Analysis: Ethereum problems hinder its leadership in the Defi system and environment


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Controversy has raged over the viability of using Ethereum as a convenient and long-term environment for decentralized finance, gaming, and NFT projects.

The outlook is not very positive given the current situation.

The impact of excessive fees, long confirmation times, and slow updates is starting to worry retail users, techies and big investors.

Ethereum developers should focus on the first layer “L1”:

Facing the difficulties of providing a satisfactory user experience, Ethereum developers have begun to move to competing blockchains to expand their reach and increase their market value.

Blockchain networks such as Solana, Binance Blockchain, and Avalanche saw a significant rise in use and value during 2021, which made them cement themselves as more efficient alternatives to Ethereum.

According to Nicholas Merten, creator of the “DataDash” channel on YouTube, the advantage of Ethereum as a blockchain that everyone uses is losing its power over time.

In another Twitter thread, Merten explained that the arguments in favor of Ethereum may not hold up over time.

He believes that, in the end, scalability solutions built on the original blockchain (layer 2 solutions) are impractical and generate little incentive for adoption.

For example, Merten told me that people would rather pay $0.01 in fees to Solana than pay $0.04 for transactions on Polygon, the latter being the cheapest Ethereum second layer solution.

For Merten, Ethereum developers should focus on solutions to make Layer 1 solutions (cross-chain transactions) more efficient and less expensive.

As smart contracts become more complex, people have to pay more fees.

Merten believes that Ethereum needs better marketing.

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In addition to the technical developments, there needs to be a team that is able to keep the community excited about Ethereum solutions.

Three Arrows Capital Ditches Ethereum and Bets on AVAX:

Interestingly enough, this view appears to be spreading among institutional investors.

Within hours of Merten’s tweet, Zhou Tsou, CEO and CIO of Three Arrows Capital, announced that he was ditching Ethereum to focus on investing in the Avalanche blockchain.

Zhou Tsou was not very kind to Ethereum, as he made it clear that basically, under the current circumstances, exorbitant network fees shouldn’t be something to deal with on a daily basis.

Zhou Tsu is not alone in this regard.

Even Antonio Giuliano, founder of dYdX, a DeFi protocol that runs on Ethereum, agrees with Zhou Tzu.

Ethereum is promising to solve these problems by implementing Ethereum 2.0, a new Proof of Stake based blockchain that will have low fees and a very high level of scalability.

However, this solution is time consuming, and major investors can only hope that it is not too late once it is launched.

Read also:

Blockchain Binance Is Under Criticism…Here’s Why!

The second largest bank in Singapore plans to enter the cryptocurrency market

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