March 22, 2022 Fortuna Capital
Since its launch six years ago, Ethereum (ETH) and its network have emerged as the most important project on the blockchain. From the beginning, Ethereum introduced a series of innovations and solutions to the industry that Bitcoin had not been able to solve.
Its native coin is the second largest in market capitalization. ETH has remained the leading altcoin in the market despite the emergence of rival projects, some of which have made interesting tradeoffs in search of scale and/or speed and/or security – the holy trinity of the decentralized ledger world.
This article delves into its potential as an alternative digital currency to BTC. We discuss its features and benefits and explain why a killer has yet to emerge to dethrone ETH from its leading position in the crypto market.
Ethereum is a very versatile digital platform that uses blockchain-based technology. Its use extends to a wide variety of applications. So much so that Ether (ETH), its native cryptocurrency, is the second-largest in market capitalization. It can be used in transactions that use this open-source software.
This platform was launched in 2015, although its development began in 2013. The purpose of the creator of Ethereum, Vitalik Buterin, was to create a protocol that would support decentralization and computing applications for the first time on the blockchain.
Like Bitcoin (BTC), Ether is part of a peer-to-peer decentralized financial system. It means that it is autonomous and does not depend on any government, unlike fiat or traditional money (dollar, euro, yen). However, the Ethereum protocol is transitioning to a proof of stake, while the bitcoin protocol is based on a proof of work.
From its birth to the present, the price of Ether has grown exponentially. In just six years, it skyrocketed from 0.66 cents (September 2015) to $4,426 in September 2021. Its rise in the market came after proving that its protocol is faster and more efficient than bitcoin.
Like all cryptos, Ether is very volatile; its fluctuations are heavy and volatile in the intraday timeframe. But its market capitalization places it in the Top Ten cryptocurrencies, rivalling BTC and the other existing digital tokens.
The crypto uses a shared ‘digital ledger’ in which all operations are recorded. This book, called blockchain, guarantees the transparency of each of the transactions. It is freely accessible to the public, but at the same time, it is very secure since it is impossible to modify later.
The Ethereum blockchain that supports Ether is built through the data mining process. Miners are responsible for verifying entire groups of Ether transactions to form “blocks” and encrypt them using complex algorithms.
These algorithms are mathematical problems that involve a certain difficulty. This makes the block processing time (one every 14 seconds approximately) long.
As new blocks are created and processed, they are linked to the previous blockchain (they are like train cars), and the miner receives a reward for his work. The system rewards the miner with a fixed amount of Ether tokens each time a block is completed.
Usually, the reward is 5 units of ETH. However, this number may decrease if the cryptocurrency continues to increase. Currently, the supply of ETH in circulation stands at 118.6 million, while that of BTC is 21 million.
Competition in the crypto industry has grown as new cryptocurrency projects emerge. Although it is considered the queen of altcoins (alternative currencies), Ether has strong competition.
Experts claim that among its main rivals (killers) could be Cardano (ADA), Solana (SOL) and Polkadot (DOT), which occupy the first places in the crypto ranking. Furthermore, a JPMorgan report published in January warned that ETH was losing ground in the NFT market to its competitor Solana.
This network is among the fastest-growing today. It is capable of processing up to 50,000 transactions per second (TPS), according to its own developers. Instead, Ethereum can only process 15 and 45 TPS. The Solana ecosystem has more than 400 diverse projects currently running, including stablecoins, Defi projects, and portfolio management.
On the other hand, there is the Cardano project, which promotes its development by adopting a very research-intensive approach to its network. Cardano has extraordinary smart contract capabilities, although it has not yet launched none of them. Cardano not only has remarkable smart contract capabilities. The third generation of this network is considered more scalable than the Ethereum blockchain.
Polkadot is another potential Ether killer. To compete with ETH, this blockchain network is trying to solve problems related to the scalability and cost of Ethereum. Polkadot has strong interoperability capabilities by allowing blockchains to communicate effectively.
