Sygnum, a cryptocurrency bank, forecasts that Solana may find it challenging to surpass Ethereum because its income is largely linked to memecoins.

The report expresses worries regarding Solana’s tokenomics, highlighting that a significant portion of its fees is allocated to validators instead of enhancing the value of the SOL token. Sygnum recognizes Solana’s growing popularity in DeFi and proposes that establishing stable revenue streams through tokenization and stablecoins could be beneficial. In a recent report, the crypto banking group Sygnum stated that Solana has not yet shown strong potential to outpace Ethereum as the preferred blockchain for institutional purposes and pointed out its heavy dependency on revenue from memecoins. Additionally, in a blog post published on Thursday, May 8, Sygnum acknowledged the negative sentiment surrounding Ethereum. Additionally, it mentioned that the market is still attentive to Solana’s “transaction volumes and its recent prominence in generating fees.” Sygnum observed that rather than concentrating on short-term market sentiments, the medium-term perspective will largely be influenced by the decisions made by traditional financial institutions regarding the platforms they use to deliver their products. Additionally, it mentioned: Currently, there are no strong indicators suggesting that Solana will become the favored option, especially considering Ethereum’s valued security, reliability, and long-term sustainability. – Sygnum – Reasons Institutions Might Favor Ethereum Over Solana. Sygnum noted that institutions might prefer Ethereum instead of Solana because Solana’s revenue is seen as “less stable” due to its significant dependence on the memecoin market. “This may restrict outperformance, as one could argue that the valuation difference is reflected by the variance in revenue sources,” stated the company. Sygnum raised concerns about Solana’s tokenomics, drawing parallels to criticisms of Ethereum’s mainnet, which has experienced minimal transaction volumes because of lower costs associated with its layer-2 solutions. Although Solana outpaces Ethereum in terms of market share for layer-1 fee generation, the company observed that “a majority of the fees go to validators, resulting in limited value appreciation for the Solana token.” “According to Sygnum, Ethereum generates revenues that are approximately 2 to 2.5 times greater than those of Solana. They also noted that the tokenomics of Solana are simpler to adjust than Ethereum’s scaling strategy.”