Author: Michael Nadeau, The DeFi Report; Translation: Deng Tong, Golden Finance.

In January 2023, the trading price of SOL was discounted by 97% compared to ETH.

By July last year, this discount had narrowed to 83%.

Now, nearly a year later, with the market questioning Ethereum's scalability roadmap and assessing Solana's potential to 'bring Nasdaq on-chain', this gap is continuing to close.

In past analyses, we primarily focused on high-level KPIs such as fees, decentralized exchange trading volume, stablecoin supply and volume, and total value locked (TVL) to compare the two networks.

This week's report will shift focus to the actual value that token holders can attain.

The actual value that token holders can attain.

Solana

The actual value that Solana token holders/stakers can obtain = Jito Tips (MEV) earned by validators and shared with stakers. This does not include newly issued SOL, base fees, priority fees, or MEV retained by searchers.

The net worth of Solana's $0.475 billion is the 6% fee charged by Jito for all validators running Jito Tips routers and block engines. If SOL is held, it can be staked to a trusted validator/LST, such as Helius (hSOL), which charges stakers a $0 commission. In this case, SOL stakers retain 94% of the MEV generated through Jito (95% of Solana's staked runs on Jito).

Ethereum

The actual value that Ethereum token holders/stakers can obtain = MEV + priority fees earned by validators and shared with stakers. This does not include new ETH issuance, base fees, block fees, and the MEV shares retained by searchers and block builders.

Ethereum's net worth of $0.134 billion deducts the 10% fee charged by Lido, the most trusted liquid staking provider on Ethereum.

Key Points:

Ethereum's TVL is 6.6 times that of Solana, and the supply of stablecoins is 10 times that of Solana.

However, regarding the actual value to token holders from the beginning of the year to now, the actual value of Solana is 3.6 times that of Ethereum.

What is the reason? Execution power and speed determine the actual value. This is how validators and token holders can monetize TVL.

• In TradFi, Nasdaq is responsible for execution and circulation speed. DTCC is responsible for custody/settlement. Ethereum is increasingly resembling DTCC (custody + accounting for settlement/L2 Trades). Base and other L2 platforms are increasingly resembling Nasdaq (handling execution/circulation speed). Meanwhile, Solana is becoming more like a combination of both.

• Integrating Nasdaq + DTCC into a single solution means that SOL holders can access 100% of the execution/circulation service value, while ETH holders can access about 10% of the value (by destroying ETH obtained from L2 platforms).

• Ethereum has these Assets. But it needs to let them circulate on-chain. This has already begun to take effect on L2 platforms and is expected to continue to grow. The question now is whether ETH token holders can ultimately obtain this value—while Solana currently has no such issues.

• Aside from some innovative LSTs on Sanctum, Solana validators will retain 100% of the priority fees obtained from user trades (not shared with stakers). Jito hopes to change this situation. The DAO currently has a governance proposal that will update the fee Router, adding priority fees to the MEV currently routed and paid to stakers. According to Jito, this proposal is expected to be implemented in the coming months.

If we add the priority fees ($0.372 billion, excluding fees from the fee Router), the figures for this year to date are as follows:

It is currently unclear the enthusiasm of Validators for choosing shared priority fees, but we hope to add them here so you can understand how the numbers change.

Actual yield percentage.

The following is the above data converted into annualized actual yield (in SOL and ETH):

Using Solana priority fees:

Total returns (including issuance/network inflation):

Key Points:

• By staking Assets, token holders can receive newly issued supply/volume (used to incentivize validators/stakers to provide services). This is a key difference between crypto networks and companies, as shareholders cannot avoid equity dilution.

• Solana's 'issuance yield' = 7.3%, based on the actual network issuance as of June 5, 2025 (annualized). Ethereum's 'issuance yield' = 2.78%.

• As of now, Solana has issued 9.4 million tokens, which will be paid to the SOL staked on validators in the network (as of June 5, 2025, the average staked amount is 0.385 billion tokens). Ethereum has issued 329,380 ETH to 34.3 million tokens staked on validators in the network.

• Due to the very low inflation rate of the Ethereum network (based on year-to-date actual data, the annualized yield is 0.64%), its 'issuance yield' has begun to normalize. Solana's 'issuance yield' will continue to decline as its network inflation rate is currently at 4.5%, decreasing 15% each year until it reaches a terminal inflation rate of 1.5%.

The source of true value.

Solana

Memecoins account for more than half of Solana's DEX trading volume (a growth of 51% over the past few months). SOL/USD makes up about 35% of the DEX trading volume, while the remaining 14% consists of stablecoins, LSTs, and Other Assets.

Is there a problem with this.

Yes and no.

Clearly, speculation/gambling is one of the most powerful use cases in Cryptos. Solana has found product/market fit by providing a better user experience.

We believe this situation will not disappear in the short term.

