Following Bitcoin, Ethereum (ETH) has had the biggest impact on cryptocurrencies in history (BTC). Since its launch in 2015, Ethereum's native Ether token has maintained its position as the second-largest cryptocurrency by market valuation. Among the innovative Web3 technologies that Ethereum developers have brought to the cryptocurrency sector are NFTs, smart contracts, and dApps. However, Ethereum still has areas where rivals are gaining ground to replace it.
As the blockchain emerged to enable smart-contract functions that the Bitcoin network could not support, Ethereum's rivals arose to provide remedies to its persisting problems.
In the blockchain community, an Ethereum rival is referred to as a "Ethereum killer." These competing chains will share many of Ethereum's features but frequently use other technologies and promise to fix its shortcomings. An Ethereum killer frequently has faster transaction speeds and lower gas prices in locations where Ethereum has suffered as demand has increased in late 2021.
All of these competing blockchains leverage the smart contract technology that was made well-known by Ethereum. Computer programs known as smart contracts execute specified actions when certain conditions are met. Since smart contracts are built on code, they allow for trustless transactions in DeFi.
Like its main competitors, "Ethereum killers" focus on luring Web3 developers to create dApps on their blockchains. The Web3 projects that Ethereum competitors have accessible include play-to-earn games, another sort of DeFi dApp, and decentralized exchanges (DEXs).
The network's competitors are ready to do something that will permanently separate them. The leading blockchain for smart contracts has a roadmap with updates and modifications that will eventually fix its current issues, but its competitors have been able to gain significant ground at its expense. Solana, Cardano, Polkadot, Avalanche, and others are currently well-known Ethereum rivals.
Following its role in the ICO bubble of 2017, Ethereum began to grow quickly. Decentralized apps appeared on the network very rapidly, and Ether's (ETH) price began to slowly increase. The typical ups and downs of the bitcoin market still apply, though. It has seen a surge in popularity since its introduction, which has fueled the growth of decentralized finance and accounted for the great majority of dApps in the ecosystem.
It has turned out that the broad adoption of Ethereum is a bitter-sweet event. On the one hand, this growth promotes creativity and attracts consumers to the crypto industry, allowing for the execution of ideas. It can be the foundation for DeFi, blockchain gaming, the metaverse, and other blockchain applications. On the other hand, the network's initial foray into widespread adoption revealed its limitations as a result of the growing usage, making it challenging for it to continue being scalable and economical.
The inability to scale
The incapacity of blockchain technology to scale has always been a problem. Due to the fact that it is more evident than other difficulties, it is most likely the focus of discourse on the blockchain network. As might be expected with extensive use, the network's transaction volumes soared during the ICO boom and the DeFi summer. The network's speed may have limited further growth, however it was a minor problem.
Ethereum can only process 15 to 30 transactions per second at the moment. Due to an increase in transaction volume, slow TPS levels may generate network congestion, which will cause delays and expensive transaction fees. Applications deployed on the network face significant challenges due to the processing capacity because dApps like games and decentralized exchanges require quick transaction finality. This is likely the reason why Ethereum hasn't seen widespread acceptance of many use cases, such as automation or machine learning.
When Ethereum was a Proof-of-Work network, some mining pools were substantially larger than others, giving them more consensus power. Naturally, this idea has sparked worries about centralization, which runs directly counter to what it represents: a secure, scalable, and decentralized blockchain network.
In order to prepare for its conversion to a proof-of-stake mechanism, which it has now completed, Ethereum developed a Beacon chain in 2021. Some contend that because this paradigm raises the cost of an attack, the possibility of a 51% strike is reduced. The validators, who staked ETH under the new system, have progressively taken the position of the miners. More worries about centralization have emerged as institutional investors and major exchanges vie for a sizeable piece of the ETH staking power.
Ethereum's optimum gas fee should be $0.05. During the DeFi boom and the ensuing gas wars, the typical gas charge on the blockchain rose to between $60 and $70. Gas fees are simply bids to include a set of transactions in the ecosystem's limited block space. These bids rise when there is high demand because clients strive to complete their transactions quickly to get an edge. Transaction costs are therefore absurdly high.
Because utilizing applications on Ethereum at these levels is too expensive for the average Web3 user, developers prefer less expensive blockchain networks like Solana, Tron, and BNB Chain.
It is important to keep in mind that The Merge did not fix the issues with gas prices. However, due to recent upgrades and the situation of the cryptocurrency market, the average cost of gas has dropped from roughly $40 to $15.55 as of the second half of 2022.
The Ethereum network is frequently referred to as having a maximum extractable value, or MEV. MEV, or maximum Ethereum value, refers to the amount that miners can earn by rearranging transactions during the creation of an Ethereum block. Protocols have used MEV to balance prices on decentralized exchanges.
MEV was known as Miner Extraction Value during the proof-of-work era, however Ethereum has since changed to become a proof-of-stake network. The network is however susceptible to various MEV extraction techniques as front-running, liquidation, and sandwich attacks.
The network has a problem with privacy, which is effectively non-existent, as do many other Layer-1 blockchains. Every transaction is not only recorded on the ledger but also made public because Ethereum is a fully transparent blockchain. Even though transparency might be advantageous, when it goes too far, it becomes one of the largest blockchain disadvantages, particularly for institutional participants and DeFi traders.
Despite having partially solved the privacy problem, zero-knowledge rollups based on Ethereum cannot replace conventional blockchains. The adoption of smart contracts cannot be facilitated by many of them due to their limitations.
With a passionate community and an abundance of development resources, Ethereum has a considerable competitive advantage over its rivals. However, critics contend that it needs to address its scalability issues quickly to stop another blockchain from eclipsing it in terms of market share.
In the years to come, it will be interesting to see how Ethereum works as a Proof-of-Stake network with full sharding capabilities. Nobody can rule out the possibility that a strong player will suddenly emerge to compete for the top spots in Layer-1 adoption in the interim.