The Ethereum blockchain was the first to support smart contracts, snippets of code that execute automatically when certain conditions are met. The implementation of smart contracts has allowed DeFi to bloom, leading Ethereum to a market capitalization second only to Bitcoin.
However, massive success often invites competition. Solana, Terra, and Avalanche are three blockchains that also implement smart contract functionality, and each aspires to be an Ethereum-killer with promises like lower transaction fees, the capacity to support more transactions per second, and more efficient energy use.
Each of the blockchains accomplishes these goals slightly differently, but all work on a modified version of a proof-of-stake system, while Ethereum still mostly utilizes proof-of-work. However, Ethereum plans to move to a proof-of-stake system later this year in an event called the “Merge” that’s already garnering huge interest in the crypto community.
While Solana, Terra, and Avalanche have their differences, the native coins of the blockchains — SOL, LUNA, and AVAX respectively — recently converged in price, showing investors may not find much value differentiating between the three would-be Ethereum-killers.
The three blockchains are also close competitors when it comes to market capitalization, especially Solana and Terra. While Solana held the lead at the start of the year, recent gains had Luna overtake it, though once again the competitors are close.
Terra is known for its coin LUNA but also for TerraUSD (UST), a stablecoin that’s meant to mimic the value of the U.S. dollar. The firm behind the Terra blockchain has bought almost $1 billion worth of Bitcoin since the start of the year to serve as reserve assets for UST. The UST coin works alongside LUNA to keep its value pegged to the dollar — every time a new UST token is created, $1 worth of LUNA must be burned.
Solana operates on a novel combination of proof-of-stake architecture and its signature “proof-of-history” mechanism which, in theory, can support hundreds of thousands of transactions per second. (Recall that Bitcoin can handle about three transactions per second, and Ethereum around thirteen.) Solana is also home to an ecosystem of NFTs that’s smaller than that of Ethereum, but may see a sharp rise soon given OpenSea’s planned adoption of the chain
Finally, Avalanche, which was started with funding from firms including Andreessen Horowitz, also runs on a novel consensus protocol with the potential for thousands of transactions per second. Avalanche has three main subnets: the Exchange Chain, used to exchange tokens, the Platform Chain, which tracks other subnets, and the Contract Chain, used to create and run smart contracts.
Will any of these coins break out and give Ethereum a run for its money? Alternative data metrics may provide some insight. On social media, Solana has the largest Twitter following by a significant margin.
However, Terra has shown a recent rise in week-over-week follower growth, in which Solana ranks third among the chains.
The three coins — sometimes called SoLunAvax — aren’t the only Ethereum competitors, of course. While all three currently rank in the top 10 cryptocurrencies by market capitalization, they fall behind Cardano and only narrowly rank ahead of Polkadot, two other proof-of-stake blockchains. As Ethereum’s long-delayed merge approaches, these altcoins may need to differentiate themselves more strongly in order to survive the coming market changes.