Ethereum killers or just pretenders? But Ether remains king for now

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The term “Ethereum killer” is starting to strengthen again in the crypto currency markets, as the native signs of several competitive blockchain networks release significant gains during September. For any alternative network to be considered part of this category, it must have one essential feature that serves as the backbone of the Ethereum network: smart contracts.

With this in mind, the most prominent blockchain networks by market capitalization that are usually under this region are Cardano (ADA), Solana (SOL), Binance Smart Chain (BSC), Polkadot (DOT), and Terra (LUNA). The innate signs of these networks were an absolute tear this year. Most recently, Solana (SOL) was under the spotlight after the bulls carrying their rally continued even before a market sale on September 8 that brought Bitcoin back below the $ 50,000 mark.

SOL has more than doubled in price over the last 30 days, but has since declined to trade around the $ 155 mark. The sign has posted more than 300% gains over the last 90 days with an extraordinary 7,871.16% gains to date (YTD). By comparison, these gains exceed ETH’s 63.77% 90-day gains and 385.36% YTD gains. Ethereum’s market capitalization is currently around $ 400 billion, which is nearly 9 times more than SOL’s $ 47 billion.

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Ethereum murder tokens release winnings

Several networks have shown promising prospects and gains. Cardano recently completed its hard fork Alonzo, which launched Plutus-powered smart contracts on the network that would allow it to host decentralized finance (DeFi) and web 3.0 applications. Although its native sign, ADA, has shown a dull response to this milestone in the project’s roadmap, it has nevertheless experienced great growth this year. ADA is trading around $ 2.40, posting 74.16% gains in the last 90 days and 1.273.86% YTD gains.

Marie Tatibouet, chief marketing officer at Gate.io – a cryptocurrency exchange – described to Cointelegraph the two reasons that started the Ethereum killing movement. Speaking of the network’s lack of scalability, she said, “As it stands, Ethereum is particularly slow and can only make 15-25 transactions per second with very low flow.”

She further mentioned how high demand and low flow lead to the following reason, inflated transaction fees, which “slightly dominate”. This could have an impact on the continued boom seen in the unbreakable token (NFT) market. She said, “Do you really want to pay half an ETH in gasoline fees just to create a JPEG?”

About this, a Solana Labs spokesman told Cointelegraph, “NFT mining at peak levels can be very costly. Recently a mining fee has reached 3 ETH, which is more expensive than many real NFTs. Solana offers faster speeds and lower prices than Ethereum, which is really about market shares. “

Another prospect of killer Ethereum, whose sign has witnessed outstanding performance this year, is Terra. Its native sign LUNA has posted more than 500% gains in the last 90 days and 5.477% YTD gains, and is currently trading around $ 36.

Such significant gains often put a token in the light because of its underlying platform and technology, which is gaining more users and increasing adoption rates. Cointelegraph spoke with Lex Sokolin, a global fintech chief and chief economist at ConSensys – a blockchain technology company supporting Ethereum’s infrastructure – who stated:

“DeFi protocols are applications that grow in terms of number of users and capital. It is likely that DeFi will be multi-chain and universal, although the largest amount of liquidity will remain secured by Ethereum. However, expanding and incorporating other sources of capital through bridges and exchanges is clearly good for the ecosystem. “

Ethereum is currently at an important stage of its transformation to Ethereum 2.0 (Eth2) – a completely proof-of-interest (PoS) blockchain after experiencing the London hard fork that brought crucial upgrades like the EIP-1559 – the aftermath of which is still hotly debated in the cryptocurrency community. This Ethereum Improvement Proposal (EIP) agreed by the developers and miners brought with it a change in the pricing mechanism of transactions for the network.

The change mainly affected the inflation rate and the miner’s income, as part of gasoline quotas are now burning after the upgrade. According to data, more than 311,300 ETH tokens were burned, with an imaginary value of nearly $ 1.1 billion. The current burn is 2.7 million ETH tokens a year, which would put the inflation rate at 2.3% with the issuance of 5.3 million tokens a year.

Ethereum is not the only blockchain network implementing such a pricing mechanism, as Solana burns 50% of its transaction fees to regulate the supply of the SOL token. A Solana Labs spokesman further said: “The Ethereum London upgrade has changed mining incentives. Some believed this would increase the MEV and solutions were launched to address this, but the cost of transactions on Ethereum continues to provide a barrier to entry.”

Chain data says Ethereum is still king

Although the native signs of these “Ethereum killer” networks have posted impressive gains, a closer look at the chain’s data reveals that Ethereum’s usage and volumes are still hampering the entire remaining market of a smart contract platform.

Ethereum currently has a market capitalization of over $ 400 billion, which is significantly higher than the rest of the market. The closest market by market constraint is Cardano, with a market capitalization of $ 76 billion, not even 20% like that of Ethereum.

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

Samy Karim, coordinator of BSC ecosystem at Binance cryptocurrency exchange, spoke to Cointelegraph about the possibilities for Ethereum to maintain its market share after the transition to Eth2 is over:

“It needs to be fast, efficient and decentralized at the same time for DeFi to gain mass adoption. Ethereum is one of the first smart contract-compatible chains that can leverage its pre-existing communities to grow after Eth2 comes out, but it’s almost impossible to predict its potential market share based of its probable update. “

Currently Ethereum leads the market in the NFT space also with all the major NFT platforms, OpenSea, CryptoPunks, Axie Infinity, Rarible and Decentraland all built on Ethereum. However, the entire NFT market has often been classified as a bubble of revelers with the Chinese Communist Party becoming the latest addition when it warned Chinese citizens about digital collectibles, and yet the market continues to expand.

Sokolin expressed his disagreement with this perspective, saying: “We disagree on the categorization of the NFT ecosystem as a bubble – it is a readjustment of digital media structure. […] NFTs offer another path and having a meaningful economic system unlocks a new business model. “

However the impact of this “bubble” even going “bust” is limited for Ethereum. In Tatibouet’s opinion, “NFTs or not, Ethereum is still the market leader when it comes to smart contracting platforms. The NFT market, however, has helped competitors gain an advantage over their peers.”

While Ethereum continues to grow momentum towards its final transition to a PoS blockchain, the confidence the financial markets are showing in its potential is slowly growing. A report of the British multinational bank, Standard Chartered Bank, discussed the real-world uses of the blockchain network and therefore appreciated ETH is “structurally” between $ 26,000 and $ 35,000. As of now, ETH continues to show bullish trading patterns like cup and handle and even has the potential to hit $ 6,500 in the coming months.