Solana (SOL) Is Emerging as the Top Challenger to Ethereum (ETH) in the Decentralized Finance (DeFi) Market

Ethereum (ETH) has long been the backbone of decentralized finance (DeFi), but in 2025, its reign is facing an undeniable challenge from Solana (SOL).

In the constantly evolving landscape of decentralized finance (DeFi), Ethereum (ETH) has long been recognized as the backbone of the sector. However, as we delve into 2025, an undeniable challenge to this status quo is emerging from Solana (SOL).

A recent report by Franklin Templeton sheds light on the growing footprint of Solana in DeFi. Despite noting that Solana may not yet pose an existential threat to Ethereum’s dominance, the report underscores the fact that Solana’s rapid rise is an occurrence that cannot be easily disregarded.

Ethereum has conventionally been viewed as the industry standard in DeFi, boasting the highest total value locked (TVL) and leading the way in decentralized exchange (DEX) volumes. Its ecosystem has facilitated up to $600 billion in monthly trading volume and secured over $120 billion in TVL.

However, for the first time, Ethereum’s dominion is encountering sustained pressure. Solana’s high-speed, low-cost transactions have attracted users and developers, resulting in an influx of new users to the DeFi sector.

However, for the first time, Ethereum’s dominion is encountering sustained pressure. Solana’s high-speed, low-cost transactions have attracted users and developers, resulting in an influx of new users to the DeFi sector.

In January, Solana DEXs collectively processed more volume than all Ethereum Virtual Machine (EVM)-based DEXs combined, a milestone that highlights the shift in user activity.

Although Ethereum remains the largest smart contract platform by market capitalization, Solana’s DeFi growth narrative has compelled analysts to reassess long-held assumptions about the sector’s future.

The SVM vs. EVM Debate Heats Up

The emergence of Solana has also renewed discussions about the superiority of its virtual machine (SVM) compared to Ethereum’s EVM. Throughout history, Ethereum has been the preferred platform for most DeFi applications due to its robust infrastructure and network effects.

However, Solana’s increasing share of the DeFi market suggests a gradual shift in the preferences of both developers and users toward Solana’s SVM.

The Franklin Templeton report suggests that “DeFi may be entering an era of Solana Virtual Machine (SVM) dominance, shifting away from the historical reign of EVM-based DeFi.”

Solana’s DeFi protocols also trade at lower valuation multiples despite realizing significantly higher growth rates. The report further indicates that this asymmetry in valuation could be interpreted as Solana’s DeFi sector being undervalued considering its growth trajectory.

Many industry experts argue that Solana is not yet optimally positioned to topple Ethereum, but they acknowledge it is becoming a formidable competitor. As Solana’s DeFi ecosystem matures, its protocols may begin to closely mirror the valuation of their Ethereum counterparts, further cementing Solana’s status as a major player in the decentralized finance domain.