Institutions could be Solana’s edge against Ethereum

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With spot bitcoin ETFs seeing successful launches and MicroStrategy buying with reckless abandon, the oldest cryptocurrency has proven its value — at least to some institutions. 

Institutions are to blockchains what whale traders are to casinos; having just a couple can really drive up revenue. But for non-Bitcoin blockchains, the path to institutional adoption is a little less clear.

Ether spot ETFs have so far been uninspiring, and large companies don’t seem to be putting non-bitcoin assets on their balance sheets with nearly as much gusto. Solana is likely far from seeing a spot ETF of its own, but it’s making a run for institutions, and some see it as having more institutional potential than Ethereum.

I got thinking about this after receiving a note from Katalin Tischhauser, Sygnum’s head of investment research.

Tischhauser said Solana has made “real progress” as a layer-1 in the past year and a half, but expectations that it would make a serious run for Ethereum’s “leading position” among smart contract blockchains were misplaced. Ethereum still wins in market share, plus Solana’s volume metrics are “overstated” and based on memecoins, which is a fragile place to make hay, Tischhauser said.

But Tischhauser said the way she thinks Solana can pass Ethereum is by drawing institutions for tokenization platforms and stablecoins.

“[T]here have been indications recently that even conservative institutions may place greater emphasis on Solana’s scalability over Ethereum’s greater stability and security,” Tischhauser wrote. She added that PayPal and Visa both praised Solana’s fast and cheap architecture when rolling out initiatives using the blockchain.

In a separate note, B2BINPAY chief marketing officer Georgy Slavin-Rudakov said Solana’s “efficiency and institutional adoption” could help it challenge Ethereum, citing tokenization and stablecoins as sectors where Solana could see growth.

In a text, Solana Foundation head of institutional growth Nick Ducoff cast stablecoins as a near-term means to gin up demand for real-world assets. In the long run, tokenization could make the pie bigger by bringing more diverse users and assets to Solana, Ducoff added.

Or perhaps institutional adoption could come from the Solana SVM being used by permissioned blockchains. 

Earlier this week, I spoke with Arnold Lee from Sphere about the payments infrastructure startup’s plans to launch SphereNet, which will be a private shared ledger running on Solana’s software — the type of thing that helps institutions and fintechs stay compliant. The project has a co-sign from Anza, which is the engineering firm spun out of Solana Labs.

“Permissioned blockchains in some sense are still successful; we just don’t think of them as blockchains,” Lee said.

He added that the closest example would be Ripple, which acts as a permissioned counterparty on the financial network RippleNet, and has shown surprising resilience as a layer-1 (it’s still the seventh-largest crypto) despite being out of the spotlight and in regulators’ crosshairs in recent years.

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