Solana’s increasing adoption by major institutions like Visa and PayPal highlights the blockchain’s scalability and low costs, positioning it as a contender to challenge Ethereum’s dominance in real-world asset tokenization. At the same time, the ”finternet,” an ambitious project backed by key figures behind India’s UPI system, seeks to unify financial systems globally through blockchain integration.
Can Solana Challenge Ethereum for Real-World Asset Tokenization?
A recent report by Swiss-based crypto bank, Sygnum, suggests that financial institutions adopting real-world asset tokenization platforms and stablecoins on the Solana blockchain may push the network into direct competition with Ethereum. Over time, Solana’s scalability, along with its integration into high-profile financial products, could position the blockchain to “seriously challenge” Ethereum’s dominance.
This observation comes amid mounting interest from several major financial entities that have begun experimenting with Solana’s blockchain technology. Sygnum notes that even traditionally conservative institutions are starting to consider Solana as a viable alternative, valuing its scalability over Ethereum’s widely recognized stability and security features.
At a Solana event, a PayPal executive remarked that “Ethereum is not the best solution for payments,” revealing concerns about Ethereum’s suitability for large-scale payment processing. This statement echoes the sentiments of other companies, such as Visa, which recently integrated Solana into its payment infrastructure to facilitate USD Coin (USDC) settlements, citing Solana’s “high throughput” and “low costs” as the main reasons behind the move.
This trend extends beyond payment processing. Franklin Templeton, a trillion-dollar asset manager, has announced plans to launch a mutual fund on Solana, signaling growing institutional interest in the blockchain’s applications beyond the cryptocurrency sector. Additionally, global financial powerhouse Citi revealed that it is exploring Solana as an option for cross-border payments, potentially increasing Solana’s reach into the world of global finance.
Despite the promising news for Solana, Sygnum’s report also points out that Ethereum remains the dominant force in the real-world asset tokenization and stablecoin markets. Ethereum holds an 81% market share in tokenization and a 49% share in stablecoin issuance, while Solana lags far behind with less than 3% in both categories, according to on-chain data.
Moreover, while Solana has garnered attention for its rapid price appreciation and performance against Ethereum, Sygnum warns that some of the network’s volume metrics are overstated. A significant portion of Solana’s network revenue is driven by the issuance and trading of memecoins, which can create an inflated perception of growth.
The bank also highlights concerns about centralization within Solana’s network. Edward Snowden, the well-known whistleblower, recently criticized Solana for its centralized structure, warning that “anything significant” built on the network could be vulnerable to disruption if governments or other powerful entities target it. These concerns may dampen its appeal among advocates of decentralization, who see Ethereum as a more secure and decentralized alternative.
Sygnum’s report highlights a significant increase in Solana’s price against Ethereum. According to the bank’s analysis, the Solana-to-Ether price ratio has risen by 300% year-over-year and surged by 600% since 2023. This exceptional performance has drawn attention from investors looking for alternatives to Ethereum, whose price has experienced a notable period of underperformance over the past two years.
However, Sygnum suggests that Ethereum may be due for a “sharp reversal.” Despite its recent struggles, Ethereum’s value proposition is clearer to traditional investors. Sygnum argues that Ether, the native token of Ethereum, derives its value from the network’s economic activity and the revenues generated by decentralized applications (dApps). For traditional investors accustomed to evaluating equities based on growth, profits, and cash flow, this approach is more relatable than Bitcoin’s “digital gold” narrative.
Regulatory Implications for Ethereum and Solana
On the regulatory front, the risks of the US Securities and Exchange Commission (SEC) labeling Ethereum as a security have diminished. In June, the SEC closed its investigation into Ethereum, reducing regulatory uncertainty around the cryptocurrency. This development could make Ethereum more appealing to institutional investors wary of regulatory entanglements.
Solana, on the other hand, may not enjoy the same regulatory clarity. Many industry insiders believe that the SEC still views Solana as a security, which could hamper its ability to attract institutional investment in the long run. Regulatory uncertainty remains one of the biggest challenges for Solana as it seeks to build out its ecosystem and compete with Ethereum in key markets.
For Solana to compete with Ethereum over the long term, Sygnum believes it must become a breeding ground for breakthrough decentralized applications that captivate the market and drive mass adoption. While the blockchain has already made impressive strides with its integrations in the payments sector and partnerships with leading financial institutions, more needs to be done to expand its share of the real-world asset tokenization and stablecoin markets.
At present, Ethereum’s entrenched position, both in terms of market share and regulatory clarity, gives it a significant advantage. However, Solana’s ability to scale efficiently, coupled with its growing ecosystem of partners, suggests that the blockchain could emerge as a serious contender if it can continue to attract institutional interest and foster innovation.
Finternet: Could India’s Digital Money Pioneers Reshape the Global Financial System on Blockchain?
