Solana's DeFi Growth is Set to Challenge Ethereum's Market Value, According to Franklin Templeton

Recently, Solana has shown impressive developments in the decentralized finance (DeFi) sector, leading to conversations about its potential to rival Ethereum's market value.

A report from Franklin Templeton has shed light on the rapid growth of Solana's DeFi protocols, highlighting their status as some of the most utilized and profitable across all blockchain networks. In the analysis, they noted that several Solana-based protocols have exceeded $1 billion in Total Value Locked (TVL), marking a significant milestone.

Franklin Templeton Points to Solana as a Serious Contender

According to the analysis, which comes from a firm managing assets totaling $1.68 trillion, the third and fourth quarters of 2024 saw Solana outperform Ethereum across multiple key metrics. Notably, the trading volume on Solana’s decentralized exchange (DEX) not only outpaced Ethereum’s but also surpassed all Ethereum Virtual Machine (EVM)-based DEXs combined.

This upward trend signifies a notable shift in DeFi activity towards Solana, challenging Ethereum's long-held market supremacy. Jito (JTO), a liquid staking protocol, recently achieved an all-time high of $3 billion in TVL, the first for a Solana-based protocol.

Other important protocols contributing to this momentum include Jupiter (JUP), Raydium (RAY), Kamino (KMNO), Marinade (MNDE), and Sanctum Coin (SANCTA), showcasing the vibrant growth of Solana's DeFi ecosystem.

Furthermore, as of January 2025, Solana reported active addresses per hour at 26 times the volume of Ethereum, illustrating its network's scalability and efficiency, which are appealing traits for developers and investors seeking cost-effective solutions.

Despite this remarkable growth, the Franklin Templeton report also pointed out that Solana's DeFi protocols might still be undervalued when compared to Ethereum’s, with their associated tokens trading at lower valuation multiples despite exhibiting superior growth potential and strong fundamentals.

“Solana’s DeFi valuation multiples trade lower on average than Ethereum's, despite showcasing significantly higher growth profiles. This indicates a valuation asymmetry between the two ecosystems.”

Nevertheless, Franklin Templeton believes that the increased activity is contributing to Solana's escalating market capitalization and overall ecosystem expansion. The differences in valuation present a possible investment opportunity as the market begins to recognize Solana's growing influence in DeFi.

In a demonstration of confidence in Solana's trajectory, Franklin Templeton has filed for a spot Solana Exchange-Traded Fund (ETF) with the US Securities and Exchange Commission (SEC). This proposed ETF would incorporate staking capabilities, allowing investors the chance to earn rewards from participation in network validation—a first for a Solana ETF.

Is Solana Positioned to Overtake Ethereum?

While some investors remain optimistic about Solana's potential to rival Ethereum, others express skepticism. One user on X (Twitter) humorously critiqued the comparison, suggesting that the foundational robustness of the two platforms is vastly different.

“It’s like comparing Ethereum to Las Vegas casino. Sure, Vegas has more chips,” the user remarked.

Similarly, industry analysts caution against making hasty assumptions about Solana's capability to outpace Ethereum in the near term. Juan Pellicer, Senior Research Analyst at IntoTheBlock, acknowledges Solana's recent narrowing of the market cap gap, yet emphasizes the many hurdles it still faces.

“While Solana may continue to grow and potentially challenge Ethereum in specific niches, it's unlikely to completely overcome Ethereum’s established dominance in the immediate future, although the competitive landscape remains dynamic.”

Pellicer also highlights the importance of Ethereum's established trust and its vast developer community, which are vital in maintaining its leadership in the DeFi realm. Addressing concerns around centralization and achieving broader developer engagement are crucial steps for Solana if it aims to seriously challenge Ethereum's preeminence.

As Solana continues to innovate and expand its DeFi landscape, the prospect of reaching valuations that are on par with Ethereum seems increasingly feasible.

Data indicates that as of this moment, Solana (SOL) is trading at $149.77, reflecting a growth of over 5% in the last 24 hours.