No one is a prophet in his own country ! – The Ethereum network, driving force of decentralized finance for several years, and its ETH token, which is the second cryptocurrency behind Bitcoin (BTC), could become “has been” according to JP Morgan. The dominance of Ethereum in DeFi could be called into question. Indeed, the share of the total value of Ether invested in decentralized finance, which naturally represented almost all DeFi funds at the start of 2021, is down to about 70% so far. Solana innovations (SOL) and other recent blockchains as well as Ethereum network scalability issues are believed to be the cause of this trend.
The Ethereum network facing the challenge of scalability
To face thehigh activity and to astronomical fees of its layer 1 blockchain, the Ethereum network has recently focused on developing a second layer (layer 2).
the sharding, one of the solutions considered by the developers to remedy the problem of scalability of layer 1, will certainly not see the light of day before the evolution of the network towards Ethereum 2.0 and the update Serenity in 2023. This method – which consists of partitioning the data horizontally in order to distribute storage and execution of in-memory contracts without impeding Security – may, however, come a little too late, if JP Morgan is to be believed.
“This development seems necessary to us for the Ethereum network to maintain its dominance, but it could come too late. »
Nikolaos Panigirtzoglou, Managing Director of Global Markets Strategy at JPMorgan
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The merciless competition of “Ethereum Killers”
If JP Morgan’s rating calls into question the dominance of Ethereum in DeFi, it is also because theinnovation in terms of decentralized finance by certain blockchains such as Binance (BSC) or Solana is undeniable. These new players are giving Vitalik Buterin and the Ethereum network a hard time. They recently won market share important, and build strong communities.
This also resulted in theincrease of the price of their native tokens respective. The price of Ether (ETH) increased by 220% last year while Solana (SOL) increased by 7000% and Avalanche (AVAX) by 2200% if we refer to the site CoinGecko. Each of these tokens has therefore largely exceeded performance of Ether last year.
Despite the recent mess of the Solana (SOL) network, the DeFi battle is far from over: it is even more than likely that the future of decentralized finance will continue to be written in the plural, in a world that some imagine multi-chains.
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