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Ethereum killers: What could outshine ETH?

14:57, 1 March 2022

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The next phase of the internet, designated Web 3, has attracted numerous players all vying to be at the centre of this lucrative development. Web 3 will be built using smart contract platforms, and market leader Ethereum has a distinct advantage over its competitors thanks to being the first to market. 

However, a gold-rush-like transition to blockchain has exposed concerns about Ethereum’s capabilities to scale. Expensive gas fees and slow transaction times on Ethereum have provided an opportunity for competitors to gain market share.

US-based investment bank Morgan Stanley issued a report in January 2022, noting that while Ethereum clearly has dominant market share leads in value, liquidity and developer and user numbers, its share could decrease over time.

“Network effects – the tendency for networks to become more valuable as more participants join them – constitute a wide moat for Ethereum, but even wide moats are sometimes overcome. Among several others, prominent Ethereum competitors include Binance, Solana and Cardano,” added Morgan Stanley.

In this article, we’ve compiled a list of top five “Ethereum killers” or alternatives to the Ethereum network based on market capitalisation. Let’s read how these Ethereum killers compare to each other and to the market leader.

Top five Ethereum killers by market cap

Binance (BNB): Evolution to smart contracts platform 

Binance, one of the world’s largest centralised cryptocurrency exchanges, launched its smart contract blockchain platform called the Binance Smart Chain (BSC) in September 2020. Over time, the total value locked (TVL) on BSC has grown to over $11.8 bn, as of 28 February 2022, data from DeFi Lama showed.

The launch of BSC transformed Binance’s BNB token from a simple utility token used to get discounts on Binance’s trading fees to a native token with its own underlying blockchain and staking mechanisms. These developments pushed the price of BNB from $24.82 at the start of September 2020 to over $395.61 at the end of February 2022, a surge of about 1,500%. Ethereum’s ETH increased by around 511% over the same period, going from $477 to $2,919.

Binance’s BSC is designed to be quicker and more cost-efficient compared to the Ethereum network. Data from BSCScan showed that BNB recorded over 68.2 transactions per second (tps) at a daily average gas fee of 7,61 GWEI. Meanwhile, the Etherscan data for Ethereum recorded 14.3 tps at a gas fee of 48 GWEI, as of 28 February.

With Ethereum soon moving to a proof-of-stake consensus, many hope that the migration will fix the issue of expensive gas fees on the world’s largest smart contract platform. 

Crypto asset manager Copper.co said: “But the best guess for the protocol switch is some time between 2022 and 2024, and timelines have been known to drift. The big question here is: what kind of market share can Binance Smart Chain grab in the next three years before Ethereum’s switch completes?”

Binance’s BNB token, the fourth largest cryptocurrency, as of 28 February 2022, with a market capitalisation of over $60bn, was initially deployed on the Ethereum network as an ERC-20 token but soon migrated to the Binance Chain. The Binance Chain runs in parallel to BSC, and is mainly used to power crypto trading on Binance.

In February 2022, Binance merged the Binance Chain and the BSC to form the BNB Chain in a push to expand its decentralised apps (DApps) ecosystem further and to strengthen BNB token’s utility as a smart contract platform token.

BNB coin all-time performance

Cardano (ADA): Can it live up to its hype? 

Blockchain network Cardano is the seventh most valuable cryptocurrency, as of 28 February, with a market capitalisation of around $31bn – Ethereum’s market capitalisation is over $316bn.

A pioneer of the proof-of-stake consensus mechanism, Cardano has been hyped as the more environment friendly, less expensive and more inter-compatible rival to Ethereum. Although Cardano has long been touted as an “Ethereum Killer”, its slow, peer-reviewed “measure twice, cut once” approach has divided opinion among crypto enthusiasts. 

For starters, Cardano only introduced smart contract capabilities on its network in September 2021, nearly four years after launch. Developer activity on Cardano is picking up. Crypto research company Santiment reported that behind the scenes more developers contributed to Cardano’s GitHub projects than any other smart contract platform in 2021, including Ethereum and Solana.

The network recently saw the launch of its first decentralised exchange (DEX), SundaeSwap, and Pavia, its first metaverse project. But Cardano still remains considerably behind Ethereum in terms of DApp deployments. As of 28 February, Cardano was host to 69 DApps, while Ethereum was home to over 3,100 DApps, including NFT-marketplace OpenSea and Ethereum-based DEX Uniswap. Data from DeFi Llama showed Cardano’s nascent decentralised finance (DeFi) ecosystem had a TVL of $116.6m compared to Ethereum’s DeFi TVL of over $110.1 bn, as of 28 February.

Cardano supporters remain optimistic as the network enters its penultimate development phase, the so-called “Basho era.” According to its roadmap, Basho will be “an era of optimisation, improving the scalability and interoperability of the network”. Cardano will introduce scaling solutions like sidechains and layer 2 solutions and will add features to switch between various accounting models to improve its inter compatibility.

Cardano (ADA) all-time performance

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Solana (SOL): Visa of blockchain?

Solana is right behind Cardano in terms of market capitalisation at around $30bn. In 2021, Solana was among the top gainers rising from less than $2 at the start of the year to end the year at about $170. However, its native token SOL has lost nearly 50% year-to-date in 2022, as of 28 February.

Bank of America global crypto and digital asset strategist Alkesh Shah compared Solana to the world’s top payment network Visa for its "high-value transactions and identity, storage and supply chain use cases”. Shah said "Solana could become the Visa of the digital asset ecosystem” in a research note seen by DeCrypt.

The network’s high throughput, estimated at 50,000 tps, and relatively low transaction fees have attracted numerous DeFi and NFT projects to the network. According to DeFi Llama, Solana’s ecosystem of DeFi apps holds a TVL of over $7bn, representing only 3.5% share of the TVL of the entire DeFi sector.

