Is Ethereum’s dominance likely to be shaken?

As the main platform for encryption applications, Ethereum will perform well in 2021, but due to the endless emergence of new applications, Ethereum is overwhelmed. If Ethereum’s sharded network is delayed, Ethereum’s market share will slowly be lost. So can Ethereum maintain its dominance?

In 2021, when the crypto market is prosperous, Ethereum has also undergone unprecedented tests, and the high gas fee has discouraged many applications. However, the engineering and implementation of Eth 2.0 has been more difficult than expected, and repeated delays have caused some impact on Ethereum’s dominance. Therefore, while the sharding network is gradually implemented, the development and competition of Ethereum Layer 2 is also called a big game. This drama will also be staged in the next year, and may coexist with Eth2.0.

On the other hand, the congestion of Ethereum has had a spillover effect. In 2021, some other public chains will take the opportunity to seize the market. The ones before the ranking comparison include: Solana, BSC, Terra, Avalanche, Fantom and Tron. If it weren’t for a big year like 2021, it would be difficult for these public chains to achieve the development they are today. Looking at the whole year of 2021, Ethereum’s market share in decentralized application hosting has shown a downward trend, from almost 100% at the beginning of the year to about 70% at the end of the year . 

If this trend continues, Ethereum really hangs. My own PoS has not been launched yet, and the PoS of competing chains has already landed. Applications are also blooming in all directions. So is Ethereum slowly losing its edge? I think the judgment of most people in the industry is still very small.

First of all, the huge ecosystem of Ethereum cannot be shaken by other projects . As mentioned earlier, the development of other chains is mainly due to the spillover effect, and they undertake applications and traffic that Ethereum cannot currently support. Currently they are also complementary to the Ethereum network. Moreover, the application forms they support have not changed much at present, and these developed chains still support DeFi, NFT, DAO and so on. with a considerable degree of homogeneity. When the market cools down, if this spillover effect becomes less pronounced, it will be these competitive chains that will be hurt first. Predictably, they are more volatile than Ethereum. In direct competition with Ethereum, spillover effects alone are not enough. In this market, the public chain that is differentiated from Ethereum may be IC (DFinity). However, it will take time for IC to mature, and it may take several years of improvement work. Another public chain worth looking forward to is Filecoin. At present, Filecoin is not a public chain, it only exists as a storage bottom layer. However, Filecoin is expected to support smart contracts in 2022, including compatibility with EVM, so that Filecoin will be upgraded to a public chain, and it is a differentiated public chain with Ethereum, which can be directly combined with data to produce different decentralized applications. In this regard, in the subsequent development of the public chain, they will face less competition and may have more room for development.

Second, Ethereum may have actual scalability in this cycle . The crypto market cannot continue to be hot, there are always ups and downs. This round of boom in 2021 may temporarily recede, or it may show a state of stagflation. In any case, the spillover effects of the adoption of Ethereum in the crypto market will slow down. At this time, it is a key stage in the development of the official Ethereum. Ethereum has two paths to improve its expansion. One is Layer 2. This part is likely to be gradually clarified within 2 years to realize the expansion of display. upgrade. Once Eth 2.0 is completed, the entire network will likely carry dozens of times the capacity, which will further cement Ethereum’s dominance.

Third, Ethereum has better decentralization characteristics . Now emerging public chains all adopt PoS. A common feature of these PoSs is that they rely on staking, and the block reward is basically proportional to the amount of staking. This is indeed greener in terms of energy consumption. However, from the perspective of network construction and maintenance, it seems to bring the blockchain back to the capital era. Capital has the final say, whoever has more money has more right to speak. Please note that this is very different from Bitcoin. The rewards of Bitcoin are directly given to the builders and maintainers of the network. Whoever has a higher proportion of computing power in the network (the network contributes more) will earn more. high. PoS has evolved into two identical nodes, doing the same verification work and ledger maintenance work, and their income will vary greatly due to the different amount of mortgage. This is a step backwards, a helpless compromise under energy consumption. At this point, Eth 2.0 does slightly better. At least it looks like each node’s collateral is the same, and each node’s revenue will be similar. Although it doesn’t work for Sybil attacks. When overall, we will see more Eth2.0 nodes, the bigger the network. And other networks like Solana, BSC, Terra, etc. will not be able to compete at this point.

In addition, Ethereum’s competing chain will also face the competition of Ethereum Layer 2 . The reason is very simple, all of them are spillover effects, so the spillover to Layer2 seems to be smoother. The maturity of Layer 2 will likely cause the flow of competing chains to flow back. Among these competing chains, Solana and BSC may perform better because they have centralized exchanges backing them. However, this goes back to the previous question, relying on the endorsement of a centralized exchange, then your decentralization characteristics will be more harmed. The damage isn’t showing up right now, but it will show up eventually.

So, is Ethereum difficult to be replaced? Actually not. Ethereum was launched in 2015 and has developed rapidly over the past few years. The main reason is that it is the first public chain to support smart contracts, and thus has established a stable ecosystem. However, just because it is the first public chain to support smart contracts, it has a lot of unreasonable and needs to be improved. The current competing chains are partially improved from different angles. Both the economic model and the consensus mechanism are different.

The biggest problem facing Ethereum is the EVM. It can be said that there is no decentralized application without EVM. However, as the earliest blockchain virtual machine, it also needs to develop. Not only to develop, but also to break through. For example, the security of EVM has been widely questioned, but there is no way to do this. It cannot be changed. It is very laborious to change. What should I do with so many historical burdens? It’s also good for immediate use. However, technological advancements and breakthroughs are always going to happen, and once other virtual machines recognized by the market gradually occupy the market, Ethereum must also adapt. At that time, we may also see Ethereum slow to adapt and gradually lose the market.

On the other hand, regarding the consensus mechanism, most of the current PoS implementations succumb to funding. Is it possible to have a better consensus mechanism? This is entirely possible, and Filecoin has done a very good attempt. Filecoin is a PoW + PoS mechanism, and it is PoS in terms of block rewards. S (equity) here refers to the actual contribution of the storage provider to the network’s storage, not the share of funds mortgaged by users according to their own ideas. It’s very different. It realizes incentives according to the contribution of participants to the network, which is a positive incentive for the network, and at the same time, it also achieves very good decentralization. This PoS based on network contribution is obviously better than PoS based on capital investment. Simply put, one is a decentralized distribution according to work, and the other is a capitalist shareholder dividend. In my opinion, such a distribution system according to work is the future of the consensus mechanism.

Whether ethereum’s dominance can be shaken, or when ethereum will lose its leadership, is anyone’s guess. What we can be sure of is that the blockchain application ecology will become more and more prosperous, and technological progress will be unstoppable. Technology will lead the change, but the ecology will also adapt to development. Who will have the last laugh, let’s wait and see.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-01-09 08:31
Next 2022-01-09 08:32

Related articles