Original Title: Should SOL be trading at a 68% discount to ETH?

Original Source: The Defi Report

Original Translation: Golem, Odaily Planet Daily Golem

Editor's Note: "That what season seems to be coming" - previously, people dared not speak directly of the season of altcoins on social media, as they had experienced too many disappointments. However, on May 8, after 3 months, when BTC once again reached $100,000, mainstream altcoins collectively rose, with ETH's performance being the most remarkable. The topic of "What happened with Ethereum's 40% surge in 3 days" even made it to the top of TikTok's trending list. 1confirmation's founder Nick Tomaino even made bold statements that ETH will ultimately surpass BTC.

However, price surges do not necessarily mean a significant change in ETH's fundamentals. There are still doubts in the market about Ethereum and discussions on whether its main competitor Solana will surpass it. In January 2023, SOL's trading price was 97% lower than ETH, and today SOL's price is still over 90% lower than ETH, with ETH's market cap being over three times that of SOL. Does SOL really have the potential to surpass ETH?

The DeFi Report's researchers believe that fundamentally, even if it cannot surpass ETH, SOL's price should absolutely not be more than 90% lower than ETH. Previous analyses mainly compare these two networks based on metrics such as fees, DEX trading volume, stablecoin supply and trading volume, total TVL, etc. This edition of The DeFi Report focuses on comparing the actual value that ETH and SOL token holders can obtain. The study found that SOL token holders receive 3.6 times the actual value that ETH holders do, thus suggesting that the current market valuation of ETH is higher than that of SOL. Odaily Planet Daily has translated the full article as follows.

Actual Value for Token Holders

Solana

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

In the graph above, Solana's $4.75 billion represents the net value after Jito charges a 6% fee to all running Jito Tips routers and block engines validators. If you hold SOL, you can stake with a trusted validator/LST, such as Helius (hSOL), which charges stakers a $0 commission fee. In this case, SOL stakers can receive 94% of the MEV run through Jito (Solana's 95% staked on Jito).

Ethereum

The actual value that Ethereum token holders/stakers can receive = MEV + Priority fees earned by validators and shared with stakers. It does not include new ETH issuance, base fees, block fees, or the MEV share retained by MEV hunters and block producers.

The estimated $1.34 billion for Ethereum in the graph above has been adjusted for the 10% fee charged by Lido (the most trusted Ethereum liquidity staking provider).

Solana is the Nasdaq and DTCC Hybrid

Ethereum's TVL is 6.6 times that of Solana, and stablecoin supply is 10 times that of Solana. However, in terms of actual value received by token holders since the beginning of the year, Solana token holders have received 3.6 times the value of Ethereum holders. As network execution and transaction speed determine actual value, validators and token holders are able to monetize TVL.

In traditional finance (TradFi), Nasdaq is responsible for execution and transaction speed, while DTCC (Depository Trust & Clearing Corporation) is responsible for custody/settlement. Ethereum is increasingly resembling DTCC (custody + settlement/accounting of L2 transactions), while Base and other L2 platforms are becoming more like Nasdaq (handling execution/speed). Solana, on the other hand, is increasingly a hybrid of the two.

Integrating Nasdaq + DTCC into one solution means SOL holders can capture 100% of the value generated by execution/speed services, while ETH holders can only capture about 10% of the value (by burning ETH to access L2 platforms). Although Ethereum holds these assets, they circulate on L2, and the current challenge is whether ETH token holders will ultimately realize this value — a problem Solana does not currently face.

In addition to some innovative LST on the Sanctum platform, Solana validators can receive 100% of the user transaction's priority fee (not shared with stakers). Jito aims to change this situation, and the DAO currently has a governance proposal to update the fee router to include the priority fee in addition to the MEV that is currently routed and paid to stakers. According to Jito, the proposal is expected to be implemented in the coming months.

If the priority fee is added (resulting in $3.72 billion after deducting the fee router fee), the data for the year to date is as follows:

It is currently unclear how strong validators' willingness is to share the priority fee, but we wanted to include this content here for you to understand how future data may change.

Actual Yield Rate

The following chart converts the above data into annualized actual yield rates (in SOL and ETH):

If Solana's priority fee is included, Solana token holders would receive an actual annualized yield of 3.31%:

Total Yield Rate (Including Issuance/Network Inflation)

Through asset staking, token holders receive newly issued supply/issuance (used to incentivize validators/stakers to provide services). This is a key difference between crypto networks and traditional companies, as company shareholders cannot avoid stock dilution.

Solana's "issuance yield" is 7.3%, based on the actual network issuance as of May 6, 2025, Ethereum's "issuance yield" is 2.78%. As of now, Solana has issued 9.4 million tokens that will be paid to SOL staked in validator nodes on the network (as of May 6, 2025, the average staked amount is 385 million). Ethereum has paid out 32,938 ETH to tokens staked in validator nodes on the network.

