The Notoriety Of Ethereum Is A Two-Edged Sword — From The State Of Crypto Study By A16z

May

18

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“Ethereum’s enormous market share describes why its users are prepared to spend more than $15 million in fees each day on average only to use the blockchain,” according to a16z.

Regarding the network’s transaction cost, Andreessen Horowitz (a16z), a cryptocurrency venture capital, has claimed that Ethereum’s growth and need are “unsurpassed.”

However, because Ethereum promotes decentralization over scaling, competitor blockchains are gaining market share with “promises of superior performance and lower costs,” according to the company.

The statements were made in a blog post announcing a16z’s “State of Crypto” analysis for 2022, in which the firm’s data scientist Daren Matsuoka, head of protocol design and engineering Eddy Lazzarin, General Partner Chris Dixon, and head of content Robert Hackett cooperated to give five major takeaways from the study.

The study covered subjects such as Web3 development, crypto acceptance rates, decentralized financing (DeFi), and stablecoins in contrast to Ethereum.

As per the study, Ethereum beats the competition in terms of development interest, with approximately 4,000 active monthly developers relative to 1,000 for second-placed Solana (SOL). At about 500 and 400, accordingly, Bitcoin (BTC) and Cardano (ADA) are the next in line.

“Ethereum’s dominance has much to do with its initial age, and the health of its community,” the analysts stated, but they emphasized the importance of the development of the network continues to increase despite high transaction costs:

“Ethereum’s overwhelming mindshare helps explain why its users have been willing to pay more than $15 million in fees per day on average just to use the blockchain — remarkable for such a young project.”

The study’s predicted transaction fees paid on a blockchain over a seven-day average, computed as of May 12, indicate that Ethereum is in short supply. Ethereum is valued at $15.24 million, according to the data. BNB Chain, Avalanche, Fantom, Polygon, and Solana, on the other hand, account for about $2.5 million in fees.

Layer-2 scaling options are competing to lower Ethereum’s costs and increase transaction speeds, according to the research, which also adds that Ethereum is getting long-awaited improvements to make the network highly efficient and cost-effective.

The “long-awaited” improvements can’t come quick enough, though, as a16z pointed out in the paper, with active addresses and transactions on competing blockchains like Solana, BNB Chain, and Polygon already surpassing Ethereum on a 30-day average as of May 12.

Ethereum has 5.5 million daily active addresses and 1.1 million daily transactions, while Solana has 15.4 million active addresses and 15.3 million daily transactions, as per the report. With 9.4 million and 5 million, BNB Chain is in third place, trailed by Polygon with 2.6 million and 3.4 million. It won’t be a winner-take-all situation, the analysts concluded:

“Blockchains are the hit product of a new computing wave, just as PCs and broadband were in the ‘90s and 2000s, and as mobile phones were in the last decade. There’s a lot of room for innovation, and we believe there will be multiple winners.”

The survey also showed that the DeFi sector’s overall value locked of almost $113 billion would make it the US’s 31st largest bank, that Web3 usage might reach 1 billion users by 2031 and that NFTs have produced $3.9 billion in revenue for inventors so far.

 

About the author, Awi Khan

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