Ethereum’s Competition

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01 December 2021| ZebPay Trade-Desk

Bitcoin and Ethereum are the two biggest names synonymous to crypto in the world. However, new players are flourishing with the commitment of cheaper transactions, less power consumption, and greater speed. These new players are referred to as altcoins, alternative cryptocurrencies that are not Bitcoin.

Ethereum may be the largest altcoin in the market, but there is a disagreement that it is really classified as altcoin because its market value of $ 557 billion is greater than any other cryptocurrency in the vast universe of cryptocurrencies.  The cryptocurrency market witnessed a bullish run in October that overflowed to  November, with many saying the altcoin season has arrived. While Bitcoin and Ethereum saw huge amounts of gains, smaller altcoins also gained profit even more in percentage terms as they were undervalued in comparison. 

 Ethereum pioneered the concept of a  smart contract blockchain platform. Smart contracts are computer programs that automatically perform the actions necessary to fulfill a multi-party agreement on the Internet. They were designed to reduce the need for trusted intermediaries among business owners, thereby reducing transaction costs and at the same time increasing the reliability of transactions. Ethereum’s main innovation was the design of a platform that would allow it to execute smart contracts using blockchain, further enhancing the already existing benefits of smart contract technology. The Ethereum blockchain was designed, according to co-founder Gavin Wood, as a kind of “computer for the entire planet”, theoretically speaking it has the capacity of making any program more robust, obviously resistant to censorship, and less prone to fraud runs via a network of public nodes around the world. 

 Along with the capacity to generate smart contracts, the Ethereum blockchain is able to host other digital currencies, called “tokens”, through the use of its ERC20 compatibility standard. In fact, this is the most common use of the ETH platform to date, over 280,000 ERC20 compliant tokens have been issued. Over 40 of them are in the top 100 cryptocurrencies by market cap, like USDT, BAT, and MANA Since the emergence of Play2Earn games, there has been a substantial increase in price interest from ETH to PHP.  Ether or other tokens are the most important part of participating in high-value transactions, including non-fungible tokens (NFT), decentralized finance (DeFi), and decentralized applications (DApps).

Ethereum was launched in 2015 and has since dominated the DeFi world followed by Bitcoin.  The ecosystem has been the foundation of around 79.23% of apps and a total net value of $77.2 Billion still the world’s popular open-source decentralized marketplace also has cons that have given birth to a league of Ethereum-killers or competitors.  One of the reasons could be low scalability, ETH used a Proof of Work model which facilitates just 13 transactions per second than its actual demand of 1.35 Million TPS every day. This surely leads to network congestion and high transaction fees.  Another reason could be the environmental angle which is unsustainable power consumption. Since the PoW model’s algorithm required a huge amount of computational power where the power consumption for an hour touched 65.5KWh. 

Ethruem’s competitors, the open-source blockchain, have tried to catch up with it in the crypto market by making sure they are performing better on the weak points of the asset. Let’s take a look at the major players calling themselves the Ethereum killer : 

Solana has proved itself in the market, especially during the Bitcoin crash by touching an all the time high value of $214.96 and a 123% rally in the past month. It is the world’s first web-scaled blockchain that is capable of hosting applications with a computational bandwidth like that of the internet. The web-scale blockchain has pushed the asset in the following ways: 

  • It is the fastest fourth -generation network with a transaction per second of 50,000 along with an average block time of 600 millisecond. 
  • It has managed to enable a fast scalable network without compromising on the decentralization or security aspect. 
  • And it is 3800 times faster than ETH, also bringing extreme cost efficiency at $0.00025 per transaction as compared to Ether’s $10-$65. 

Polkadot is unique because of something called a parachain or parallel processing chain which has the capacity to connect different blockchains into a unified single network.  And they have managed to create an advantageous position for the asset in these ways: 

  • It has a high scalability when compared to Ethereum network facilitating multiple transactions from 100K to almost 1 million TPS. 
  • The parachain has also allowed the interoperability feature which helps in diversifying chains to perform multiple functions such as transactions as well as random messaging.   
  • Another unique feature this parachain has enabled in Polkadot is the forkless protocol, unlike other networks the forkless blockchain undergoes automatic upgradation to add any new feature to the network without having to splint. 

Cardano was founded in 2017 and is named after the 16th-century Italian scholar Gerolamo Cardano. The native ADA token is named after 19th-century mathematician Ada Lovelace, widely regarded as the world’s first computer programmer. The ADA token is created to ensure that owners can participate in the functioning of the network. For this reason, those who hold the cryptocurrency have the right to vote on any proposed software modification.  The team behind the layered blockchain claims that there have already been compelling use cases for its technology, which aims to enable the development of decentralized applications and smart contracts with modularity. 

