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

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

The term “Ethereum killer” is beginning to pick up the pace once again in the cryptocurrency markets as the native tokens of several competing blockchain networks are posting significant gains during September. For any alternative network to be considered as a part of this category, it needs to have one essential feature that serves as the backbone of the Ethereum network: smart contracts.

Keeping this in mind, the most prominent blockchain networks by market capitalization that usually come under this purview are Cardano (ADA), Solana (SOL), Binance Smart Chain (BSC), Polkadot (DOT), and Terra(LUNA). The native tokens of these networks have been on an absolute tear this year. Most recently, Solana (SOL) has been in the spotlight after the bulls carrying its rally continued even in the face of a marketwide selloff on Sept. 8 that brought Bitcoin back below the $50,000 mark.

Our top trading bots

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

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

Ethereum killer tokens post gains

Several networks have shown promising prospects and gains. Cardano recently completed its Alonzo hard fork that 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 a lackluster response to this milestone in the project’s roadmap, it has still experienced a substantial rise this year. ADA trades at around $2.40, posting 74.16% gains in the last 90 days and 1,273.86% gains YTD.

Marie Tatibouet, chief marketing officer at Gate.io — a cryptocurrency exchange — outlined to Cointelegraph the twofold reasons that started the Ethereum killer movement. Speaking about the network’s lack of scalability, she said, “As things stand, Ethereum is particularly slow and can only do 15-25 transactions per second with very low throughput.”

She further mentioned how high demand and low throughput lead to the next reason, bloated transaction fees that “are a bit of control.” This could go on to have an impact on the ongoing boom seen in the nonfungible token (NFT) market. She said, “Do you really want to pay half an ETH in gas fees just to mint a JPEG?”

On this, Solana Labs spokesperson told Cointelegraph, “Minting an NFT at peak levels can be very costly. Recently, a minting fee hit 3 ETH, which is more expensive than many actual NFTs. Solana offers faster speeds and lower prices than Ethereum, which is really what it comes down to with market shares.”

Another Ethereum killer prospect whose token has witnessed an outstanding performance this year is Terra. Its native token LUNA posted over 500% gains in the last 90 days and 5,477% gains YTD, and is currently trading at around $36.

Such significant gains often put a token into the spotlight due to its underlying platform and technology getting more users and increasing adoption rates. Cointelegraph spoke with Lex Sokolin, global fintech co-head and head economist at ConSensys — a blockchain technology company backing Ethereum's infrastructure — who stated:

“DeFi protocols are applications that grow with the number of users and capital. It is likely that DeFi will be multichain and multipurpose, though the largest amount of liquidity will remain secured by Ethereum. However, expanding and incorporating other capital sources through bridges and exchanges 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 after undergoing the London hard fork that brought in crucial updates like the EIP-1559 — the aftermath of which is still highly discussed in the cryptocurrency community. This Ethereum Improvement Proposal (EIP) that was agreed upon by the developers, and miners entailed a change in the transaction pricing mechanism for the network.

The change mainly impacted the inflation rate of the tokens and the miner’s revenues since a portion of gas fees are now being burned following the upgrade. According to data, over 311,300 ETH tokens have been burned, with a notional value of nearly $1.1 billion. The current burn rate is 2.7 million ETH tokens per year, which would put the inflation rate at 2.3% with the issuance of 5.3 million tokens per year.

Ethereum is not the only blockchain network to implement this kind of pricing mechanism, as Solana burns 50% of its transaction fees to regulate the supply of the SOL token. The Solana Labs spokesperson further said: “The Ethereum London upgrade changed miner incentives. Some believed that this would increase the MEV and there have been solutions launched to address this, but the cost of transactions on Ethereum continues to provide a barrier to entry.”

On-chain data says Ethereum is still king

Even though the native tokens of these “Ethereum killer” networks have posted impressive gains, a closer look at the on-chain data reveals that Ethereum’s utilization and volumes still dwarf the entirety of the remaining smart contract platform market.

Ethereum currently has a market capitalization 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 $76 billion market capitalization, not even 20% as that of Ethereum.

