Solana Dominating Blockchain Payments Battle: Bernstein

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An analytical report from research and brokerage firm Bernstein, says Solana (SOL) is leading the dominance battle in market share for blockchain payments in terms of stablecoin transactions based on liquidity and investor sentiment.

According to The Block, several push factors propel Solana up the metrics. These include a single design layer with higher throughput and lower transaction costs than other platforms like Ethereum.

In February, Bernstein’s interest and the increasing interest in spot ETH exchange-traded funds (ETFs) helped propel Ethereum toward the $3 thousand mark.

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Solana’s Rise to Dominance

Gautam Chhugani and Mahika Sapra, analysts at Bernstein, say Solana’s market share in the value of stablecoins transferred has reached as high as 43%, compared to Ethereum’s previous lead in this metric. The Bernstein analysts attribute Solana’s success in this cycle to its single-layer design. This they note eliminates the complexities associated with bridging to Ethereum Layer 2 solutions.

However, comparing the number of stablecoin issued on the blockchain, Ethereum takes the lead despite Solana’s achievements in stablecoin settlement. Regardless of the indices, USDC remains the most popular stablecoin on both networks. It has been noted that Solana is gradually gaining market share in this aspect.

According to The Block’s data dashboard, USDC -0.36% — the most popular stablecoin on the network — has a supply of $2.2 billion on Solana, compared to $26.4 billion on Ethereum.

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Solana Encounters Scalability Challenges

Analysts observe that although Solana has positioned itself as a global settlement network for cross-border payments and has engaged in pilots with Visa and Shopify, it has yet to make significant inroads into mainstream consumer or business-to-business (B2B) payments.

The challenges identified include scalability requirements for Solana which has necessitated a substantial increase in transactions per second to meet demand. Meanwhile, the congestion issues that users experienced on the Solana network have led to transaction delays and dropped transactions.

These were primarily caused by spam transactions from bots prioritizing their activities over regular users. Despite the challenges with the transaction failures on the Solana network, Fantom creator Andre Cronje maintains the performance issues were technical challenges rather than flaws in the network’s consensus mechanism.

Resilience of the Stablecoin Market

Despite the different challenges, the stablecoin market has shown resilience, with stablecoin supply rebounding from a low point during the crypto bear market. “With improved crypto market sentiment late 2023 onwards, stablecoins in circulation are back on the growth path and circulating supply currently stands at $150 billion,” the analysts said.

According to Chhugani and Sapra, “Stablecoin value settled on the blockchain indicates a strong adoption trend of digital dollar within the crypto trading ecosystem as well as a cross-border payments currency.” 

Their analysis aligns with the overall growth trajectory of the stablecoin market as a cross-border payment currency and digital dollar alternative.

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