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As Ethereum gas fees have soared in the past year, many investors are looking for alternatives to the blockchain. In November 2021, Ethereum’s price fell, while several smaller smart contract blockchain platforms rose dramatically. Polkadot and Solana are both projects looking to improve upon current blockchain technology through implementing more scalable consensus mechanisms. Polkadot aims to connect blockchains to improve interoperability and scalability. Similarly, Solana is a blockchain focused on speed and low fees.
What Is Polkadot?
Polkadot is a multi-chain network that connects blockchains. Most blockchains operate completely independently. For example, you cannot send Bitcoin (BTC) to the Ethereum network because they operate independently. This limitation is often seen as an issue for crypto adoption, as the 2 seperate networks cannot interact directly.
Polkadot looks to solve this problem by connecting blockchains, or as they call them, “parachains.” These chains operate in parallel and communicate between each other, hence the name. Polkadot already has over 100 chains on the network and can process up to 1 million transactions per second. However, the project is still in development and in the “Prechain Rollout” phase.
While Polkadot’s governance and NPoS systems have not been officially released, Kusama is a project that is testing Polkadot’s software. Kusama allows users to create projects and test them out on multiple chains. Kusama is a crucial part of Polkadot’s release, as it gives the developers feedback on the platform. Once Polkadot is released, the 2 platforms will combine.
Moonriver is another important aspect of the Polkadot network. Moonriver allows users to test their projects and have them verified. It is also compatible with the Ethereum Virtual Machine (EVM), which allows the project to use the creative power of the Ethereum network. Moonriver will play a vital role in helping developers create useful and powerful projects on the Polkadot network.
What Is Solana?
Solana is a single blockchain that is mainly focused on speed and low costs. It allows almost anyone to create new projects on the chain through the use of smart contracts. Moreover, the chain supports a variety of functions, ranging from decentralized finance (DeFi) to NFTs.
Solana allows anyone to deploy smart contracts onto its blockchain. Smart contracts are programs that can automate tasks and save time. Smart contracts use conditionals to automatically execute tasks. For example, a smart contract might say if someone sends me ETH, send them back a note that says “Thank you.” In this situation, a smart contract would save the user time by automatically replying to each person that sent them ETH. Obviously, this is a simple example, and smart contracts can be used in many other situations.
Solana is also known for its speed and low costs. Payments sent on the Solana chain are verified within seconds and cost an average of $0.00025, functioning as a key aspect of the Solana chain, as many issues surrounding crypto involve transaction fees and speed. Solana is able to solve the issue of high transaction fees and slow speeds through a proof-of-history (PoH) consensus model.
Proof of Stake vs. Proof of History
Solana uses a PoH consensus model to accurately and efficiently verify all transactions on the chain. The PoH model is different from traditional consensus models.
The PoH model works by organizing all the transactions into chronological order using a verifiable delay function (VDF). Once the transactions are sorted, they are given out to validators for verification. Solana has strict requirements on who can become a validator as not as many are needed in comparison to other methods of verification.
A good analogy for PoH is that of a jigsaw puzzle. In traditional consensus models, validators are given all the pieces of a puzzle and are tasked with putting them together correctly. Solana’s PoH gives validators puzzle pieces with numbers on the back. This process allows fewer people to complete the puzzle in a shorter amount of time, as the pieces are already in order. The validators have to figure out if any pieces are missing or do not belong. A PoH model makes the process of solving a puzzle, or verifying transactions, much faster and more efficient.
When Polkadot is fully functional, it will use a Nominated proof-of-stake (NPoS) consensus model to verify transactions. A NPoS model allows holders of a token to lock their position onto the chain in order to receive the chance to validate transactions and earn rewards.
When users stake their tokens on traditional PoS blockchains, they will be given the chance to earn a block reward. However, usually only 1 person can earn this block reward. To combat this, users will place their funds into pools separate from the chain. This pooled money will be staked and increase the chance of winning a block reward. When a block reward is won, the pool will distribute it among the members of the pool.
This system presents an issue, as the funds are stored off-chain and the pool can have lots of power. Polkadot’s NPoS allows for these pools to be on the chain. Stakers can pool their funds into a validator and earn block rewards that way. Stakers nominate validators to represent them, which allows the average staker to earn block rewards while keeping the staked funds on the chain.
What Has More Room To Grow: SOL or DOT?
In terms of market cap, DOT has more room to grow. DOT’s market cap is currently just above $36 billion, while SOL’s is above $60 billion. It would be easier for DOT to increase its market cap in percentage gains, as it is smaller.
However, utility will most likely play a larger role in overall growth. For both tokens, future utility may cause price increases. For SOL, its focus on speed and low costs may attract Ethereum users that are fed up with high fees. If this were to happen, the price of SOL would almost certainly increase. However, ETH2.0 is hoping to tackle the issue of high fees. If Ethereum can lower its fees, then SOL may not be as useful.
Polkadot has not yet been fully released, and the developers have not given out a set release date. If the project is successfully released and can help with issues of scalability and interoperability, there is definitely room for DOT to appreciate. However, if the release takes much longer than expected or another project solves the problem of interoperability, then DOT may not be needed as much.
The future prices of both tokens will largely be driven by future utility. If the projects become extremely useful, then the price will most likely appreciate. Conversely, if the projects provide minimal utility or another project provides a better solution, then the price may depreciate.
So, What’s Better: Solana or Polkadot?
Because the 2 projects are so different, it is impossible to say which is better. Polkadot hopes to tackle problems of scalability and interoperability in blockchain technology, while Solana is a blockchain that hopes to provide speed and low fees. While the 2 projects are different, they are both looking to improve the way crypto is used. If they can accomplish these goals and provide unique usability, then the projects may become backbones of the blockchain ecosystem.
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About Caden Pok
Caden has been involved with crypto since 2018, when he began investing, trading, and mining tokens. He took part in undergraduate research studying cryptoeconomics at the University of Michigan, where he will graduate Phi Beta Kappa with a bachelor’s in economics in 2025. He is experienced with DeFi technology and multiple blockchains, currently investing in Ethereum and Bitcoin.