Macroeconomist and technology investor Tascha expects Ethereum’s (ETH) market share to “continue to decline” in 2022, as emerging rivals push for a blockchain that has yet to find the market. the backbone of its value proposition.
Tascha, PhD in Macroeconomics, told BeInCrypto that layer 1 (L1) blockchains that rival Ethereum, including Avalanche (AVAX), Solana (SOL) and Terra (LUNA), “are growing faster, with more advanced technologies. up-to-date and better suited to scaling ”.
In contrast, “updating an existing network like Ethereum is not easy and progress is very slow,” she added, emphasizing ETH’s declining share in the total. assets managed by the decentralized finance ecosystem (DeFi).
Since the start of the year, Ethereum’s dominance in total locked-in value (TVL) has fallen 37% to $ 158 billion, according to data from DefiLlama.
As a reminder, Ethereum held a nearly 100% stake in the cumulative TVL at the start of 2021. But subsequently, the network divested much of its assets to emerging competitors.
LUNA now has the second largest amount of assets under management in the DeFi industry, with TVL of $ 18.31 billion. Binance Smart Chain (BSC) comes next, with an TVL of $ 16.97 billion.
On the other hand, the competition continues to tighten between Solana and Avalanche. The two networks have $ 11.95 billion and $ 11.94 billion in total locked-in value, respectively.
Several blockchains that will be launched soon, such as Cosmos, Near, or Polygon, will probably take market share from Ethereum, because they will continue to grow by 2023, said the technology investor.
Confusion within the Ethereum community
Tascha seems to allude to some confusion within the Ethereum community, according to a long thread posted on Twitter.
In her post, she explained that the expectations of members of the Ethereum community are different. Indeed, the discourse constantly shifts from one value proposition to another.
The focus has shifted “from sharding and troubleshooting scaling issues to an execution layer with a Layer 2 (L2) on top, and then competing with Bitcoin (BTC) on who’s the. ultimate “stable currency” [la réponse est ni l’un ni l’autre]. ”
“These are all signs that Ethereum is still looking for a pivot in its value proposition,” she explained. The macroeconomist, who prefers to be called Tascha, added:
“The truth is everything Ethereum wants to be in the future: sharding, layer of security for L2s, etc. Avalanche subnets, Near application chains, Cosmos zones ”.
Sharding is a technique used by networks or blockchain companies to help increase the number of transactions per second. A layer 1 blockchain is a series of solutions based on an existing network, for example Ethereum or Bitcoin. It also aims to improve scaling.
Layer 2 solutions connect to an existing Layer 1 blockchain to improve its efficiency. They generally belong to third parties.
The idea is that for blockchain networks to develop as viable alternative payment systems, they must necessarily be able to handle large volumes of transactions, data and users. This is commonly referred to as scalability.
“The world won’t wait for Ethereum to improve”
Tascha pointed out that existing Layer 2 deployments are stagnating and that the expected performance of L2 Zero-Knowledge rollup solutions, which have not yet been launched, “is so high that it is already difficult for them not to disappoint. ”.
“The world doesn’t stop and wait for Ethereum to improve,” she stressed. “[Il est] difficult to imagine a scenario where Ethereum would overtake competing solutions ”.
While Ethereum seems to fall victim to its community’s confusion, its three main Layer 1 competitors, namely Solana, LUNA, and Avalanche, don’t seem to suffer from the same problem.
All three were widely adopted in 2021, as evidenced by the evolution of their price and TVL. In his Twitter thread, Tascha explained how SoLunAvax could deliver the “best reward / risk ratios in the crypto industry” over the next two years.
For Solana, the biggest advantage is its monolithic structure. “For use cases that enjoy unique status across the platform and complete, elegant composability, Solana leads the market with a clear value proposition,” she said.
The structure means that SOL is the “one and only platform token” with no “confusion as to where the platform’s values accumulate”. However, when these aspects are combined with a lack of “super-successful apps”, it could be detrimental to it as well.
“[Une] monolithic structure is less flexible and prevents Solana from competing in many potentially promising use cases. For example, private channels or those dedicated to companies ”, continued Tascha.
“Modular networks have a much greater notoriety”, she underlined. This means more people are working on these blockchains, learning from each other, and making improvements faster.
Avalanche promises strong growth
What is a “curse for Solana is a blessing for Avalanche,” Tascha explained, emphasizing the latter’s subnet structure, which she said offers “more flexibility, use cases and possibility of extension ”.
Compared to Solana and Luna, Tascha is perhaps more optimistic about Avalanche. Despite its late launch, the macroeconomist sees in this network “signs of healthy and diversified growth of the ecosystem with native innovations”.
If Avalanche and Solana seem somehow connected or similar, LUNA is “considerably different”. According to Tascha, Terra is “less an ecosystem but more a range of products” piloted by two projects in particular, Anchor and Lido.
“Anchor alone owns over 40% of the total TVL. If you remove Lido, which is simply a staking service from LUNA, Anchor’s share exceeds 60%, ”she continued.
“It is remarkable that the growth of UST stablecoin and a few Knockout projects (stand-alone JavaScript implementation of the Model – View – ViewModel) propel Terra into the top 10 cryptocurrencies by market capitalization. This is a testament to the power of creating products for the masses instead of targeting certain groups of crypto nerds ”.
The macroeconomist also compared Terra to the Korean economy, “where the four biggest projects Samsung, Hyundai, SK and LG account for almost half of GDP.” In addition, she asserted that one should not “bet everything” on LUNA due to the high level of risk.
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