Forward the Original Title‘The Secret Battle of Solana vs Ethereum that Ethereum Doesn’t Know They are Fighting’

TL;DR

Another day another rallying-cry for revenue and fundamental driven valuation as pick-your-number-in-the-chart low float high FDVs start to trickle downwards with relentless unlocks.

https://x.com/TheiaResearch/status/1894530608740605973

In equilibria, and logically (?) the value of a crypto-token has to be anchored to something. As more institutional capital allocators enter the space, we will likely see more inflows into fundamentals (revenue) driven investments that they can underwrite for their LPs that are fundamentals (revenue) driven (though I am unsure that suddenly MKR will trade at 20x fees).

Therefore, to maximize token price as a dapp, you will in the future have only one choice—MRMC—maximize revenue minimize costs. This fundamental fact of business will trickle into every decision you make, including (and of particular interest to us) the infrastructure on which you decide to deploy your application.

Today, the decision is as follows:

To maximize revenue -> Move to the chain with the largest NUMBER of users (games on Ronin, speculative vehicles on Solana), or liquidity (core-defi on Ethereum) depending on your revenue model. Consider an appchain if fee internalization is worth the additional costs.

To minimize costs -> Be on a general purpose chain with users and liquidity to lower CAC and liq incentive spend. Reconsider appchains if infrastructure and bootstrap costs are not worth it.

From the perspective of an application deciding on whether to deploy on Solana or Ethereum we have this matrix:

From the perspective of the Solana Foundation, you already have a CLEAR cheaper tx advantage and you’ve managed to push your memecoin mania advantage to bootstrap a core foundation of users, volume and liquidity. You are beating Ethereum on DAU and Volume. The next MRMC matrix item to compete on is RWAs, stablecoins, core-defi usage and liquidity.

This is why - https://x.com/y2kappa/status/1825979796930834635 + https://x.com/solana/status/1837147973438030261 + https://x.com/solana/status/1800546646218158303 + https://x.com/solana/status/1851589665851380028 …etc Breakpoint 2024 had an entire section dedicated to RWA issuance on Solana.

This is also why it’s important that memecoin mania lasts as long as possible as it brings in users and liquidity into the ecosystem which marginally trickle into Solana’s core defi primitives.

Regardless, the issue is that competing against Ethereum here is HARD - ETH has a multi-year head start and is seen as the most secure, decentralized, safe, immutable, credibly neutral base layer. L2-centric also means that businesses have deployed L2s (therefore creating a safe precedent a corporate can point to) and L2s allow corporations to control their blockspace.

The question is then whether there exists an axis on which Solana can compete with Ethereum on that Solana can dictate the terms on.

Onto the main point of the article.

Today, 100% of the user-defined priority fee goes to validators, searchers, and coordinating infrastructure between these entities. Apps charge only on tx volume/frontend fees, some of which are bypassable. As a result, each successive app accrues massive value to its base layer, resulting in fat protocol theses and continued investments in execution layers.

If Solana, prior to Ethereum can figure out a way to divert this revenue back to dapps while preserving node count and geographical decentralization (and we’ve seen that they do not care about total economic value staked), they have a chance at completely subverting the matrix.

Choosing Solana vs ETH would be a no-brainer as not only would you incur lower costs, higher user count, equal (in the future?) liquidity and legitimacy, but you’d immediately ceterus paribus have significantly higher revenue from a cut of the base layer’s share!

Solana has always planned to move to multiple leaders per slot to minimize geographical inclusion latency. Little did they know (afaiu) that Ethereans themselves would give them the solution to the above problem.

https://www.paradigm.xyz/2024/06/priority-is-all-you-need June 4th - Dan publishes MEV taxes where assuming strict priority ordering - hence an honest block proposer - apps can define as a multiple of the priority fee some fee they get to internalize.

https://x.com/danrobinson/status/1820506643739615624 @MaxResnick1 MCP allows priority ordering in a permissionless validator set.

Max joins Anza https://x.com/MaxResnick1/status/1866168109289160842.

Though today it is no longer a secret, SF’s plan is to compete with Ethereum head-on using app revenue as a key competitive metric - from currently laying the competitive groundwork with chain GDP, app revenue, to technically implementing a mechanism that allows apps to accrue MEV. They are weaponizing the fact that Ethereum engineering timelines are slower and the fact that their community recognized the value of Ethereum research before Ethereum did to open up a new competitive field whose axis they can dictate and drive narrative around.

I believe this battle to increase app revenue is the secret battle of Solana vs Ethereum that Ethereum doesn’t know they are fighting.

Consensys let Max leave and he wasn’t immediately absorbed into the EF (given that at the time he had the most mature implementation thinking around MCP on Ethereum).

Solana is slowly gearing up for an all-out competition highlighting app revenue, app economics, apps as businesses, and how, as a logical MRMC CHOICE—given that there’s institutional adoption, low-cost TXs, and stablecoin LIQ on Solana as well—it is a no-brainer to deploy to Solana over deploying to Ethereum. They plan to use their fast mover, research value recognition advantage to push hard on fundamentally changing dapp economics disrupting the balance of the current dapp deployment choice matrix.

I have opinions about this game as a player whose benefiting from ETH liquidity and legitimacy and and the SVM. But I don’t yet see ETH’s response to this move.

@Etherealize_io is an effort to press an already existing advantage. But this doesn’t change the MRMC equation for deployment as the battle for liquidity and institutions remains in relative stalemate (with a slight favor to ETH in my perception). As Solana embraces dapp revenue maximization philosophies that are fundamental to the tech layer, what move will the EF respond with?

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