• Are Ethereum assassins or charlatans? But for the time being, Ether reigns supreme

  • As “Ethereum killer” networks gain traction, the issue of high gas fees rears its head once more for the Ethereum community.

    As the native tokens of several competing blockchain networks post significant gains in September, the term “Ethereum killer” is regaining traction in the cryptocurrency markets. For any alternative network to be considered in this category, it must have one essential feature that serves as the Ethereum network’s backbone: smart contracts.

    Keeping this in mind, the most prominent blockchain networks by market capitalization that typically fall under this umbrella are Cardano (ADA), Solana (SOL), Binance Smart Chain (BSC), Polkadot (DOT), and Terra (TRX) (LUNA). This year has been a whirlwind for these networks’ native tokens. Solana (SOL) has recently been in the spotlight after the bulls driving its rally continued even in the face of a marketwide selloff on Sept. 8 that brought Bitcoin back below $50,000.

    SOL’s price has more than doubled in the last 30 days, but it has since dropped to around $155 per share. Over the last 90 days, the token has gained over 300 percent, with a year-to-date gain of 7,871.16 percent (YTD). In comparison, these gains dwarf ETH’s 90-day gains of 63.77 percent and YTD gains of 385.36 percent. Ethereum’s market capitalization is currently around $400 billion, which is nearly 9 times SOL’s market capitalization of $47 billion.

    Ethereum killer tokens are gaining traction.

    Several networks have demonstrated promising prospects and profits. Cardano recently completed its Alonzo hard fork, which enabled the network to host Plutus-powered smart contracts, allowing it to host decentralized finance (DeFi) and Web 3.0 applications. Despite the fact that its native token, ADA, had a lackluster reaction to this milestone in the project’s roadmap, it has still experienced a significant rise this year. ADA is currently trading at around $2.40, having gained 74.16 percent in the last 90 days and 1,273.86 percent year to date.

    Marie Tatibouet, chief marketing officer at cryptocurrency exchange Gate.io, explained to ULTCOIN365 the two factors that sparked the Ethereum killer movement. “As things stand, Ethereum is particularly slow and can only do 15-25 transactions per second with very low throughput,” she said of the network’s lack of scalability.

    She went on to say that high demand and low throughput lead to the next reason, which is bloated transaction fees that are “a little out of control.” This could have an impact on the current boom in the nonfungible token (NFT) market. “Do you really want to pay half an ETH in gas fees just to mint a JPEG?” she asked.

    According to a spokesperson for Solana Labs, “mining an NFT at peak levels can be very costly.” A minting fee recently reached 3 ETH, making it more expensive than many actual NFTs. Solana provides faster speeds and lower prices than Ethereum, which is essentially what market share is all about.”

    Terra is another Ethereum killer prospect whose token has performed exceptionally well this year. Its native token, LUNA, has gained more than 500 percent in the last 90 days and 5,477 percent year to date, and is currently trading at around $36.

    Such significant gains frequently bring a token to the forefront as its underlying platform and technology gain more users and adoption rates. Lex Sokolin, global fintech co-head and head economist at ConSensys, a blockchain technology company that supports Ethereum’s infrastructure, told ULTCOIN365:

    “DeFi protocols are applications that grow in number and capital with the number of users. DeFi is likely to be multichain and multipurpose, though Ethereum will continue to secure the majority of liquidity. Expanding and incorporating other capital sources through bridges and exchanges, on the other hand, is a net good for the ecosystem.”

    Ethereum is currently in an important stage of its transformation to Ethereum 2.0 (Eth2), an entirely proof-of-stake (PoS) blockchain, following the London hard fork, which brought in critical updates such as the EIP-1559, the aftermath of which is still heavily debated in the cryptocurrency community. This Ethereum Improvement Proposal (EIP) agreed upon by developers and miners entailed a change in the network’s transaction pricing mechanism.

    The change primarily affected the token inflation rate and miner revenues, as a portion of gas fees are now burned as a result of the upgrade. According to data, over 311,300 ETH tokens with a notional value of nearly $1.1 billion have been burned. The current burn rate is 2.7 million ETH tokens per year, which would result in a 2.3 percent inflation rate with the issuance of 5.3 million tokens per year.

    Solana burns 50% of its transaction fees to regulate the supply of the SOL token, making it not the only blockchain network to use this type of pricing mechanism. According to the Solana Labs spokesperson, “the Ethereum London upgrade changed miner incentives.” Some believed that this would increase the MEV, and solutions have been developed to address this, but the cost of transactions on Ethereum remains a barrier to entry.”

    According to on-chain data, Ethereum is still the king.

    Despite the fact that the native tokens of these “Ethereum killer” networks have seen impressive gains, a closer look at the on-chain data reveals that Ethereum’s utilization and volumes continue to dwarf the rest of the smart contract platform market.

    Ethereum currently has a market capitalization of more than $400 billion, far exceeding that of the rest of the market. Cardano, with a market capitalization of $76 billion, is the closest network in terms of market cap, but it is not even 20 percent as large as Ethereum.

    The total volume locked (TVL) in DeFi protocols built on the Ethereum blockchain is just over $100 billion, according to DappRadar data. In terms of utilization, the Binance Smart Chain (BSC) ranks second with a TVL of $18 billion, which is less than 20% of Ethereum’s TVL in DeFi.

    Samy Karim, BSC ecosystem coordinator at Binance cryptocurrency exchange, spoke to ULTCOIN365about the possibility of Ethereum retaining its market share after the Eth2 transition is complete:

    “In order for DeFi to gain widespread adoption, it must be quick, efficient, and decentralized all at the same time. Ethereum is one of the first smart contract compatible chains that can leverage its pre-existing communities to grow once Eth2 is released, but forecasting its potential market share on the basis of its likely upgrade is nearly impossible.”

    Ethereum currently leads the market in the NFT space as well, with all of the major NFT platforms, including OpenSea, CryptoPunks, Axie Infinity, Rarible, and Decentraland, built on Ethereum. However, the entire NFT market has been labeled as a bubble by skeptics, with the Chinese Communist Party the most recent addition when it warned Chinese citizens about digital collectibles, and yet the market continues to grow.

    Sokolin has expressed his dissatisfaction with this viewpoint, stating, “We disagree with the categorization of the NFT ecosystem as a bubble — it is a reconfiguration of digital media structure.” […] NFTs provide a different path, and having a meaningful economic system enables the development of a new business model.”

    The impact of this “bubble” even going “bust” is, however, limited for Ethereum. “NFTs or not, Ethereum is still the market leader when it comes to smart contract platforms,” says Tatibouet. The NFT market, on the other hand, has aided competitors in gaining a competitive advantage.”

    As Ethereum gains momentum toward its final transition to a PoS blockchain, the financial markets’ confidence in its potential grows gradually. A report by Standard Chartered Bank, a British multinational bank, discussed real-world use cases for the blockchain network and valued ETH “structurally” between $26,000 and $35,000. ETH is currently exhibiting bullish trading patterns such as cup and handle and has the potential to reach $6,500 in the coming months.

    What's your reaction?