Due to Ethereum's very low inflation rate (based on actual year-to-date data, the annualized inflation rate is 0.64%), its "issuance yield" has normalized. Solana's "issuance yield" may continue to decrease as the network's inflation rate is currently 4.5% and decreases by 15% annually until it reaches a final level of 1.5%.

Actual Value Source

The Meme coin has contributed over half of the Solana DEX's trading volume (growing 51% in the past few months), with SOL/USD accounting for about 35% of the Solana DEX volume, while the remaining 14% is in stablecoins, LST, and other assets.

Is this an issue for Solana? Yes and no. Clearly, speculation is one of the strongest demands in cryptocurrency, and Solana has found a product-market fit by providing a better user experience, which is unlikely to disappear in the short term. In addition, Meme coin trading is stress-testing the system and providing valuable feedback to infrastructure providers.

Today it's Meme, but perhaps tomorrow it will be equities, bonds, fiat currencies, and private assets, which may be Solana's ultimate goal. Currently, on the Ethereum mainnet, only 1-2% of DEX trading volume is in Meme coins, stablecoin volume accounting for about half, ETH/stablecoin trading volume and other project tokens each representing around 20% of the volume. However, approximately 50% of the DEX trading volume on Base comes from Meme coins, the vast majority of which are newly trending Memes.

MEV

Some cryptocurrency analysts believe that, with the compression/commoditization of base fees, MEV (the value users pay for time-sensitive transactions) is the only sustainable long-term value in L1. We do not agree with this view, but we do believe that MEV will drive most of the economic benefit. Therefore, it is necessary to elucidate the differences in how MEV operates on Solana and Ethereum, as well as the implications for L2.

Ethereum

Ethereum has a mempool where all transactions are sorted before being submitted to validators. This is where MEV is captured, with the main actors being:

· Searchers (bots): These bots use machine learning algorithms to identify profitable opportunities in the mempool.

· Block producers: Block producers are responsible for building blocks. In other words, they order transactions into blocks and accept bribes from searchers in the process.

· Validators: After block producers (with fees) submit blocks, validators will approve these blocks.

Workflow: User submits transaction -> Ethereum mempool -> "Bot" (Searcher) identifies value (arbitrage, sandwich attack, liquidation) -> Submits a replace-by-fee transaction to a block builder (with a tip) -> Block builder includes the transaction in a block -> Submits to validators (with a tip) -> Validators approve the transaction and keep most of the tip (block builder and searcher keep a portion).

The biggest unknown facing Ethereum is what happens to MEV if the majority of transactions move to L2 as expected? We believe MEV will shift to L2 as a form of tip first. The graph below shows that 85% of the Base fee comes from tips.

Solana

Solana does not have a mempool, but it has dedicated validator clients like Jito, which implement some form of a rolling, private mempool.

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

Searchers typically monitor on-chain state directly by running their full nodes or RPC endpoints (e.g., order books, liquidity pools). They detect arbitrage opportunities by observing state changes caused by confirmed transactions rather than by viewing pending transactions in the mempool. When a profitable opportunity arises (e.g., price imbalances between DEXs), bots swiftly construct and submit their transactions (usually through Jito or similar relays), hoping to front-run others.

Currently, approximately 50% of arbitrage MEV on Solana is done through Jito (this value is shared with stakers through a tip router):

Data: sandwiched.me

If you invest in these networks, you need to understand how as a token holder, you can accrue MEV through staking. At the same time, SOL holders currently have a higher chance of earning MEV (and potential tip) compared to ETH holders.

Summary

Should SOL's transaction price be 93% lower than ETH's? Fundamentally speaking, absolutely not. Even considering ETH's outstanding network effects, decentralization, asset collateralization, and other factors, the price differential is still too large. Our conclusion is that based on ETH's network effects and TVL, the market currently values ETH higher than SOL.

The macro background of ETH is that it will become the home of tens of trillions of tokenized assets such as stocks, bonds, currencies/stablecoins, and private assets, which may happen in the future. However, ultimately, investors should focus on how ETH can extract real value from these assets. As investors have a choice, if another chain can continue to bring more value to token holders, more capital will flow to that asset in the long run. As Benjamin Graham once said: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

ETH can attempt to change this situation through re-staking and blob fee adjustments. For example, by using EigenLayer for Data Availability (DA) on MegaETH, ETH holders can capture additional real value from these networks through re-staking their ETH. However, it must be clear that nowadays, very few crypto assets are traded based on fundamentals. Although we believe that prices will always revert to value, the current situation is not the case. Market narratives, trends, influence, and liquidity conditions are still the driving factors of the market.

Of course, in recent years, ETH has always been at a disadvantage in the narrative, but this situation has improved after the recent price surge. For an asset worth over $2.2 trillion, a 20% increase in a single day is no small feat. Remember: the crypto market has a strong reflexivity, price -> narrative -> fundamentals. Whether ETH's recent volatility marks the beginning of a larger uptrend, we will have to wait and see.

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