Ethereum Faces Growing Competition in Blockchain Industry

Ethereum is poised to confront intensified competition in the blockchain industry this year from cheaper layer-2 networks and Ethereum Virtual Machine (EVM) compatible blockchains. According to research from Flipside, a sizable portion of EVM users are exploring alternatives due to lower fees and faster transaction speeds offered by emerging solutions. 

Past bull runs fueled by Ethereum-based protocols led to excessive gas fees. Now, the focus has shifted to reducing costs for end-users. Consequently, governance tokens of layer-2 networks like Optimism, Arbitrum, and Polygon are attracting renewed interest. Ethereum’s upcoming Shanghai upgrade, introducing blobs for storing data on-chain, could further boost throughput for layer-2s and layer-1s – bolstering the competition.

Analysts at Galaxy Digital also predict a pivotal 2024 for Ethereum amid rising competition from other layer-1 chains. They point out technological risks coming from Ethereum’s early-stage rollup architectures. Galaxy Digital identifies Solana as a primary competitor with its distinct monolithic design this year, given its potential for faster and cheaper transactions.

As alternative networks prioritize affordability and speed, Ethereum’s market dominance faces tests in the months ahead. Its ability to scale effectively while retaining its developer ecosystem will be important.

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