Ethereum Faces Increased Competition in 2024, Says Flipside
The demand for cost-effective alternatives to Ethereum and the rise of Ethereum Virtual Machine (EVM)-compatible layer-2 networks will pose a challenge to Ethereum’s dominance in the blockchain space this year, according to a research report by Flipside, a blockchain data platform.
The Shift Towards Layer-2 Solutions
Many EVM users are actively exploring alternative options to Ethereum as they seek lower fees and faster transactions provided by emerging layer-2 solutions. This shift is significant, considering that previous bull runs driven by Ethereum-based protocols resulted in high transaction costs.
The Focus on Cost Reduction
The growing number of EVM-compatible layer-2 networks is compelling layer-2 projects to prioritize cost reduction for end users. Governance tokens of layer-2 networks like Optimism (OP), Arbitrum (ARB), and Polygon (POL) are gaining attention as they can impact each network’s competitive advantage.
Ethereum’s Challenges Ahead
Ethereum’s planned Dencun upgrade, featuring the introduction of “blobs” that allow storing large data pieces on Ethereum blocks through EIP-4844, is expected to intensify competition. This upgrade will enhance block space and throughput for layer-2 networks, further challenging Ethereum’s position. Galaxy Digital analysts also highlight the modular architecture of Ethereum and identify Solana as its main competitor with its monolithic architecture.
Hot Take: A Pivotal Year for Ethereum
In 2024, Ethereum faces increased competition and challenges from cost-effective alternatives and EVM-compatible layer-2 networks. The shift towards these solutions highlights the need for lower fees and faster transactions. Additionally, the introduction of blobs through the Dencun upgrade will enhance competition and throughput for layer-2 networks. As other layer-1 blockchains raise the stakes, Ethereum’s modular architecture may pose potential challenges. Solana is positioned as the primary contender against Ethereum this year. It remains to be seen how Ethereum will navigate these challenges and maintain its dominant position in the blockchain space.
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