‘It’s So Early’: How Solana Is Competing With Ethereum for Institutional Interest

It
would
be
easy
for
a
casual
observer
to
think
that
the
Solana
network
is
for
memecoins
and
Ethereum
for
financial
institutions.

That,
however,
doesn’t
mean
Ethereum
has
a
monopoly
on
institutional
interest,
according
to
Hadley
Stern,
chief
commercial
officer
at
Marinade
Finance,
a
Solana-based
DeFi
protocol
that
provides
staking
services
for
that
blockchain’s

(SOL)
token.

“On
the
institutional
side,
it’s
so
early,”
Stern,
who
was
the
founding
president
of
Fidelity
Digital
Assets
and
global
head
of
digital
asset
custody
at
BNY
Mellon,
told
CoinDesk
in
an
interview.
“We
could
probably
count
on
one
hand
the
amount
of
TradFi
products
that
are
being
built
or
have
been
built
on
Ethereum
and
Solana.”

“I
was
brought
on
[Marinade]
because
there’s
a
lot
of
product
discovery
around
strong
interest
from
institutions,”
Stern
said.
“Asset
managers,
high
net
worth
holders,
individual
holders,
hedge
funds
…
are
interested
in
[staking
on
Solana].”

Launched
in
March
2020,
Solana
and
SOL
exploded
on
the
crypto
scene
during
the
2021
bull
market
partially
thanks
to
support
from
FTX
CEO
Sam
Bankman-Fried.
SOL
cratered
when
FTX
collapsed,
but
staged
a
comeback
in
2023
and,
at
$79
billion,
is
now
the
fifth
largest
cryptocurrency
by
market
capitalization.

Stern’s
assessment
comes
as
financial
giants
such
as

Franklin
Templeton,

Citibank
and

Société
Générale
all
announced
new
Solana-based
projects
last
September
during
Breakpoint,
the
network’s
biggest
yearly
conference.
And
he
wasn’t
the
only
one
electrified
by
such
institutional
enthusiasm.

“At
Breakpoint,
it
was
eye-opening
to
see
how
many
people
are
now
building
on
Solana,”
Tristan
Frizza,
founder
of
Solana-based
decentralized
derivatives
exchange
Zeta
Markets,
told
CoinDesk
in
an
interview.
“Institutions
are
doing
pretty
crazy
stuff.”

At
first
view,
building
on
Ethereum
can
seem
like
a
no-brainer
for
financial
institutions.
After
all,
it’s
the
oldest
and
largest
smart
contract
blockchain,
it
has
the
largest
number
of
developers
in
the
crypto
ecosystem,
it
settles
the
majority
of
stablecoin
transactions
and
it’s
the
birthplace
of
DeFi.
“If
you
work
at
a
large
bank
and
you’re
trying
to
tokenize
an
asset,
you’re
not
going
to
get
fired
for
putting
it
on
Ethereum,”
Bitwise
Chief
Investment
Officer
Matt
Hougan
recently

told
CoinDesk.

But
Ethereum
isn’t
risk-free,
according
to
Leah
Wald,
CEO
of
Sol
Strategies,
a
crypto
holding
company
that
also
runs
a
large
Solana
validator.

“The
uncertainty
that
continues
around
transaction
fees
certainly
doesn’t
make
anyone
comfortable,”
Wald
told
CoinDesk
in
an
interview.
“If
you’re
going
to
be
if
you’re
an
institution,
and
you’re
thinking
10
years
out,
you
can’t
be
building
on
a
blockchain
that
you’re
concerned
about.”

“BlackRock’s
BUIDL
is
based
on
Ethereum,
and
for
what
they’re
trying
to
build,
I
think
that’s
perfectly
fine,”
Wald
added,
but
any
kind
of
projects
with
high-volume
transactions,
like
real-time
payments
or
trading,
might
struggle.
“If
we’re
talking
about
a
more
sophisticated
on-chain
fund,
or
a
financial
platform,
then
there’s
a
real
opportunity
for
Solana.”

Solana’s
cheap
transactions
and
low
throughput,
by
contrast,
don’t
hinge
on
the
accomplishment
of
a
complex
and
technical
roadmap.
And
that
can
make
all
the
difference.

Wald
noted,
however,
that
in
the
U.S.,
Ethereum
benefits
from
more
regulatory
clarity
than
Solana.
The
fact
that
the
Securities
and
Exchange
Commission
approved
spot
ether
exchange-traded
funds
this
summer
is
likely
a
reassurance
for
institutions,
even
as
inflows
into
those
new
funds

have
been
disappointing.
A
spot
SOL
ETF
might
be
years
away,
depending
on
the
outcome
of
today’s
presidential
election.

Another
point
where
Solana
tends
to
be
underestimated,
Frizza
said,
is
in
terms
of
technical
innovations.
While
Ethereum
is
famous
for
its
army
of
developers,
builders
on
Solana
tend
to
fly
under
the
radar,
even
when
they
come
up
with
new
tools
and
products
that
can
have
an
impact
on
crypto
ecosystems
beyond
their
own.

“People
underrate
what
Solana
enables
from
a
structural
perspective
—
and
also
the
mindset
that
Solana
builders
have,”
Frizza
said.
“They
really
care
about
users,
the
product,
building
things
that
scale
and
that
address
user
needs.”

To
Frizza,
that
attitude
means
that,
if
another
crypto
mania
occurs
again,
fascinating
apps
will
come
to
light
on
Solana.
Speaking
of
Zeta
Markets,
he
said
one
priority
was
to
“bring
down
UX
barriers
and
make
it
feel
as
easy
as
trading
on
Robinhood.
That’s
when
you
can
really
start
opening
up
the
funnel
and
bringing
a
lot
of
people
in.”

Stern
concurred.
Memecoins
aren’t
an
innovation
in
themselves,
he
said,
but
the
fact
they
were
able
to
flourish
on
Solana
in
a
way
they
couldn’t
on
any
other
platform
is
a
symptom
of
developers
working
at
the
highest
level:
pump.fun
is
simply
taking
advantage
of
a
technical
breakthrough.
“Ethereum
has
a
very
hands-off
relationship
with
an
open
source
viewpoint,
whereas
I
think
the
Solana
Foundation
does
a
better
job
from
a
business
development
standpoint,”
Stern
said.
“Sort
of
guiding
the
ship,
but
not
in
a
completely
controlling
way,
and
letting
a
thousand
flowers
bloom.”