The following is a guest post and analysis by Shane Neagle, editor -in -chief of the Tokenist.
Because the fertile but somewhat fraudulent initial currency (ICO) frenzy in 2017, Ethereum (ETH) remains the second only on Bitcoin, now on 9x lesser market capitalization. In the past five years, Ethereum had an average annual return on almost 60%That is neck and neck with Bitcoin.
In the past year, however, there has been a noticeable shift in the appreciation of Ethereum, especially against rival block chains such as Solana (SOL). Compared to Bitcoin, which yielded 33.73% for a year of one year, Ethereum yielded nearly 50% loss. At the current price, ETH returned to the price level of October 2023.
What is noticeable is that alternative proof-of-stake Solana has large and frequent intake splashes, while Ethereum tends to fall without such rallies. Ethereum represents the Decentralized Finance (Defi) and now has hardly any 52% market share, the lowest since May 2022.
In the meantime, Solana doubled its market share more than since May 2022, from 3% to almost 8%. Given that there is no shortage of layer 1 block chains comparable to Solana, this is a sign that
Ethereum will continue its slide and can be canceled by Pure L1 chains that are not dependent on L2 solutions?
In other words, how should one view the foundations of Ethereum? Could it be that Ethereum is actually ready to maintain or even enlarge the Defi market domination, but that the ETH price will still be faint?
To answer that, we first have the big crypto image.
What is Ethereum’s vision?
Since the internet has been commercialized, it misses an obvious component – native value transfer. After all, if e -books can replace books, and if e -mails can replace e -mail, why can’t Emoney replace Fiat -Valuta? What is even more important, why cannot contracts be automated for replacing bank services such as loans?
This is the underlying urge for blockchain technology, starting with Bitcoin. But for the indigenous money transfer from the internet to be assumed on a scale, it must have three critical components:
- It must be confidential, which eliminates the vulnerability of random human intervention. To be completely familiar, the spectrum of trust must be minimized to almost zero.
- It must be user -friendly, implement intuitive design, seamless interoperability and frictionless user experience, just as smartphones have achieved as mass adopted.
- It must be scalable to handle the transition from legacy financing to blockchain financing.
Within this framework, Ethereum is strongly positioned as a theoretical building. Recently one of the top -eatherum -developers, Justin DrakeFiltered what Ethereum means at different locations of Legacy Human Action.
But in practice, what is the chance that this will happen?
Is crypto actually viable?
At first glance, Ethereum strives to upgrade deep -rooted power networks. Expecting expecting that it would go without great friction would be an exercise in foolishness. That is why we have made persistent efforts Ventilates the expansion of Defi services During the Biden admin.
When President Trump took on and Elon Musk launched the Department of Government Efficiency (Doge), it became even clearer that the entire mediator and political space will continue Social Engineering and Institutional Deception. And the underlying power of such a system is the lack of transparency in money flows.
What has been established in particular is:
- If a power is threatened, the conditions are set up to contain alternative power.
- In the context of Cryptos, the basis of deep -rooted power is the need for Fiat conversion.
- Defi apps can be useful, but are useless if one cannot spend money in the real world.
- That is why all participants in the (block) chain must meet the conditions of deep-rooted power to live Fiat-Crypto conversion.
An example, which believes if a person believes climate change To be a systemic hoax, aimed at suppressing wealth distribution through Net zero policy? Such a policy is financed and maintained through taxation. The output of financing for the perceived compulsory policy would then require laws to be violated.
This applies to any public policy that is considered unjust or deceptive.
But if mass adoption of Defi -Blockchain is successful and For credit cards To get a good rival, there should be a consistent compliance with the laws, regardless of what they are at a certain moment. That’s because Dapp Nut is equal to compliance with the regulations. In other words, even a confidential system should bind itself to the random trust framework that it would like to leave.
But if that is the case, why should the deep -rooted Power Network not implement His own cash layer On the internet? After all, it would enjoy the complete credibility for massive adoption, while it is also more convenient.
