Ethereum laid the groundwork as a smart contracts platform in the crypto industry, leading to the emergence of technologies like NFT and DeFi. While this is very interesting, it also led to a big problem. While innovation with DeFi and NFT can be seen as an opportunity to look into the near future, it is not the way to go. It has led to increased use of the network, which has led to it becoming more and more congested over time. This has happened with the NFT revolution and the release of countless new projects every week. Coinage wars are extremely congesting the network. This leads to obscene gas prices, sometimes in the neighborhood of $300 per transaction.
It’s not the norm, but it’s rare to see gas below 100 these days. It’s not a problem if you have high equity in ETH and you send large amounts. But it is a serious obstacle when you are trying to connect new users to the Ethereum blockchain. Now I know very well that we have second tier solutions to combat this problem, such as Polygon, Arbitrum etc. etc. Along with the upcoming ZK accumulations, but this does not dispute the fact that currently using Ethereum is a privilege for the users of the underlying network.
Competitors eat up market share
The current growth of other blockchains, such as Solana and Avalanche, is due to the fact that the current Ethereum gas situation is untenable. This does not change the fact that Ethereum is a premium chain, but it should be available to everyone. It’s not going anywhere because we clearly see a trend where NFTs on Ethereum are priced the most. In addition, new entrants keep releasing their projects on Ethereum. While other networks have cheaper solutions, Ethereum is like Manhattan at the moment. It is expensive, but you can probably expect it to go up in price. However, the network effect would probably already be stronger if gas fees weren’t such a big deal.
While the idea of decentralization sounds compelling, people are not willing to pay large sums for a transaction for its cost. It begs the question of how much people actually care about decentralization. Solana is more centralized than Ethereum, so it can have such fast transaction speeds and low fees. We’ve seen a problem with this when the network didn’t work because it has a more centralized point of failure. Nevertheless, it offers a more convenient transition to cryptocurrency, given that it is more financially accessible. So does Avalanche, which is also seeing rapid growth in popularity and pricing behavior.
Although I mentioned a second-tier solution such as Polygon, the cryptocurrency community considers it slow. Although this can be fixed by increasing the gas charge, this is the reason you originally used the Polygon network. Thus, you get a paradox.
Fortunately, Polygon is taking action in this regard,
In addition to Polygon, there are countless ZK accumulations going on, such as zkSync, Loopring, and others. This is a clear sign that measures are being taken to solve the gas problem, but the main problem will be connecting new users to these platforms because the network effects are strong in the core network. We hope that Ethereum 2.0 will be a solution to this problem because it should bring the gas charges down to almost zero. While this is encouraging, we don’t have an exact release date yet. Right now, the Ethereum community is hungry for that hope.
Lack of originality in different blockchains
Although other blockchains are gaining in popularity. The space lacks originality, which puts them at risk for existence in the long run. What is happening in the industry is more or less a copied version of Ethereum in terms of implementing NFT and DeFi while incorporating it into different blockchains. If Ethereum can successfully implement its convolutions along with the transition to Ethereum 2.0, what happens to other blockchains? It is best to innovate faster, as there is a high probability that their unique commercial argument will fade over time. Network effects are strong in this space, and if most participants use the dominant blockchain, the rest will follow.
Some questions remain: Is there room for multiple blockchains solving the same problem, or will one dominate? Will Ethereum take market share from other blockchains and make them obsolete, or are their communities already too strong? That’s a question for Father Time.
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I want to make it clear that while I am a financial professional, this is not financial advice, and this article is only meant to shed light on the current market situation. I advise everyone to do their own research, I just want to help you find what you are looking for.