Solana is 7.3%, based on the actual network issuance as of May 6, 2025, while Ethereum's "issuance yield" is 2.78%. As of now, Solana has issued 9.4 million tokens, which will be paid to the SOL staked in the validating nodes on the network (as of May 6, 2025, the average staked amount is 385 million). Ethereum has paid 329,380 ETH for the 34.3 million tokens staked in the validating nodes on the network.

Due to the extremely low inflation rate of the Ethereum network (according to actual data from the beginning of the year to date, the annualized inflation rate is 0.64%), its "issuance yield" has normalized. The "issuance yield" of Solana may continue to decline, as the network's current inflation rate is 4.5% and is decreasing by 15% each year until it reaches a final level of 1.5%.

Source of Actual Value

Meme coins have contributed to more than half of the trading volume on Solana DEX (growing by 51% over the past few months), with SOL/USD accounting for about 35% of the trading volume on Solana DEX, and the remaining 14% consisting of stablecoins, LST, and other assets.

Is this a problem for Solana? Yes and no. Clearly, speculation is one of the strongest demands in cryptocurrency, and Solana has found a product-market fit by offering a better user experience, which is unlikely to disappear in the short term. In addition, Meme coin trading is also stress-testing the system and providing valuable feedback to infrastructure providers.

Today is Meme, perhaps tomorrow what will be popular are stocks, bonds, currencies, and private assets, which may be the goal of Solana. Currently, only 1-2% of the DEX trading volume on the Ethereum mainnet is Meme coins, while stablecoin trading volume accounts for about half, with ETH/stablecoin trading volume and other project tokens each accounting for roughly 20% of the trading volume. However, currently about 50% of the DEX trading volume on Base comes from Meme, the vast majority of which are newly popular Memes.

MEV

Some cryptocurrency analysts believe that with the compression/commoditization of base fees, MEV (the value users pay for time-sensitive transactions) is the only sustainable long-term value in L1. We disagree with this view, but we do believe that MEV will drive most of the economic benefits. Therefore, it is necessary to clarify the differences in how MEV operates on Solana and Ethereum, as well as the potential impact on L2.

ETH

Ethereum has a memory pool where all transactions go before being sorted and submitted to validators. This is where MEV is obtained, and the main participants are:

· Searchers (Bots): These bots use machine learning algorithms to identify profitable opportunities in the memory pool.

· Block Builders: Block builders are responsible for constructing blocks. In other words, they sort transactions into blocks and, in the process, accept "bribes" from seekers.

· Validator: After the block builder (with a tip) submits the block, the validator will approve these blocks.

Workflow: User Submits Transaction — > Ethereum Mempool — > "Searchers" (bots) Identify Value (Arbitrage, Sandwich Attacks, Liquidation) — > Submit Replacement Transactions to Block Builders (with Tips) - > Block Builders Package Transactions - > Submit to Validators (with Tips) - > Validators approve transactions and keep most of the tips (block builders and searchers keep a portion of them).

The biggest unknown facing Ethereum is what will happen to MEV if most transactions shift to L2 as expected? We believe that MEV will transfer to L2 in the form of prioritized fees. The chart below shows that 85% of Base's fees come from prioritized fees.

Solana

Solana does not have a memory pool, but it has dedicated validator clients like Jito, which implement some form of rolling, private memory pool.

How it works: Jito's block engine creates a very short (about 200 milliseconds) window during which searchers can submit transaction bundles to be included in the next block. This rolling memory pool is not public, but searchers connected to the Jito infrastructure can access it, allowing them to discover and exploit potential arbitrage opportunities within this brief window.

Searchers typically monitor on-chain status directly (e.g., order books, liquidity pools) by running their own full nodes or RPC endpoints. They detect arbitrage opportunities by looking at state changes caused by confirmed transactions, rather than by looking at pending transactions in the mempool. When a profitable opportunity arises (such as a price imbalance between DEXs), the bot quickly builds and submits its own trade (usually via Jito or a similar relay), hoping to seize the opportunity before anyone else.

Currently, about 50% of the arbitrage MEV on Solana is conducted through Jito (this value is shared with stakers via the tip router):

Data: sandwiched.me

If you invest in these networks, you need to understand how to accumulate MEV through staking as a token holder. At the same time, compared to ETH holders, SOL holders currently have a better chance of obtaining MEV (as well as potential priority fees).

Summary

Should the trading price of SOL be 93% lower than that of ETH? From a fundamental perspective, absolutely not. Even considering ETH's outstanding network effects, decentralization, asset backing, and other factors, the price difference is still too large. Our conclusion is that, based on ETH's network effects and TVL, the market currently values ETH higher than SOL.

The macro background of ETH is that it will become the home for trillions of tokenized assets such as stocks, bonds, currencies/stablecoins, and private assets in the future. However, ultimately, investors should focus on how ETH derives real value from these assets. Investors have the choice, and if another chain can consistently bring more value to token holders, then over the long term, more capital will flow to that asset. As Benjamin Graham once said: "In the short run, the market is a voting machine. But in the long run, it is a weighing machine."

ETH can attempt to change this situation through re-staking and blob fee adjustments. For example, using EigenLayer for data availability (DA) MegaETH, ETH holders can capture additional real value from these networks through re-staked ETH. However, one thing must be clear: nowadays, cryptocurrencies are rarely traded based on fundamentals. While we believe that prices will always return to value, the current situation is not the case. Market narratives, trends, influence, and liquidity conditions are still the driving factors of the market.

Of course, ETH has been at a disadvantage in the narrative over the past few years, but this situation has improved after the recent price increase. A one-day increase of 20% is not a small matter for an asset worth over $220 billion. Remember: the crypto market has a strong reflexivity, price → narrative → fundamentals. Whether ETH's recent excitement is the beginning of a larger market trend remains to be seen.

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