In the world of smart contract, Ethereum is king and the rest can only watch from a distance.
Ethereum’s potential to become the dominant blockchain for carrying out transactions within a decentralised financial system seems infinite. Ethereum continues to absorb the majority of users, liquidity and developer creativity. Watkins of research agency Messari looked at the blockchains of Ethereum and Bitcoin and concluded that the daily transaction volume of Ethereum is twice as high.
The downside of dominance
But such a high transaction volume also has a price. Literally. Transaction costs (gas) have to be paid. An enormous growth in popularity in DeFi and, to a lesser extent, NFTs, pushed transaction costs to record heights. This makes Ethereum too expensive for many consumers to use, unless the amounts involved are very large. It also makes it less attractive for non-financial applications. Ethereum developers have made several attempts to solve scale problems, but there is no miracle cure yet.
Room for competitors
This ‚gas crisis‘ is in theory the perfect storm for the so-called Ethereum Killers to pluck their cheap solutions and superior scale technology. The full launch of ETH 2.0 will take some time, giving other networks a glimmer of hope to conquer part of the smart contract market.
The past quarter has seen a revival of other smart contract platforms. There are five projects that collectively raised 138 million dollars in Q3. We are also seeing the emergence of parallel DeFi ecosystems. There are more than 50 projects building on the Cosmos SDK and Polkadot DeFi projects have raised a total of more than USD 18.5 million in the past two months.
The coming months could be very decisive for the future of smart contracts. Almost every high-profile Ethereum competitor will be live by the end of this year. With Ethereum’s current gas problems, their timing could not be better to try to convince the talent and liquidity of developers to switch.