Additionally, memecoin trading is stress testing the system and providing valuable feedback to infrastructure providers.

Today's memecoins. Tomorrow's Stocks, Bonds, MMF, and private Assets.

This is ultimately the goal of Solana.

If you're curious, currently 1-2% of the DEX trading volume on Ethereum Layer-1 consists of memecoins. Stablecoin swap trading volumes account for about half, with ETH/stablecoin swaps and other project tokens respectively accounting for about 20% of the trading volume.

Currently, about 50% of DEX trading volume on Base comes from memes, with the vast majority coming from new memecoins.

MEV

Some Cryptocurrency Analysts believe that as base fees are compressed/commoditized over time, MEV (the value users pay for time-sensitive trades) is the only long-term value that can be sustained in Layer 1.

We disagree with this perspective, but we do believe that MEV will drive the majority of economic benefits. Therefore, it is necessary to clarify the differences in how MEV operates on Solana and Ethereum, as well as the potential impacts that Layer 2 may generate.

Ethereum

Ethereum has a memory pool where all transactions pass before being sorted and submitted to validators.

The MEV market is here. The main participants are as follows:

• Seekers: These robots use machine learning algorithms to identify profit opportunities in the memory pool.

• Block Builders: Block builders are responsible for constructing blocks. In other words, they sort transactions by block and accept 'bribes' from seekers in the process.

• Validators: Validators approve these blocks after block builders submit them (with tips).

Workflow:

Users submit transactions —> Ethereum memory pool —> ‘Seekers’ (robots) identify value (arbitrage, sandwich trades, liquidation) —> submit extra transactions to block builders (including tips) —> block builders package transactions —> submit to validators (including tips) —> validators approve transactions, keeping most of the tips (block builders and seekers keep a portion).

The biggest unknown in Ethereum: What will happen to MEV if most of the transaction volume transfers to Layer-2 as expected?

We believe that MEV will transfer to Layer-2 through priority fees. The chart below shows that 85% of Base's fees come from priority fees.

Solana

Solana does not have a memory pool. Instead, it has dedicated validator clients like Jito that implement a form of rolling private memory pool.

How it works:

Jito's block engine creates a very short window (about 200 milliseconds) during which seekers can submit transaction packages to be included in the next block. This rolling memory pool is not public, but seekers connected to the Jito infrastructure have access, allowing them to discover and exploit potential arbitrage opportunities during this brief window.

Seekers typically monitor on-chain status (such as order books and liquidity pools) directly by running their own full nodes or RPC endpoints. They detect arbitrage opportunities by observing state changes caused by confirmed transactions, rather than looking at pending transactions in the memory pool.

When profit opportunities arise (for example, price imbalances between DEXs), the robot quickly builds and submits its own trades or packages them for the next block leader (typically through Jito or a similar relay), hoping to seize the opportunity before others.

Currently, about 50% of arbitrage MEV is conducted through Jito (this value is shared with stakers via a tip router):

If investing in these networks, it's important to understand how MEV accumulates for token Holders through staking.

We believe that, compared to ETH Holders, SOL Holders currently have a better chance of obtaining MEV (and possibly priority fees).

Summary

Should the trading price of SOL be at a 65% discount compared to ETH (63.5% when fully diluted)?

From a fundamental perspective, absolutely not. Even considering the strong network effects of ETH, decentralization, Lindy effect, collateralization of assets, etc., this discount is too high.

Our conclusion is that based on the network effects of ETH and total locked value (TVL), the market currently values ETH higher than SOL.

One major highlight of ETH is that it will become the home for trillions of tokenized assets, covering stocks, Bonds, MMF/stablecoins, private assets, and more.

This may be the case in the future.

But ultimately, investors need to pay attention to how ETH can derive real value from these Assets.

Why.

Because investors have choices. If another chain can continuously bring more value to token Holders, we should expect more capital Inflow into that Asset in the long run.

As Benjamin Graham once said:

In the short term, the market is a voting machine. But in the long term, it is a weighing machine.

One way ETH might catch up is through re-staking and blob fee adjustments. With the exciting new types of L2 layers (such as MegaETH using EigenLayer for data access) coming to market, ETH Holders can derive additional real value from these networks through re-staking ETH.

We will conduct further analysis in these areas.

But we must make one thing clear:

Nowadays, crypto assets are seldom traded based on fundamentals.

Although we believe this situation will change, that is not the case at present.

Narrative, momentum, storytelling, social influence, and liquidity conditions are still factors driving the market.

Of course, ETH has been at a disadvantage in the narrative game over the past few years.

But it feels like things are getting better.

For an asset valued at over 220 billion dollars, a 20% fluctuation in a single day is not significant.

Remember: the cryptocurrency market has high reflexivity. Price —> narrative —> fundamentals.

We are waiting to see whether the recent fluctuations are just the beginning of greater volatility.