Source: Adobe / David Stuart
Ethereum (ETH) isn’t the only smart contract platform in town. While it certainly has a first-mover advantage in its quest to become a decentralized general-purpose computer, there are a growing number of other chains that also offer the infrastructure to run decentralized apps (dapps), and some of them seem to be significantly in the share of the cake to be mixed in by Ethereum.
The recent emergence of blockchains like Binance Smart Chain (BSC), Solana (SOL), Cardano (ADA), Cosmos (ATOM), Polygon (MATIC), and Internet Computer (ICP) (to name a few) begs the question: however. Can such blockchains and platforms coexist peacefully in a “multichain ecosystem”, or are we likely to see consolidation around a few dominant networks as the industry matures?
According to industry watchers, we will see a multichain future even if a handful of platforms get bigger than others. But while most envision that Ethereum will continue to play a leading role in the ecosystem for some time to come, others warn that it will have to resolve its gas problem quickly or otherwise fall behind newer rivals.
Rise of the blockchains
“A number of new EVM (Ethereum Virtual Machine) -compatible blockchains are currently successfully taking Ethereum itself out of action,” said Mark Jeffrey, CEO of Guardian Circle.
The most successful of these is Binace Smart Chain, which has expanded much faster than Ethereum in terms of new addresses and transactions in recent weeks.
Jeffrey says there are a number of simple reasons for this expansion of EVM-compatible chains.
“The first is that the gas crisis on Ethereum itself made transactions there very difficult. Fees from $ 30 to $ 50 for sending coins and fees greater than $ 130 for minting new NFTs [non-fungible tokens] have greatly delayed the use and growth of Ethereum, ”he said, adding that rising costs would have created a clear opening for competitors.
Second, by developing EVM-compatible chains, Ethereum’s rivals have essentially given themselves a ready-made ecosystem of dapps and projects to host.
“The clever ‘Ethereum killers’ realized that all the popular projects on Ethereum could simply transfer their EVM-compatible code to the new chain if they had simply forked Ethereum and eliminated the gas problem by changing the consensus and mining mechanisms. On the user side, Metamask and other ETH compatible wallets could be used immediately with these new chains, ”added Jeffrey.
In other words, the current crop of “Ethereum killers” – like BSC, Polygon, and Fantom (FTM) – has a better chance than ever of gaining a significant share of the Ethereum market, what they of would-be killers of several Years ago is different.
“Yes, one could argue that the higher fees for Ethereum now offer more opportunities for competitors than before,” a spokesman for BitMEX Research told Cryptonews.com.
For Binance’s Changpeng ‘CZ’ Zhao, the emergence of newer chains isn’t particularly surprising as the industry is still growing and looking for alternatives to existing platforms.
“BSC offers, for example, a high-performance and inexpensive public, permission-free network that is compatible with the Ethereum Virtual Machine,” the CEO told Cryptonews.com. “The faster transaction speed and lower transaction costs have accelerated its usefulness since its introduction last year, and this is one of the efforts to provide better service to users.”
However, few industry insiders expect any of these competitors to overtake Ethereum enough to become the dominant chain and relegate Ethereum (and others) to the fringes.
Instead, Peng Zhong – the CEO of Tendermint, a key contributor to the Cosmos Network – suggested that different chains essentially need to work together to be successful, developing some sort of symbiosis that allows them to mutually, albeit indirectly, to support.
“We have seen incredible developments and innovations built on and around Ethereum, and at Cosmos we want to support that development, especially in the emerging field of DeFi [decentralized finance]to grow sustainably. We believe blockchains should work together to grow the industry and benefit from each other’s expertise, ”he told Cryptonews.com.
Zhong added that chains positioning themselves as “Ethereum killers” will have a hard time competing without compromise, be it in terms of decentralization, user base, or network effect. “We shouldn’t compete internally, we should look for ways in which we can work together and help each other grow.”
No zero-sum game
In fact, few, if any, participants in the broader blockchain ecosystem believe that crypto is a zero-sum game in which one platform will inevitably conquer everything. This is not least due to the fact that currently almost no chain is technically able to handle every user in crypto.
“We can see from the mainframe model of Ethereum that the ‘one blockchain to rule them all’ approach is not sustainable. The network is already over 99% full, resulting in network congestion and high fees, ”said Zhong.
He argues that DeFi applications shouldn’t exist solely as smart contracts on Ethereum.
“We believe they should exist as sovereign blockchains in a networked ecosystem, which is what Cosmos is all about,” he said.
Others agree that crypto and blockchain need to take a more collaborative, coexistence-oriented approach. As Mark Jeffrey suggested, compatibility can now be a necessary requirement for survival and success:
“It’s not a zero-sum game. The rule now is that you need to be EVM compatible. If that is you, now is your time to run. It is best to get multichain.xyz and other utilities to assist your chain. It is best if you get SushiSwap or a clone of it up and running quickly in your chain and have liquidity, farming and all of those things going fast. “
‘A MySpace Moment’ for Ethereum
But even assuming that crypto will need multiple chains to really thrive and develop, can we still expect Ethereum to be the leading smart contract platform for the foreseeable future?
Jeffrey doesn’t take this for granted.
“Ethereum has to solve the gas crisis. And so on. It has to, absolutely. This is a MySpace moment for ETH – either solving their grave problems and defending their turf, or being left behind while BSC or Polygon have their milkshake, ”he told Cryptonews.com.
For BitMEX Research, Ethereum offers certain benefits that may be enough to keep it on top for some time.
“[Liquidity locked inside of DeFi] could be a strong advantage. It could be difficult for competing platforms to generate this liquidity unless the competitors have help from well-funded financiers like FTX and Binance, “the spokesman said.
BitMEX Research also adds that the distribution of coin ownership in terms of greater dispersion than competitors can benefit Ethereum. As well as the sheer number of apps and tools developed for Ethereum, even if many of them can be transferred to other chains.
In the longer term, however, Tendermint’s Peng Zhong suspects that the dominance of Ethereum could decrease to a certain extent if developers shift more to building blockchains than apps, driven by the desire to have their own chain of sovereignty and set their own rules .
“As the benefits of this autonomy become clear and the networked chain ecosystem grows, I believe we will see a migration away from smart contracts to independent blockchains. There will be no limit on the number of chains or potential use cases for the future multichain and multiprotocol environment and Ethereum will definitely continue to play an important role, “he said.
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