Which Is a Better Buy — Waves or Solana?

Solana ( SOL 0.49% ) took the crypto world by storm in 2021 and established itself as one of the major blockchains. Waves ( WAVES -2.17% ) is one of the few cryptocurrencies with a positive return year to date in 2022. Both are known for low fees and fast transaction speeds. Which of these popular cryptos is a better buy?

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Battle of the NFTs

Solana has a burgeoning NFT scene centered around Magic Eden, which saw more than $500 million of total sales volume during the past 30 days . Projects like Degenerate Ape Academy have had sales of over $1 million. Waves has NFTs as well, although they are in a nascent stage and not yet tracked by some of the major data aggregators. That said, Waves has some NFT projects like Waves Ducks that are generating excitement among a passionate fanbase. Waves Ducks has quietly accrued 200,000 players, and the top Duck sold for 12,500 WAVES (or $245,000).  I will give Solana the edge here as it has a more established and robust NFT ecosystem, but I am impressed with what Waves has accomplished so far and think that it will continue to gain momentum in the NFT market.

Thriving ecosystems 

Both Solana and Waves enjoy thriving ecosystems of development. Solana boasts many interesting projects, like blockchain-based music project Audius, which has 6 million monthly active users;  automated lending platform SoLend; and automated market-maker Raydium.

Waves has intriguing projects as well, such as lending platform Vires.Finance. Another, the decentralized exchange Waves.Exchange, allows users to trade cryptocurrencies like Bitcoin and Litecoin with low fees. Perhaps most fascinating of all is stablecoin platform Neutrino, which enables users can create stablecoins tied to real-world assets and currencies like the dollar or the euro.

Waves recently announced a new parent company, Waves Labs, which will be investing $150 million into developing new applications for the Waves platform.  So while Solana has a big head start and is the winner right now in terms of the breadth and depth of applications on its platforms, I’m excited about what Waves has created so far and about what it will do with the influx of funding.

Valuation 

One of the key ways you can “value” DeFi (decentralized finance) assets is by looking at market cap versus total value locked (TVL). Investors can take a look at the TVL in a platform and divide it by the coin’s market capitalization to get a feel for whether the asset is undervalued or overvalued, in much the same way that investors compare a company’s per-share book value to its stock price. Waves has a market cap of $3.5 billion against a TVL of $3 billion, meaning it has a market-cap-to-TVL ratio of just 1.16. Solana has a market cap of $28.8 billion versus a TVL of $7.1 billion, giving it a market cap-to-TVL ratio of just over 4. By this measure, Waves is more attractive on a valuation basis. 

Which is a better buy?  

Solana is the more established blockchain heavyweight with a big head start in terms of publicity, total users, and development on the platform. However, I’m impressed by the momentum Waves is gaining and the user base it has built up so far. While Waves trails Solana in many areas now, it is gaining momentum and could narrow the gap further as its $150 million investment in developing the network begins to bear fruit. Waves looks like a better value on a market-cap-to-TVL basis. Lastly, zooming out, Solana has a $27 billion market cap versus a $3.5 billion market cap for Waves, so on the surface it looks like Waves should have more growth runway ahead of it. 

I am bullish on both of these cryptos for the long term and think that both have some incredible capabilities and opportunities ahead, but based on valuation, size, and the influx of new development money, I view Waves as the better buy.