Ethereum (ETH) used to be the be-all and end-all of blockchains for developers building apps and producing cryptocurrencies. Others have, of course, emerged to challenge it, but it’s only in the last year and a half that investors have started paying attention to them. Where they choose to invest depends on where project developers are headed outside of Ethereum.
Instead of following the money, the money follows the developers.
Ethereum was the first kid on the block, but that first-mover advantage can quickly melt away once other platforms prove they’re just as good or even slightly better.
“We are big fans and supporters of Cardano (ADA),” says Vedran Vukman, founder and CEO of Revuto (REVU). Cardano is a proof-of-stake smart contract blockchain platform. “We believe in it due to its benefit primarily of significantly cheaper fees, better scalability, and higher transaction throughput and speed than what’s currently offered by Ethereum’s 1.0 blockchain,” says Vukman. He owns ADA. “It was an incredible rally. The era of smart contracts has only just begun. The best days for ADA and Cardano are yet to come.”
All blockchains face what is known as the “trilemma,” where they must prioritize two of the three issues: decentralization, security, and scalability (which introduces costs). Ethereum has opted for decentralization and security, which has come at the cost of scalability, making it more expensive and sometimes a slower service.
This became clear to developers in 2021, when “gas” fees for using Ethereum skyrocketed as more people started using its blockchain. This led developers and investors to competing blockchains (so-called “Layer 1” solutions). It has become clear that the future of blockchain is “multi-chain” – which is actually great news. One would be the opposite of anything crypto related.
According to industry blog Electric Capital, their Jan. 5 developer report showed that Polkadot (DOT), Solana (SOL), Avalanche (AVAX), and others are growing their developer communities faster than Ethereum was doing at similar points in its history.
Polkadot, a multi-chain platform building what some are calling the “Internet of Blockchains,” has become home to the second-largest number of full-time developers working on all blockchains. Considering that Polkadot only launched its first round of projects, including Parallel Finance, on December 17 last year, the potential for Polkadot to surpass Ethereum in the total number of developers is possible, thinks Yubo Ruan, founder of Parallel Finance.
“This does not mean that the developers have given up on Ethereum. But it is plausible that instead of being taken over by Ethereum, the (new) blockchains will instead attract new talent,” he said. “I don’t think there will be an ‘Ethereum killer’ in the short term, but I do think there will be competitors in certain niche categories,” says Ruan.
It lists Binance Smart Chain among cryptocurrency traders thanks to its close connection to Binance, one of the largest exchanges out there. Another is Solana, which also works well for the high-frequency cryptocurrency traders due to its lower transaction fees. They also gain market share. Emerging markets can also be put off by Ethereum’s high cost.
“Polygon (MATIC) has the potential to create competition for Ethereum,” says Ruan, citing her partners Reddit and the NFT marketplace OpenSea. “It is plausible that Polygon could partner with organizations that have a large user base. Especially if they can do this faster than Ethereum can move to 2.0.”
Developer Kenny Li, co-founder of the Manta network, says that some developers who started building on Ethereum are trying to expand into other networks because of gas fees. Manta builds on Polkadot and Kusama, which are closely related. Polkadot founder Gavin Wood founded Kusama in 2019.
“We decided to build Manta Network on top of Polkadot first for a number of reasons. We needed to build the network at layer one and not as an application sitting on top of a network,” says Li. “We need to be able to communicate with other layer one networks. These features are native to Polkadot. We are monitoring Ethereum 2.0 developments, but our current design requirements cannot be met by using the existing version of Ethereum.”
Elie Le Rest, CEO of Colony Lab and co-founder of Exo-Alpha, a Paris-based cryptocurrency hedge fund, has selected another Ethereum alternative for Colony – its Avalanche, a proof-of-stake blockchain known for its speed is known.
“Avalanche was an easy choice,” says Le Rest, citing that it uses the Solidity programming language just like Ethereum, but at a lower cost and faster speed. “It’s easy to launch on Avalanche C-Chain and have this ability to be more self-sufficient with a subnet switch, which makes a lot of sense, especially for gamefi and defi projects looking to increase the performance of their games/protocols “, he says.
Those are the most popular names. Other developers are venturing out on their own, following the prevailing winds to build faster, lower-cost blockchains. Johann Polecsak, CTO of the Estonia-based QAN platform (QANX), lets developers build in any programming language and is said to be a firewall against attacks from quantum computers.
“In the end, developers will only be pulled from Ethereum if another chain offers a significantly simpler or more viable solution,” says Polecsak. “Ethereum has failed in terms of quantum security. VItalik (Buterin, founder of Ethereum) has denied the problem for years and is quietly looking for post-quantum cryptographs. We are prepared for the threat of quantum computer hacking, which you must take into account.”
Blockchain and digital assets are turning many traditional areas of finance and investing upside down.
Cryptocurrencies are valued at trillions of dollars in market capitalization. Adoption is accelerating at all levels, with all institutional investors joining in.
Alongside legacy coins like Bitcoin and Ethereum, non-fungible tokens (NFTs) represent additional types of digital assets that are disrupting sectors like art and real estate, said Global X, an ETF provider owned by Mirae Asset of South Korea. in a recent PowerPoint presentation presentation for investors.
Alongside Solana, Polkadot and Avalanche, Ben McMillan, CIO at IDX Digital Assets in Tampa Bay, Cosmos (ATOM) and Terra (LUNA) are worth a look for investors diversifying away from Ethereum in their Gemini accounts.
“Cosmos is similar to Polkadot in that it enables interoperability between other blockchains and also relies on Proof of Stake,” says McMillan. “The main difference is that Polkadot prioritizes security while Cosmos prioritizes interoperability, making it easy for anyone to connect a blockchain to the Cosmos network via its inter-blockchain communication protocol. I don’t know if Cosmos can continue on its course, but so far it remains one of the top blockchains.”
Finally there is Terra. It is a blockchain that uses the Cosmos software and its main focus is to create stablecoins.
“Terra was built with the Asian payments market in mind, and South Korean payments app Chai helped grow its user base,” says McMillan. “Their dollar-pegged stablecoin (UST) skyrocketed to a market cap of up to $7 billion in its first year. I think it will overtake even Dai.”
The author of this article owns Bitcoin, Cardano and Polkadot.