Ethereum is a decentralized finance behemoth that has exploded in popularity in recent years thanks to events like “DeFi Summer” and the rise of non-fungible coins (NFTs). However, Ethereum’s popularity may be contributing to its demise, as alternative protocols seek to chip away at or entirely absorb its market share, resulting in people having second thoughts on if they should buy Ethereum.
However, Ethereum’s popularity may be contributing to its demise, as rival protocols seek to lower or replace its market share. Bitcoin (BTC), on the other hand, is the mother of all blockchains and was the first modern version of cryptocurrency. Since then, various attempts have been made to provide users with more capability, but most have failed. Ethereum, whose native currency Ether (ETH), is now the second-largest cryptocurrency by market capitalization as many investors decided to buy Ethereum, and it is one of many that has responded to the challenge.
Ethereum enabled users to write smart contracts in a manner that Bitcoin couldn’t, propelling the network to its current position as the most popular blockchain for DeFi initiatives. It is evident that Bitcoin is here to stay, and there have been advancements in its DeFi capabilities — notably through the use of layer two solutions like the Lightning Network, Portal, and DeFiChain to help with scaling. In the DeFi space, however, Ethereum is still ahead of Bitcoin, but is it losing its grip, or are more investors choosing to buy Ethereum?
Ethereum Losing Its Grip As The future Of DeFi
In 2021, Ethereum had extraordinary growth, reaching 800,000 daily active users in November. It has real-world applications, with over $150 billion locked in through DeFi applications on the blockchain by 2021. Loans, derivatives, asset management, stablecoins, trading, and insurance are just a few of the services provided by decentralized applications on Ethereum. However, because of its growing popularity in recent years, blockchain’s popularity has also become its curse.
The conversion to proof of stake and other upgrades in Ethereum’s entire transition to what is informally known as Ethereum 2.0 provides an answer to the problem of congestion and scaling. The more people utilize the network, the more crowded it becomes, raising transaction costs, also known as gas prices. These fees are in place to encourage network miners to participate in the network’s proof-of-work consensus method. However, delays in implementing the various phases of the full Eth2 deployment and the growing popularity of competing for smart contract blockchain networks may cause Ethereum to lose its crown and experience reduced investors who buy Ethereum.
Several blockchain protocols are vying for the top spot in the cryptocurrency rankings. Only a few have demonstrated great adoption, popularity, and real-world use cases in recent years and are now attracting the attention of people in the blockchain industry who would ordinarily buy Ethereum. Three of these blockchain networks are examined in depth in the Cointelegraph Research report: Solana, Polkadot, and Algorand. Each protocol’s history, distinctive characteristics, ecosystem, and scaling potential are detailed to see if any of these chains has what it takes to be the “Ethereum killer.”
Solana promises to be able to execute more than 50,000 transactions per second (TPS), but the network has failed to achieve these rates while offering quicker transaction speeds at a fraction of the cost of Ethereum. Polkadot brings interoperability to the table, allowing several strings to work in unison. On the other hand, Polkadot hasn’t fully taken off yet, and it’s unknown how it will do in the real world. Algorand is a blockchain with high TPS, low network fees, and no history of crashes, designed by some of the brightest minds in the crypto field. Will, that approach be a winning strategy in the end? Your adoption metrics reflect a modest but steady pace – will that strategy be a winning strategy?
Solana, Polkadot, and Algorand all operate in quite different ways, with each providing benefits over Ethereum in its current state. While the future may be multichain and full of paths to interoperability, only the best will be able to dominate in the DeFi area — who will it be?
Will Ethereum Retain Its Place As The Future Of DeFi?
Solana, Polkadot, and Algorand, among other networks, are putting a lot of pressure on Ethereum. Each of them proposes a solution to Ethereum’s existing issues. These promising protocols would be pleased to take Ethereum’s place as the future of DeFi and dissuade investors who intend to buy Ethereum if the complete rollout of Eth2 does not go well or continues to be delayed.