  • It is a third generation blockchain that has tried to address all the limitations present in the first two generations of Bitcoin and Ethereum. 
  • It is a Proof of Stake model making it energy efficient with 266 TPS and eco-friendly as the transaction validation takes a fraction of the total computation time when compared to ether’s network. 
ETH Jun Jul Aug Sep Oct Nov
Price (US $) 2335.8 2131.1 3098.4 3337.1 3818.8 4434.1
MoM ROI (%) -25.63% -32.15% 45.39% 7.70% 14.44% 16.11%
Market Cap ($ BN) 271.65 248.75 362.95 392.22 450.48 524.82
% growth -25.36% -31.66% 45.91% 8.07% 14.85% 16.50%
SOL Jun Jul Aug Sep Oct Nov
Price (US $) 35.7 30.4 60.8 151.2 172.4 224.4
MoM ROI (%) -10.46% -23.79% 100.06% 148.56% 14.05% 30.16%
Market Cap ($ BN) 9.74 8.29 17.35 44.58 51.72 67.97
% growth -10.46% -23.78% 109.35% 156.94% 16.01% 31.42%
DOT Jun Jul Aug Sep Oct Nov
Price (US $) 20.4 14.3 23.4 31.6 39.0 44.7
MoM ROI (%) -37.27% -55.90% 63.37% 34.69% 23.57% 14.66%
Market Cap ($ BN) 19.40 13.92 23.09 31.16 38.51 44.15
% growth -36.43% -54.39% 65.93% 34.94% 23.57% 14.65%
ADA Jun Jul Aug Sep Oct Nov
Price (US $) 1.5 1.3 2.1 2.4 2.2 1.9
MoM ROI (%) -10.55% -22.54% 65.09% 15.01% -11.54% -11.82%
Market Cap ($ BN) 47.27 41.01 67.92 77.93 70.31 63.18
% growth -90.96% -92.16% 65.62% 14.75% -9.79% -10.13%

In the table above we have the MoM analysis of the Price and Market Capitalization of Ethereum and its rivals. The last 6 months have been an exciting journey for the crypto market. Some great achievements to be recorded in history have occurred as well the accusation on crypto has risen too. But the rate of innovation has never been so high as we have observed this year. To get a piece of the market share of Ethereum many rivals have been sprouting and in the last 6 months played an important role in their growth and coming to the limelight.

Solana has been in the spotlight quite a lot in the last few months which can be observed in the table as it has shown great growth both in terms of price and market cap since August and has been quite resilient during the fall of September and early November.  The asset now holds a place in the top 5 assets ranking at 5th with market capitalization risen by around 73,891% since January. And YTD has been phenomenal with an 11,240% increase entrusting old investors and attracting new ones. 

DOT, the native utility token of the Polkadot system, has shown a similar trend as that of ETH and Solana tokens. An accelerating broadening has been observed in the asset with the auction of its first parachain pushing the token to create a new ATH. Dot has swelled by about 403.69% in terms of market capitalization this year holding the 9th rank in the top assets. The year-to-date return has been 356.8% is expected to rise higher with new developments lined up after the para chain slot auction and their uses. 

ADA is the in house functional token of the Cardano ecosystem and has not followed the path of its rivals altcoin with showing negative numbers until August due to the aftermath of the May crash and reviving and even claiming the 3rd rank in the top asset by market capitalization and again plunging due to the market instability. The token has swelled by about 850% in the last 10 months, currently competing with Binance Coin to claim the 3rd position again ranking just below it. The YTD ROI is approximately 748% providing support to the long-time investors and supporters of the ever-developing network. 

Etheruem though holds strong on its 2nd rank but is facing stiff competition and rivalry due to its limitation and is fastening up to solve some of its fundamental issues in its upcoming ETH 2.0 version. The upgradation is already in the process taking place in phases. The recent Landon Hard Fork upgrade aimed at reducing transaction fees and inflating the asset by coin burning.  The Ethereum 2.0 is expected to come before 2022 and is claiming to significantly transform the network with the efficient PoS mode, reduction of power consumption by 99.95%, and lower gas fees as well as increased transaction capacity. It is very difficult for Solana, DOT, or ADA to replace Ethereum mainly because Ethereum has a better hold on the market, due to its first mover advantage and eventually having very high Brand recognition. No doubt these have better technology but it takes time for people to adopt new technology.

Competition between tier one rages on as the frenzy around various decentralized applications (dApps) and non-fungible tokens (NFTs) in 2021. While the  DeFi summer of 2020 depended on Ethereum as the main driver, 2021 saw the rise of another layer one protocols such as Solana and others like Cardano, Polkadot who promised higher transaction speeds at lower costs, which Ethereum aims to achieve using its Ethereum 2.0 upgrade.

While all these blockchains have certainly found their fair share of fans and supporters, Ethereum reigns supreme as a blockchain offering a much more transparent and advanced ecosystem of dApps. But there are certainly differences among them that cannot be ignored.  Currently, these are the prominent Ethereum would-be successors, but they also face fierce competition from the likes of Algorand, Tezos, Binance coin, and Polygon, among others. Hence, while DOT, ADA, and SOL is definitely a force to be reckoned with, it is still relatively small, and their further development will determine if they can actually beat Ethereum. However, the future does look bright for all these assets.

References:

https://coinmarketcap.com/

https://www.coindesk.com/

Disclaimer : This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptocurrencies viz. Bitcoin, Bitcoin Cash, Ethereum etc.are very speculative and are subject to market risks. The analysis by Author is for informational purposes only and should not be treated as investment advice

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