You often read about “Ethereum (ETH) killers” as Cardano (ADA) which is or is not expected to become the biggest project of the crypto market. But do we get a ‘the winner takes it all’ situation? In Timo’s take this week I write about my expectations of the relationships between the different smart contract networks.
Crypto Generations: From Bitcoin to Cardano
First we had Bitcoin (BTC), a decentralized digital network that allows users to send, receive and own value. Revolutionary in technology and the monetary system. Bitcoin may now help even poorer countries an economic revolution by making. But blockchain has more to offer, as Vitalik Buterin also thought in 2013, when he invented Ethereum.
Ethereum can do what Bitcoin can, but goes a step further. You can develop and execute smart contracts on Ethereum. The possibilities are endless with especially Decentralized Finance that is now in the spotlight. In the future, people will be able to borrow and lend money without the intervention of a bank. A large number of users are already doing this via the various DeFi applications. And let’s get the non-fungible token (NFT) craziness don’t forget.
While Bitcoin is a first generation blockchain, Ethereum is a second generation. But as technology progressed and it became clear that Ethereum does have some flaws here and there (high transaction costs, for example), new projects have sprung up like mushrooms. These newer networks, running on more efficient and scalable protocols, are third-generation blockchains.
Ethereum and the rest can suffocate, or do they help Ethereum breathe?
These third generation networks include Cardano, Solana (SOL) on Polkadot (DOT). Cardano runs on a Proof-of-Stake (PoS) protocol and the developers have looked at what could be done better with Bitcoin or Ethereum and have applied this in their own project. The latter also applies to projects such as Solana and Polkadot; developers look around and learn as the industry evolves.
These networks are often more efficient, faster, cheaper and more scalable. But does this immediately mean that Ethereum is redundant? I do not think so. Each network often serves its own target group with technology that works better for some than for others. Ethereum also has the first mover advantage, a large amount of developers who can build on it and a very strong brand. Moreover, Ethereum is not sitting still. In the near future, that network will also switch to a PoS protocol.
In addition to competing, we also collaborate
It seems more logical to me that these projects will collaborate more often in some areas. This week we already saw news that Cardano gets a side chain giving Ethereum and Cardano some kind of bridge. People can use smart contracts on Ethereum from their Cardano wallet. Such interoperability is, according to many, necessary for blockchain and crypto to actually be used on a large scale. For many projects, the goal is not to inflate the price of a crypto. Their goal is to make the world a better place. If successful, the prize will of course follow.
My expectation is that in the coming years we will see the values (read user numbers, locked crypto in DeFi, etc.) more equally distributed among smart contract networks. Does this mean that Ethereum’s market cap is going to fall to get closer to Cardano’s, Binance coin (BNB) and Polkadot, or are these networks creeping closer to Ethereum? Ultimately, all projects that really have something to offer will be able to help each other up. I therefore provide a well-diversified crypto portfolio in order to benefit from the growth that the entire crypto market is currently experiencing.
–