Whenever major financial figures delve into blockchain technology, it’s easy to approach their efforts with a healthy dose of skepticism. Often, institutional blockchain initiatives seem more like public relations exercises than actual innovations. However, a new initiative, dubbed the “finternet,” has piqued the interest of industry insiders, particularly due to the involvement of key figures behind India’s Unified Payments Interface (UPI). The finternet project, which aims to reshape the financial world by moving economic activity onto blockchain rails, is beginning to make waves—especially given its integration with the Solana blockchain.
The finternet is being championed by a team that includes prominent contributors to India’s UPI digital money system, a revolutionary payments platform that has transformed financial transactions in the country. One of the key figures behind the project is Nandan Nilekani, co-founder of Infosys, India’s sixth-largest company by market cap, and a pivotal figure in India’s digital transformation.
In collaboration with the Bank for International Settlements (BIS), Nilekani co-authored a paper in April 2024 outlining the vision for the finternet. Since then, Nilekani and Siddharth Shetty, a former advisor to India’s Ministry of Finance, have been actively promoting the project, discussing its potential at various global fintech forums. In August, the duo demoed the finternet at the Global Fintech Fest, showcasing a transaction in which 2,000 rupees were sent and settled on Solana’s blockchain.
The team’s objective is bold: they aim to create a unified financial system across different asset types and geographies, relying on blockchain rather than traditional financial rails. At its core, the finternet seeks to tokenize assets and make them interoperable across multiple financial ledgers. This vision has the potential to revolutionize how the global economy operates, moving it onto blockchain infrastructure, where transactions can occur faster, more transparently, and with lower fees.
While many blockchain projects are in their experimental stages, the finternet’s connection to Solana lends credibility to its ambitions.
In a talk at Solana Breakpoint, Shetty emphasized the potential of blockchain for building an interoperable, on-chain economy, where assets can be tokenized and exchanged seamlessly. Though the presentation was dense with technical jargon, the underlying message was clear: the future of finance could lie in decentralized, blockchain-based systems like Solana.
The Solana Foundation and Superteam India, a Solana community group, have been involved in building the finternet’s sandbox environment. This collaboration could be crucial for the project’s success, as it allows the team to leverage Solana’s scalability to experiment with real-world applications.
It’s impossible to discuss the finternet without acknowledging the legacy of UPI, the digital payments platform that has reshaped the financial landscape in India. Launched in 2016, UPI was part of a broader effort by the Indian government to digitize the country’s financial system. By 2023, UPI had processed over 100 billion transactions, establishing itself as one of the world’s most successful digital payments systems.
Nilekani and Shetty were instrumental in developing UPI, and their involvement in the finternet suggests that they are aiming to apply the lessons learned from UPI to a new, blockchain-powered financial system. However, it’s important to note that the finternet is distinct from UPI. While UPI remains an off-chain digital payments solution primarily used within India, the finternet is focused on creating a global financial system that operates on blockchain technology.
This difference is critical. UPI’s success was built on its ability to connect millions of Indians to a digital payments infrastructure, but it remains limited to fiat currency transactions within India. The finternet, on the other hand, envisions a future where any asset—whether it’s fiat currency, stocks, or even real estate—can be tokenized and transferred seamlessly across borders, thanks to blockchain’s decentralized nature.
Despite the ambitious vision, the finternet project is still in its early stages, and many questions remain. The concept of moving economic activity on-chain is not new, and many projects have tried—and failed—to achieve mass adoption. What sets the finternet apart is the names involved: Nilekani’s Infosys is worth $94 billion, and both Nilekani and Shetty played key roles in the creation of UPI, a system that has already proven its ability to scale.
However, skeptics are cautious. Blockchain projects, especially those with institutional backing, often generate hype without delivering substantial results. The involvement of high-profile names doesn’t necessarily guarantee success, and there is a risk that the finternet could become yet another unrealized vision in the blockchain space.
Additionally, concerns about scalability, interoperability, and regulatory challenges loom large. While Solana offers high throughput and low costs, it has faced its share of technical issues, including network outages. For the finternet to succeed, it will need to overcome these hurdles and prove that it can operate efficiently on a global scale.
Moreover, regulatory uncertainty remains a significant challenge for any blockchain project. Governments around the world are still grappling with how to regulate decentralized financial systems, and the finternet could face significant legal and regulatory obstacles, particularly as it seeks to operate across multiple jurisdictions.
Despite the challenges, the finternet has the potential to reshape the global financial system in ways that few other blockchain projects have attempted. Its integration with Solana, combined with the expertise of its founders and contributors, gives it a unique advantage.
For now, the finternet remains in its experimental phase, but its association with prominent figures and organizations makes it a project worth watching. As the financial world continues to explore blockchain technology, projects like the finternet could play a critical role in determining whether blockchain will become the foundation for the next generation of global finance.
This article was originally Posted on Coinpaper.com
