Author: Michael Nadeau, The DeFi Report; Translated by: Deng Tong, Golden Finance

In January 2023, the trading price of SOL was at a 97% discount compared to ETH.

As of July last year, this discount rate had narrowed to 83%.

Now, nearly a year has passed. As the market questions Ethereum's scaling roadmap and evaluates Solana's potential to "bring Nasdaq on-chain," this gap is continuing to narrow.

In past analyses, we primarily focused on high-level KPIs such as fees, decentralized exchange trading volume, stablecoin supply and trading volume, and total value locked (TVL) to compare the two networks.

This week's report will focus on the actual value that token holders can obtain.

Actual Value for Token Holders

Solana

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

The $475 million from Solana is the net value of the 6% fee charged by Jito 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 commissions to stakers. In this case, SOL stakers retain 94% of the MEV generated through Jito (95% of Solana's staked SOL runs on Jito).

Ethereum

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

Ethereum's net worth of $134 million has deducted the 10% fee charged by Lido, the most trusted liquid staking provider on Ethereum.

Key Points:

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 to token holders from the beginning of the year to now, Solana's actual value is 3.6 times that of Ethereum.

What is the reason? Execution and speed determine actual value. This is how validators and token holders monetize TVL.

• In TradFi, Nasdaq is responsible for execution and liquidity speed. DTCC is responsible for custody/settlement. Ethereum is increasingly resembling DTCC (custody + accounting for settlement/L2 transactions). Base and other L2 platforms are becoming more like Nasdaq (handling execution/liquidity speed). Meanwhile, Solana is increasingly resembling a combination of both.
• Integrating Nasdaq + DTCC into a single solution means that SOL holders can receive 100% of the execution/circulation speed service value, while ETH holders can receive about 10% of the value (by destroying ETH obtained from the L2 platform).
• Ethereum possesses these assets. However, it needs to enable their circulation on-chain. This has already started to take effect on L2 platforms and is expected to continue growing. The current question is whether ETH token holders will ultimately be able to access this value—whereas Solana does not face this issue at the moment.
• In addition to some innovative LSTs on Sanctum, Solana validators will retain 100% of the priority fees obtained from user transactions (not shared with stakers). Jito aims to change this situation. The DAO currently has a governance proposal that will update the tip router to include priority fees, in addition to the MEV 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 ($372 million, excluding the tip router fee), the numbers so far this year are as follows:

It is currently unclear how enthusiastic validators are about choosing shared priority fees, but we hope to add them here so you have an understanding of how the numbers change.

Actual Yield Percentage

The following is the annualized actual return converted from the above data (in SOL and ETH):

Use Solana priority fees:

Total revenue (including issuance/network inflation):

Key Points:

• By staking assets, token holders can receive newly issued supply/issuance (to incentivize validators/stakers to provide services). This is a key difference between a crypto network and a company, as company shareholders cannot avoid equity dilution.
• Solana's "issuance yield" = 7.3%, based on the actual network issuance as of June 5, 2025 (annualized). Ethereum's "issuance yield" = 2.78%.
• As of now, Solana has issued 9.4 million tokens, which will be paid to the SOL staked with validators on the network (as of June 5, 2025, the average staking amount is 385 million tokens). Ethereum has issued 329,380 ETH for the 34.3 million tokens staked with validators on the network.
• Due to the extremely low inflation rate of the Ethereum network (based on actual data from the beginning of the year to date, the annualized yield is 0.64%), its "issuance yield" has normalized. Solana's "issuance yield" will continue to decline as its network inflation rate is currently 4.5% and decreases by 15% each year until it reaches a terminal inflation rate of 1.5%.

The Source of True Value

Solana

Memecoins account for over half of the trading volume on Solana DEX (growing by 51% in the past few months). SOL/USD accounts for about 35% of DEX trading volume, with the remaining 14% made up of stablecoins, LSTs, and other assets.

Is there a problem?

It is and it is not.

Clearly, speculation/gambling is one of the most powerful use cases in cryptocurrency. Solana has found product/market fit by providing a better user experience.

We believe that this situation will not disappear in the short term.

In addition, memecoin trading is putting pressure on the system and providing valuable feedback to infrastructure providers.

