One of the most visible victims of the recent bloodshed has been Ethereum’s native token. Ether has lost 17.3% of its valuation over the past week. Regardless of this, institutional supporters have continued to trust the blockchain network even as ‘ETH killers’ threaten to dethrone it from the top spot.
The chief investment officer of cryptocurrency-centered hedge fund Pantera Capital, Joey Krug, is one such believer. He recently suggested that Ethereum could one day become a fundamental part of the global financial system. Speaking to Bloomberg, he said,
“If you turn the clock forward 10 to 20 years, a very large percentage, maybe even north of 50% of financial transactions in the world in one way or another, will hit Ethereum.”
This will be despite the stiff competition that it is currently facing, which Krug believes will eventually turn to Ethereum as a base layer to build upon. Several smart contract platforms have emerged in the years since Ethereum’s inception. Thus, posing as threats to its dominance with the rise of DeFi and NFT trading. These include the likes of Solana, Avalanche, and Polkadot, which all claim to offer higher transaction speed and lower cost amidst Ethereum’s rising congestion issues.
Without distinguishing any network, the CIO highlighted concerns about security threats and increased centralization on rival ETH platforms, arguing:
“There’s too many trade-offs other chains are making that Ethereum is not making on the decentralization side that are pretty important. I don’t know if they’re best suited to be the new global financial settlement layer.”
One obstacle to reaching this milestone would be the typical high transaction costs of the network. Earlier this week, total gasoline fees billed to transact hit a one-month high of $ 1,882,360.
Consequently, the number of non-zero addresses reached an all-time high on 10 January. Thereby, suggesting that users have been unable to move their assets even during a market slump due to high network fees.
Ethereum’s scalability issues have already started to hamper its adoption as a layer of institutional settlement. Notably, Su Zhu, CEO of Singapore-based hedge fund Three Arrows Capital recently announced the “abandonment” of the network due to its high gas costs.
However, Krug predicted that these obstacles will be removed once Ethereum successfully transitions to ETH 2.0 and ushers in the Proof-of-Stake era, further propagating its use as a base layer. With the public testnet already released, the merge to POS is expected to take place in the first quarter of 2022.
Its co-founder Vitalik Buterin recently noted that further developments will focus on increasing network scalability and throughput. It also proposed a multidimensional pricing model for its combustion mechanism.
However, analysts at the global banking supremo JP Morgan remain unconvinced, as they believe important developments might arrive too late for the network to continue holding its dominance. A recent research note highlighted that delays in incorporating the final phase of sharding, which will be significant in scaling the network, have pushed the development to at least next year. Thus, giving its competitors a window to capture chunks of the DeFi market share.
