Throughput (or TPS) is often cited as one of the most critical metrics for evaluating a blockchain’s potential for mass adoption. High throughput can enable seamless user experiences and lower fees. However, a blockchain's long-term success is not solely determined by TPS. Monetary policy (and other factors like security, decentralization, etc.) play an equally crucial role, in influencing the economic sustainability, security, and overall trust in the system. While some blockchain communities, such as Solana’s, place a heavy emphasis on TPS, it is essential to analyze whether this alone is enough to ensure long-term dominance. The reality is that blockchain success is about more than just scalability—it’s about trust, fairness, and sustainability. Bitcoin has the lowest TPS of any blockchain in existence and the Lightning Network is not widely used. Yet Bitcoin maintains its dominance in market capitalization. Let's explore the importance of monetary policy. High TPS may not mean adoption Solana’s high TPS is often pointed to as a sign of superior adoption and usability. However, upon closer examination, a significant portion of Solana’s transaction volume stems from voting transactions and bot activity. There are a lot of failed transactions. This raises the question: how many genuine, active users does the network truly have? If the bulk of activity is inorganic, then TPS alone does not equate to real-world adoption. Moreover, Solana has faced several network outages and restarts, calling into question the reliability of its high-speed infrastructure. A blockchain that can process thousands of transactions per second but suffers from frequent downtime might not be as robust as it appears. From a utility perspective for specific use cases where network outages are acceptable, Solana is certainly a useful network. That doesn't necessarily mean people want to hold SOL coins. Monetary Policy: The Overlooked Foundation of Blockchain Success Beyond throughput, monetary policy plays a vital role in the stability and attractiveness of a blockchain ecosystem. Some of the most crucial factors include: 1. Supply Cap vs. Infinite Inflation A capped supply (e.g., Bitcoin’s 21M of BTC or Cardano’s 45B of ADA) ensures scarcity, which can drive value appreciation over time. In contrast, Solana employs an inflationary model, meaning new SOL tokens are continuously minted. While inflation can help secure a network by incentivizing validators, it can also lead to long-term devaluation if not managed properly. Cardano, on the other hand, has a more conservative monetary policy with a fixed supply and structured staking rewards. This ensures long-term predictability, making it an attractive option for those who value financial stability. Bitcoin introduced the concept of digital scarcity. Inflationary monetary policy is close to fiat money. We believe that blockchains should prefer digital scarcity. 2. Governance: Stability vs. Frequent Policy Changes A blockchain that frequently changes its monetary policy introduces uncertainty. Investors and users need to trust that the rules governing supply and incentives will not change arbitrarily. Solana has made multiple attempts to modify its economic structure, leading to concerns about centralization and unpredictability. Ethereum also changed its monetary policy and introduced the concept of ultra-sound money. The idea was that more ETH would be burned than minted. Currently, Ethereum is once again an inflationary project. Cardano, by contrast, has a constitution and an on-chain governance model designed to ensure gradual, community-driven changes rather than abrupt shifts dictated by a small team or venture capital interests. 3. Staking Mechanisms: Liquid Staking vs. Coin Locking Staking is essential for securing non-Proof-of-Work networks. Cardano offers liquid staking, allowing users to stake without locking up their assets. No minimum number of coins for staking is defined. Users maintain full control over their funds while still participating in network security. If the coins are locked, users cannot spend them at any time. The coins are not liquid, which is in contrast to the original ethos of cryptocurrencies. To run an Ethereum validator, 32 ETH must be locked. If users do not have this amount, they are forced to use third parties like Lido. They receive defiant tokens that are liquid. However, the ETH remains locked. From a monetary policy perspective, this solution is not optimal, since users do not have full control over the coins. 4. Token Distribution: Fairness Matters The initial distribution of tokens significantly impacts decentralization and network integrity. Solana’s token distribution heavily favored venture capital firms and early investors. There are planned large token unlock events that could flood the market and dilute value. In contrast, Cardano focused on a fairer initial distribution model, aiming to ensure broader community participation rather than centralized control by institutional investors. VC funds were intentionally omitted. The distribution of ADA coins is similar to the distribution of BTC coins. High TPS is not a guarantee of success While Cardano’s current throughput may not match Solana’s, its roadmap includes scaling solutions such as Leios, Hydra, and Midgard. These technologies aim to significantly increase transaction capacity while maintaining decentralization and security. Importantly, scaling is not just about L1 performance—L2 solutions can enhance efficiency without compromising the integrity of the base layer. The key is ensuring that L1 remains the universal currency of the ecosystem, capturing value from L2 adoption rather than being bypassed by it. At the end of the day, success in blockchain is about more than just TPS—it’s about trust and longevity. A network with high throughput but questionable economic policies may struggle to sustain value over time. Meanwhile, a network with sound monetary policy and a committed community has the foundation for enduring success. Cardano’s large and loyal staking community demonstrates this principle. While stakers are not necessarily active users, they represent a strong, vested interest in the network’s future. The combination of monetary soundness and increasing scalability positions Cardano as a formidable contender in the blockchain space. The decision between Solana and Cardano ultimately comes down to priorities: If high TPS is the primary concern and monetary policy issues are overlooked, Solana may seem appealing. If sustainable economics, decentralization, and long-term viability are the focus, Cardano offers a more balanced approach. However, the truth is that Cardano needs to scale better. Both options have their merits, but history has shown that economic integrity and trust often outweigh raw speed in the long run. As Cardano continues to scale, it could emerge as the blockchain that successfully balances throughput and monetary soundness, securing its place as a dominant force in the industry. Some influencers believe that if a blockchain has a high TPS, it must eventually lead to an increasing market capitalization. This reasoning is correct in principle. The increasing network effect should positively affect market capitalization. Other aspects such as decentralization, trust, security, uptime, the number of hacks in DeFi, and others should not be underestimated. Any chain can theoretically achieve a satisfactorily high TPS. The mix of various factors will determine which chain will be the most successful.