Today's memecoins. Tomorrow's stocks, bonds, currencies, and private assets?

This is ultimately the goal of Solana.

If you're curious, currently 1-2% of the DEX trading volume on Ethereum Layer-1 is memecoins. Stablecoin swap trading volume accounts for about half, with ETH/stablecoin swaps and other project tokens accounting for approximately 20% of the trading volume.

Currently, about 50% of the DEX trading volume on Base comes from memes, with the vast majority coming from new Meme coins.

MEV

Some cryptocurrency analysts believe that as the base fees compress/commoditize over time, MEV (the value that users pay for time-sensitive transactions) is the only sustainable long-term value in Layer 1.

We do not agree with this viewpoint, but we do believe that MEV will drive most economic benefits. Therefore, it is necessary to clarify the differences in how MEV operates on Solana and Ethereum, as well as the potential impacts of Layer 2.

Ethereum

Ethereum has a memory pool where all transactions go through before being ordered and submitted to validators.

The MEV market is here. The main participants are as follows:

• Searchers: These bots use machine learning algorithms to identify profit opportunities in the mempool.
• Block Builders: Block builders are responsible for constructing blocks. In other words, they sort transactions into blocks and accept "bribes" from seekers in the process.
• Validator: Validators approve the blocks after the block builders submit them (along with tips).

Workflow:

User submits transaction —> Ethereum mempool —> "Searcher" (bot) identifies value (arbitrage, sandwich trading, liquidation) —> Submit additional transaction to block builders (including tips) —> Block builders pack transactions —> Submit to validators (including tips) —> Validators approve transactions, keeping most of the tips (block builders and searchers keep a portion).

The biggest unknown of Ethereum: What will happen to MEV if most of the trading volume shifts to Layer-2 as expected?

We believe that MEV will shift towards Layer-2 through priority fees. The chart below shows that 85% of Base's fees come from priority fees.

Solana

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

Working Principle:

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

Searchers typically monitor on-chain states (e.g., order books, liquidity pools) directly by running their own full nodes or RPC endpoints. They detect arbitrage opportunities by observing state changes caused by confirmed transactions, rather than looking at pending transactions in the mempool.

When profit opportunities arise (for example, price imbalances between DEXs), the bot quickly constructs and submits its own trades or packages them for the next block leader (usually through Jito or similar relays), hoping to seize the opportunity before others.

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

If you are investing in these networks, you need to understand how MEV accumulates for you as a token holder through staking.

We believe that compared to ETH holders, SOL holders currently have a better opportunity to obtain MEV (as well as potential priority fees).

Summary

Should the trading price of SOL be discounted by 65% compared to ETH (63.5% when fully diluted)?

From a fundamental perspective, it absolutely should not. Even considering factors such as ETH's outstanding network effects, decentralization, the Lindy effect, and asset collateralization, this discount is just too high.

Our conclusion is that, based on the network effects of ETH and the total locked value (TVL), the market currently values ETH higher than SOL.

One of the highlights of ETH is that it will become the home for trillions of tokenized assets, covering stocks, bonds, currencies/stablecoins, private assets, and more.

The future may be like this.

But ultimately, investors need to pay attention to how ETH derives real value from these assets.

Why?

Because investors have choices. If another chain can continuously bring more value to token holders, we should expect that, in the long run, more capital will flow into that asset.

As Benjamin Graham once said:

"In the short term, the market is a voting machine. But in the long term, it is a weighing machine."

One way ETH might catch up is through restaking and blob fee adjustments. With the exciting launch of new types of L2 layers (such as MegaETH, which uses EigenLayer for data access), ETH holders can gain additional real value from these networks by restaking ETH.

We will conduct more analysis in these areas.

But we must be clear about one thing:

Nowadays, crypto assets are rarely traded based on fundamentals.

Although we believe this situation will occur, it is not the case at the moment.

Narrative, momentum, storytelling, social influence, and liquidity conditions remain factors driving market development.

Of course, over the past few years, ETH has been at a disadvantage in narrative games.

But it feels like the situation is improving.

For assets worth over 220 billion dollars, a 20% fluctuation in a single day is nothing.

Narrative

We are watching closely to see if the recent fluctuations are just the beginning of larger fluctuations.