Ultimately, Ethereum’s vision can stare too high on a wall to scale. But now that we have painted the big picture of crypto connection, is Ethereum primarily competitive?
Ethereum’s revitalizing initiatives
Although the transition from Ethereum from proof-of-work to proof-of-stake Hacks some hackles raisedIt could be said that the 99% energy reduction was worth scaling. In this way, Ethereum has the potential to become a global smart contract launching path.
On that road, the adopted approach depends on Layer 2 solutions such as optimism, polygon, arbitrum, base, starknet, zksync and others to discharge traffic and reduce transaction costs. And the lower the transaction costs, the lower the friction for the end user.
The problem is that this approach introduces a whole new layer of frictions, such as juggling with multiple chains, bridges and portfolios. This not only increases the accession threshold, because the average user always looks for the simplicity, but the capital that would otherwise have flown in Ethereum itself.
On the front of the scale, however, Vitalik Buterin noted that the L2 approach succeeded in increasing the blockchains transaction processing capacity by 17x. The umbrella goal is now to make Ethereum a kind of operating system (OS) for Defi:
- Make L2S interactions “under the hood” by creating chain-specific addresses, common standards for cross-chain bridges and reducing transactive sinality of to soften Up to minutes.
- Double the Blobs (temporary data) per block of 3 to 6 with Pectra -upgrade. The increased Blob throughput should further expand L2 layers while retaining low costs.
- To make ETH an appreciative active, Buterin hopes to anchor it as the primary collateral in Defi apps.
- In addition to the burning mechanism such as ETH transaction costs, this ETH can make it a deflationary active. At the moment ETH has a inflation From 0.754%, slightly lower than Bitcoin’s 0.829%.
Buterin, however, also considers privacy delivery as first, which is why the Ethereum ecosystem must go to standard one address per app. According to his own wordsThis would “make significant sacrifices of convenience, but IMO is a bullet that we have to bite”.
At a time when the convenience level of the Ecosystem of Ethereum is dubious against pure L1s such as Solana, it is still to be seen whether the “bullet” will be counterproductive. Judge the Deloitte -survey At the end of 2024, 85% of consumers “take at least one step to tackle their privacy and safety problems”, but this sentiment usually suffers erosion when collision with ease.
Ultimately, Ethereum will have to reach a stage in which users deal with daps without knowing that they use crypto. In such a scenario, the adoption percentage should compensate for potential crypto interpretation.
The problem is, Solana is already 1st In terms of real-time transactions per second (TPS) at 1,049 while Ethereum 17th is at 14.07 TPS (more than a week)-a reminder that even Differences measured in a single tap Can have large implications on a scale. Against the theoretical 60,000 TPS from Solana, the route map of Ethereum has been set for 100,000 TPS, because the blockchain is sanded in “golf“Development phase.
Accounting For all route map phases, users should not expect that the massive acceptance potential of Ethereum will come true until 2030. This gives a lot of lane for rival block chains, including centralized from established financial institutions such as such as such as Jpmorgan.
The Bottom Line
Blockchain apps are currently in the awkward era of Flipphones with physical keyboards. To approach everybody, Dapps must evolve into the era of smartphones – intuitive, seamless and invisible to the user.
But such a omnipresence can paradoxical enough rely on the very institutional support that the blockchain ecosystem wanted to move. In addition to technical obstacles, the Memecoin Mania Has clearly demonstrated that much of the accession of the public in crypto remains poorly informed and speculative.
As more people build negative experiences through gambling based on token, this wrong allocation of capital risks that alienate a wider acceptance. It also creates a dynamic in which blockchain ecosystems become ripe for centralization, offers guarantees and the observed legitimacy of certified institutions.
This is the lens that means that Ethereum and its rival chains must be viewed: as exciting, innovative platforms for decentralized finances, yet navigating a precarious path between idealism and reality.
