Why Ethereum Remains the Backbone of Decentralized Finance

• Ethereum is positioned as the backbone of the decentralized financial system through Layer-2 and Layer-1 solutions.
• Solana’s limitations in client diversity and decentralization prevent it from rivaling Ethereum as a global backbone.

Ethereum has long positioned itself as the backbone of the growing global financial system, particularly through Layer-2 (L2) scaling solutions and Layer-1 (L1) applications.

Ryan Berckmans, a member of the Ethereum Community, claims that Ethereum is not just well-established but also unmatched among other blockchain networks in its central infrastructure function in this new digital economy.

While other chains, like Solana, have shown notable expansion, especially in decentralized apps and meme coins, none are able to replicate Ethereum’s role as the backbone for the decentralized web, Berckmans underlines.

There'll be one global backbone – Ethereum

Ethereum is the backbone of the new global financial system of L2s and L1 apps. No other chain will come close.

Mert suggested that Sol can pivot to being the backbone. But Solana will never be the backbone. Here's 5 reasons why.

Four… pic.twitter.com/RoyEkASRP5

— Ryan Berckmans ryanb.eth (@ryanberckmans) October 26, 2024

Ethereum’s Long-Term Strategy Secures Its Role as Blockchain Backbone 

According to Berckmans, “Ethereum is the pillar of the emerging global financial system of L2s and L1 apps. None else will come close.”

Based on Ethereum’s long-term strategy, which changed four years ago to concentrate on becoming a basic layer for the expanding ecosystem of decentralized finance (DeFi), NFTs, and blockchain applications, this claim is supported.

Ethereum has become the preferred tool for developers creating L2 solutions—which are meant to offer scalability and customization on top of the Ethereum main chain—in recent years. These L2 networks let Ethereum handle more transactions effectively while still preserving the security and decentralization its users need.

Although another well-known blockchain, Solana, has seen a spike in activity, especially in relation to speculative assets like meme coins, Berckmans thinks Solana will not be able to pivot to a like-minded function.

Though Solana leadership has indicated such a change, he notes five main reasons Solana is not prepared to become the backbone for the decentralized web.

Solana’s Lack of Client Diversity and Bandwidth Issues Limit Its Potential 

Berckmans claims that Solana cannot compete with Ethereum as a backbone, mostly because of its lack of client diversity. Ethereum adds security and decentralization to the network by running several independent clients in parallel right now.

Solana, on the other hand, depends on a single production client, “agave rust,” and is still under construction on a second client, “Firedancer.” Solana remains susceptible to mistakes or assaults affecting the whole network without several independent clients. This lack of variation compromises Solana’s capacity to be a consistent backbone for L2 networks and is decentralized apps.

Solana’s great bandwidth needs are another important consideration. Solana’s architecture requires at least 10Gbps upload bandwidth, which limits its decentralization, according to Berckmans.

High bandwidth needs make it challenging for the network to perform effectively outside of corporate data centers, so centralizing risks are increased. Conversely, Ethereum is more suited for a worldwide backbone since it has considerably less bandwidth needs and can run across a greater spectrum of conditions.

Solana’s Network Reliability and Centralization Issues Undermine Its Backbone Potential

Berckmans further contends that Solana’s prior network pauses and great danger of future outages prevent it from being a good backbone. A worldwide financial backbone must be constantly uptime, something Ethereum has regularly shown even with sporadic congestion.

Solana’s regular failures and inability to generate blocks during network problems raise questions about dependability that would discourage big businesses from using it as a long-term fix.

Economically, Solana also has problems. Solana’s degree of decentralization is far less than Ethereum’s more fair distribution; roughly 98% of its initial coin offering (ICO) goes to insiders. Extended proof-of-work (PoW) duration of Ethereum helped distribute ETH tokens generally, therefore encouraging a more decentralized network.

Solana’s centralized token distribution would appeal less to big institutional investors looking for decentralized networks with fewer single points of failure.

The fifth and maybe most important reason Berckmans provides for why Solana cannot mimic Ethereum’s backbone method is the developing importance of zero-knowledge (zk) proof aggregation for L2 settlement.

zk-Proof Technology Secures Ethereum Scalable and Decentralized Future 

Expected to rule L2 solutions in the next few years, this technology lets several transactions be aggregated into a single proof that can subsequently be settled on the Ethereum main chain. Ethereum will be able to manage the mounting L2s and L3s without compromising decentralization or scalability by using zk-proof technology.

Berckmans claims that Ethereum’s approach is not only sustainable but also scalable in a manner unlike Solana’s. Solana is becoming less and less fit for the future demand for decentralized, scalable blockchain solutions, even if it emphasizes L1 execution scalability.

“Not only will Solana not be the backbone,” Berckmans says, “but soon, it won’t be the fastest or cheapest chain.” Together with continuous improvements like Ethereum 2.0, Ethereum’s L2-centric architecture guarantees that it stays the most reliable and scalable solution for decentralized banking, decentralized apps (dApps), and institutional adoption.

Nevertheless, Solana has reached noteworthy achievements in spite of Berckmans’ claim. According to a prior CNF report, Solana outperformed Ethereum in terms of economic value on-chain, reaching a record value of $11.09 million, due to rising activity in meme coins and technological advancements.

Though exciting for Solana, these advances still fall short of Ethereum’s larger aim of building an interoperable, scalable ecosystem with decentralized L2 solutions at its core.

Ethereum’s value is still robust at the time of writing; ETH is trading at about $2,509.43, a 1.70% rise over the last 24 hours.