The increased congestion of the ETH network, along with its high fees, could eventually dethrone the crypto that has most revolutionized the industry. Likewise, Ethereum has lost market capitalization share with respect to Solana, as the volume of NTFS traded has decreased.
According to JP Morgan, “crypto markets continue to evolve, and so-called ‘Ethereum killers’ are gaining popularity based on their improvements made versus Ethereum.” The US investment bank also warned that Ethereum’s dominance over Defi platforms was at risk due to the scalability of the network.
Other alternative blockchains such as Binance Smart Chain, Avalanche, Terra, Polygon and Fantom are also making inroads in Defi market share. These would-be ETH killers have received heavy funding and are promoting the use of their networks through significant incentives.
With all the dangers that lie in wait for the Ethereum blockchain and its native digital currency, the project maintains its leadership. This is why there is no ETH killer yet, and perhaps; there will be none in the immediate future.
ETH and the other rival cryptocurrency projects can continue to coexist without the need for one to become obsolete per se. With each chain having its advantages and disadvantages, may the best ones ride to the top of the market cap and make the decentralized world faster and safer to transact in
Many crypto market analysts do not believe that ETH can be killed. Even less so with its POS upgrades that will make it greener by reducing energy consumption.
ETH has become deflationary after the enhancement proposal (EIP-1559), according to a report by a group of Australian academics. The pace of innovation and growth in developers accepting solidity and their core language of programming and the Ethereum network as the core network for building their applications has outpaced most of the smaller projects.
Although it costs more, for now, Ethereum is still considered the best blockchain in terms of work. In addition, to compensate for the delay in transactions, there is Polygon (MATIC), which offers scalability solutions to projects that operate within the Ethereum network.
Major NFTs are still sold in ETH and not on sidechains or other chains because they are created and managed on this blockchain. Therefore, the payment requirements for NFTs are also on Ethereum.
These decentralized applications can run with increased speed, interoperability with the network, and lower fees.
Despite the drop in the price of ETH along with the other cryptos, there is no doubt that the project is still going strong. Some experts even predict that crypto will surpass Bitcoin, thanks to the boom in NFTs, its versatility and the intensive use of the blockchain network.
They consider that it will be able to overcome the downward trend that has accompanied it in recent months. Ether surged 504% in just one year, rising from $730 in January 2021 to $3,680, where it hit in late December, according to CoinMarketCap records.
As of mid-March 2022, its market capitalization reached $355.187 million. Only NFT projects developed on the Ethereum blockchain currently bring in a total value of $156 billion. This is by far almost double the value of the other 10 networks combined.
Ether has how and with what to defend itself in the market. Its advantages are many compared to other cryptos. One of the main ones, being a decentralized network, is its hacker-proof security. Consequently, users’ personal information and funds are safe. Any barrier of mistrust between the parties is eliminated.
It has its own design that allows it to prevent fraud and adulteration. Ethereum has become a multipurpose network, offering various solutions to everyday industry problems. The network allows developers to adapt blockchain technology to different applications.
For this reason, it has become the preferred infrastructure for the development of multiple decentralized projects. In other words, financial services are created and hosted on a decentralized platform like public blockchains and smart contracts.
Such contracts operate automatically, depending on how they have been programmed. For example, they can be used to send a certain amount of Ether to a third party at a future date or store debt records without the need for intermediation.
The network and smart contracts offer a diversity of uses and applications. Ethereum simplifies administrative processes by dispensing with intermediation, with the additional benefit that it lowers costs and is totally reliable.
These are just some uses of smart contracts through the blockchain:
In conclusion, ETH is one of the most innovative cryptocurrencies ever created, and there is still a lot of room for improvement. This is a very safe and reliable bet for those who are just starting to operate in the crypto market. Compared to some of the ETH ‘killers’, we feel that ETH will maintain its dominance, but we also look carefully into each of the competitors to spot areas of growth that can outstrip the pace of ETH in the short run. Long live ETH.