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

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The term ‘Ethereum killer’ is starting to accelerate in cryptocurrency markets again, as native tokens from several competing blockchain networks show significant gains in September. For an AC network to be considered in this category, it must have one essential characteristic that serves as the backbone of the Ethereum network: smart contracts.

With that in mind, the largest blockchain networks by market capitalization that typically fall under this jurisdiction are Cardano (ADA), Solana (SOL), Binance Smart Chain (BSC), Polkadot (DOT), and Terra (LUNA). ). The native tokens of these networks have been in absolute tear this year. More recently, Solana (SOL) has been in the spotlight after the bulls carrying her rally continued even in the face of a market sell-off on September 8 that brought Bitcoin below the $ 50,000 mark.

SOL has more than doubled its price in the past 30 days, but has since declined to trade around the $ 155 mark. The token has posted more than 300% gains over the past 90 days with extraordinary gains of 7,871.16% year-to-date (YTD). By comparison, those gains eclipse ETH’s 63.77% 90-day gains and 385.36% current-year gains from ETH. Ethereum’s market cap is currently around $ 400 billion, almost 9 times SOL’s $ 47 billion market cap.

Ethereum killer tokens show gains

Several networks have shown promising prospects and gains. Cardano recently completed its Alonzo hard fork which launched Plutus-powered smart contracts on the network that would allow it to host decentralized finance (DeFi) and Web 3.0 applications. Even though its native token, ADA, showed poor response at this important milestone in the project’s roadmap, it still saw a substantial increase this year. ADA is trading at around $ 2.40, posting gains of 74.16% over the past 90 days and gains of 1,273.86% year-to-date.

Marie Tatibouet, director of marketing at Gate.io – a cryptocurrency exchange – explained to TBEN the double reasons that sparked the killer movement of Ethereum. Speaking about the lack of network scalability, she said, “As it stands, Ethereum is particularly slow and can only perform 15-25 transactions per second at very low throughput.”

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She further mentioned how high demand and low throughput lead to the following reason, inflated transaction fees which “are a little bit of control”. This could impact the current boom in the non-fungible token (NFT) market. She said, “Are you sure you want to pay half an ETH in gasoline costs just to create a JPEG?”

Regarding this, the spokesperson for Solana Labs told TBEN: “Hitting an NFT at peak levels can be very expensive. Recently, the minting fee has reached 3 ETH which is more expensive than many real NFTs. Solana offers faster speeds and lower prices than Ethereum, which really matches the market share.

Terra is another Ethereum killer prospect whose token has performed exceptionally well this year. Its native LUNA token has posted over 500% gains in the past 90 days and 5.477% YTD gains, and is currently trading at around $ 36.

Such large gains often put a token in the spotlight because of its underlying platform and technology which attracts more users and increases adoption rates. TBEN spoke to Lex Sokolin, global co-director of fintech and chief economist at ConSensys – a blockchain technology company supporting Ethereum’s infrastructure – who said:

“DeFi protocols are applications that grow with the number of users and capital. It is likely that DeFi will be multi-chain and versatile, although the greatest amount of liquidity is still provided by Ethereum. However, the expansion and incorporation of other sources of capital through bridges and exchanges is a net good for the ecosystem. “

Ethereum is currently in an important phase of its transformation into Ethereum 2.0 (Eth2) – a fully Proof of Stake (PoS) blockchain after undergoing the London hard fork which brought crucial updates like the EIP-1559 – the consequences of which are still very much discussed in the cryptocurrency community. This Ethereum Improvement Proposal (EIP) that was accepted by developers and miners resulted in a change in the transaction pricing mechanism for the network.

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The change mainly affected the token inflation rate and miner’s income, as part of the gas fee is now burned off as a result of the upgrade. According to the data, more than 311,300 ETH tokens were burned, with a notional value of almost $ 1.1 billion. The current burn rate is 2.7 million ETH tokens per year, which would bring the inflation rate to 2.3% with the issuance of 5.3 million tokens per year.

Ethereum is not the only blockchain network to implement this type of pricing mechanism, as Solana burns 50% of its transaction fees to regulate the supply of the SOL token. The Solana Labs spokesperson added: “The Ethereum London upgrade has changed the incentives for miners. Some believed it would increase the SRM and solutions have been launched to address this, but the cost of trading on Ethereum continues to be a barrier to entry.

On-chain data indicates Ethereum is still king

Even though the native tokens of these “Ethereum killer” networks have shown impressive gains, a closer look at the on-chain data reveals that Ethereum’s usage and volumes still eclipse the entire remaining market for the platform. smart contracts.

Ethereum currently has a market cap of over $ 400 billion, which is significantly higher than the rest of the market. The closest network in terms of market cap is Cardano, with a market cap of $ 76 billion, not even 20% like Ethereum’s.

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

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BSC Ecosystem Coordinator at Binance Cryptocurrency Exchange Samy Karim spoke to TBEN about possibilities for Ethereum to retain market share after the transition to Eth2 is complete:

“It needs to be fast, efficient and decentralized for DeFi to achieve mass adoption. Ethereum is one of the first smart contract-enabled chains that can leverage its pre-existing communities to grow once Eth2 is released, but it’s nearly impossible to predict its potential market share based on its likely upgrade. .

Currently Ethereum is also leading the market in the NFT space with all the major platforms NFT, OpenSea, CryptoPunks, Axie Infinity, Rarible and Decentral and all built on Ethereum. However, the entire NFT market has often been categorized as a bubble by opponents, with the Chinese Communist Party becoming the latest addition when it warned Chinese citizens against digital collectibles, and yet the market continues to develop.

Sokolin disagreed with this prospect, saying, “We don’t agree with categorizing the NFT ecosystem as a bubble – it’s a reconfiguration of the structure of digital media. […] NFTs offer a different path and having a meaningful economic system opens up a new business model. “

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

As Ethereum continues to gain momentum towards its final transition to a PoS blockchain, the confidence financial markets are showing in its potential is slowly increasing. A report by the British multinational bank, Standard Chartered Bank, discussed actual use cases of the blockchain network and therefore valued ETH “structurally” between $ 26,000 and $ 35,000. At present, ETH continues to display bullish trading patterns such as cut and grip and even has the prospect of reaching $ 6,500 in the next few months.