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

BSC ecosystem coordinator at Binance cryptocurrency exchange Samy Karim spoke to Cointelegraph about the possibilities of Ethereum retaining its market share once the transition to Eth2 is complete:

“It has to be quick, efficient and decentralized at the same time for DeFi to attain mass adoption. Ethereum is one of the first smart contract compatible chains that can leverage its pre-existing communities to grow once Eth2 is out, but it’s next to impossible to forecast its potential market share on the basis of its probable upgrade.”

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

Sokolin has voiced his disagreement on this perspective, saying: “We disagree with the categorization of the NFT ecosystem as a bubble — it is a reconfiguration of digital media structure. [...] NFTs offer a different path and having a meaningful economic system is unlocking 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 contract platforms. The NFT market, however, has helped the competitors in gaining an advantage over their peers.”

As Ethereum continues to build momentum toward its final transition to a PoS blockchain, the confidence that the financial markets are showing in its potential is slowly rising. A report by the British multinational bank, Standard Chartered Bank, discussed the real-world use cases of the blockchain network and accordingly valued ETH “structurally” between $26,000 and $35,000. As of now, ETH continues to show bullish trading patterns such as cup and handle and even has the prospect of hitting $6,500 in the coming few months.

Keep reading relating to Cointelegraph
Charles Hoskinson under fire for… not dropping out of a PhD program?
A debate has surfaced online following claims that Cardano founder and Ethereum co-founder Charles Hoskinson may have fudged the specifics of his educational...
Evedo seeks to bring event planning to the blockchain
Evedo, a platform consisting of business-to-business, or B2B, & business to consumer, or B2C, marketplaces, seeks to provide blockchain solutions for businesses...
Ubisoft launches Ubisoft Quartz platform for playable and energy-efficient NFTs
French video game publisher Ubisoft announced its first foray into nonfungible tokens (NFTs) via a new platform called Ubisoft Quartz to launch in beta...
'We want to be the AWS of crypto,' says Coinbase exec
With Amazon Web Services (AWS) being one of the most popular cloud service providers on the planet, it's no surprise that Coinbase, a cryptocurrency exchange...
Nervos debuts mainnet beta layer-two blockchain project
Public blockchain platform Nervos Network has announced the mainnet beta launch of Godwoken.The layer-two blockchain protocol integrates Ethereum Virtual...
Browser-based DeFi wallet XDEFI launches public version
XDEFI Wallet, a browser-based wallet service for decentralized finance (DeFi) and nonfungible token (NFT) users, launched its public version on the Chrome...
Wells Fargo files for Bitcoin fund
Wells Fargo – one of the oldest banks in the United States – has registered a new, pooled investment fund that offers its wealthy clients indirect exposure...
Dip-buyers anticipate further downside after Bitcoin price falls to $38K
The cryptocurrency market is in the midst of another lackluster day as Bitcoin (BTC) price dipped below $40,000 ahead of the Federal Open Market Committee...
El Salvador reportedly weighing paying employees in Bitcoin
Rolando Castro, the Minister of Labor and Social Welfare in El Salvador has said that the government is discussing whether companies in the country should...
Defying COVID-19: Blockchain events make an in-person return
The year 2020, for most of the inhabitants of our planet, was passed in lockdowns or quarantine due to the COVID-19 pandemic; many were forced to stay at...
Ether bursts past $4,000, other cryptos firm
SINGAPORE (Reuters) -Cryptocurrency ether broke past $4,000 on Monday, climbing to a new peak for a third session in a row on bets it may find new uses,...
Nuvei eyeing $250M acquisition of crypto startup Simplex
Canadian payments giant Nuvei is reportedly in talks to acquire Simplex, an Israeli cryptocurrency startup, for up to $250 million — sending a strong signal...
Price analysis 5/3: BTC, ETH, BNB, XRP, DOGE, ADA, DOT, UNI, LTC, BCH
Ether (ETH) has been the star performer among major cryptocurrencies in the past few days as its rally has continued unabated. The second-largest cryptocurrency...
Bitcoin rebounds to $56K as Dogecoin price halts at 420% weekly gains
Bitcoin (BTC) saw a staunch comeback on Tuesday thanks to fresh bullish news from PayPal combined with solid on-chain indicators. BTC/USD 1-hour candle...
Bitcoin vs. Altcoins: Why to Consider Various Options for Investment
It is somewhat difficult to imagine how a middle-class person can purchase one bitcoin, at a price of around $15,000, at a time. No wonder that lots of...