Industry experts are concerned about Solana trading decentralisation for higher performance, which came to light when the network experienced downtime in mid-September 2021 due to a sudden increase in bot transactions during the Grape Protocol Initial Dex Offering (IDO). The Block explained in its 2022 Digital Asset Outlook report

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“Eventually, validators voted to restart the network, but not before Solana’s DeFi protocols were put at major risk of malfunction that could have resulted in significant loss of user funds.
“Solana’s network downtime this year highlights the unique challenges of creating a new blockchain ecosystem, especially when it grows at such a rapid pace. One of the questions it raises is the issue of centralisation; Solana effectively trades throughput for decentralisation as its validators are much more computationally intensive to run compared to other L1s. During the downtime incident, validators were able to quickly reach consensus to resolve a critical issue, but one could also argue that such centralisation presents a concentrated point of risk for the network.”

Solana (SOL) all-time performance

Avalanche (AVAX): Fastest blockchain in the world? 

Like Solana, Avalanche saw a meteoric rise in 2021 as it surged about 2,400% in the year. The smart contract platform’s AVAX token has broken into the coveted list of top ten most valuable cryptocurrencies and currently (1 March) boasts a market capitalisation of over $19bn.

According to its website, Avalanche claims to be the fastest smart contracts platform as measured by time-to-finality. Finality is the time taken by a blockchain network to validate a transaction and guarantee its execution. Avalanche said its unique consensus engine allows it to achieve transactional finality in less than two seconds compared to 60 minutes and 6 minutes taken by Bitcoin and Ethereum, respectively.

The blockchain platform has attracted big-name corporates including payment giant Mastercard and consulting company Deloitte to partner with it on blockchain projects. In November 2021, Deloitte signed a deal with Ava Labs, the research team behind Avalanche, to develop a new disaster recovery platform that uses the Avalanche blockchain to help governments get federal emergency funding. 

Later in December 2021, Ava Labs was selected by Mastercard to join its Mastercard Start Path Crypto, a scheme dedicated to explore new blockchain technology development opportunities. 

Unlike Solana, Avalanche is EVM (Ethereum Virtual Machine)-compatible, which means that the network allows developers to upload Ethereum-native smart contracts to Avalanche. This has played a major role in its growing popularity.  

“With users and developers able to use familiar Web3 tools like Metamask and Solidity to interact with Avalanche, the barriers for entry to the ecosystem are relatively low, particularly for existing Ethereum users,” said the Block.

Avalanche (AVAX) all-time performance

Polkadot (DOT): Focus on interoperability 

Closing the list of Ethereum alternatives is Polkadot, the twelfth largest cryptocurrency network with a market capitalisation of over $17bn. Polkadot is a unique contender as its main focus is on interoperability of blockchains.

Polkadot, which was created by Ethereum co-founder Gavin Wood, consists of a network of individual blockchains called parachains which are secured by the Polkadot Relay Chain. Each parachain can have its own characteristics specialised for various use cases and will have control over their own governance, according to Polkadot.

Developers have to bid for limited parachain slots in order to build DApps on Polkadot. The network also has a EVM-compatible canary network or testate called Kusuma, which allows developers to undergo iteration cycles before deployment on the Polkadot chain.

“With the popularity of Acala and Moonbeam’s networks (parachains on Polkadot), users on Polkadot and Kusama appear to be signalling the importance of EVM compatibility for the future of these growing ecosystems. What remains to be seen is how Polkadot’s ethos of blockchain interconnectivity will evolve, and how it will extend to its relationship with other L1 ecosystems,” said Kevin Peng, Arnold Toh and Rebecca Stevens of the Block in a report.

Polkadot (DOT) all-time performance

Ethereum killers: Is the threat real?

Can competitors pose a real threat to Ethereum dominance? Commenting on the crypto market future trends, analysts from the Block said:

“Non-Ethereum L1s with comparatively lower fees began to take centre stage. Average transaction fees on Ethereum rose to record-high levels in the first half of the year [2021]. Users were paralysed with exorbitant gas fees and long confirmation times during times of extreme network demand for Ethereum. As a result, users sought alternatives with other L1 networks that offer lower transaction fees.

Speculating on the major risks for the Ethereum platform, Morgan Stanley also highlighted that high transaction fees create scalability issues and threaten user demand:

“High costs make Ethereum too expensive for small-value transactions. Layer 2 platforms—separate blockchains that synchronise with Ethereum—ease congestion on the main Ethereum chain but also divert activity from Ethereum to their own platforms.”

According to Morgan Stanley, the changing regulatory landscape poses another big risk:

“Much of the activity on Ethereum is in DeFi and NFTs — two areas with rapidly evolving regulations. Regulations that restrict or eliminate certain market segments, such as finance, from using Ethereum could reduce demand for Ethereum transactions.”

Whether you’re a firm believer in Ethereum, or eager to compare Ethereum killers in search for a cheaper and faster alternative, always conduct your own research. 

The list of main Ethereum killers outlined above (as of 28 February) could change anytime. The crypto market is extremely volatile. Past performance never guarantees future results.

Explore each project separately, considering the fundamental value and latest price drivers behind the crypto platform before making any investment decision. Never invest more than you can afford to lose.

FAQs

What coins are ethereum killers?

Ethereum killers are smart contract platforms that are seen as alternatives to market leader Ethereum. Blockchain networks including BNB Chain, Cardano, Solana, Avalanche and Polkadot have been touted as potential Ethereum killers.

Can ethereum ever crash?

Ethereum is inherently volatile and poses a threat of significan price swings. You should conduct your own due diligence before making a decision to buy or sell ETH. The broader crypto market sentiment, the platform’s internal developments, regulatory news and adoption rates could affect the ETH price.

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