Digital asset management company Grayscale believes that Ethereum may become the market focus as the final decision on the Ethereum spot ETF application by the US Securities and Exchange Commission (SEC) is expected to come in May. Additionally, the Dencun upgrade scheduled for March 13th is expected to help Ethereum compete with other smart contract platforms in terms of scalability.
According to a research report released by Grayscale on Friday (23rd), Ethereum is facing increasing competition from other blockchains such as Solana. The report states that Ethereum’s performance in 2023 is not as good as other smart contract networks like Solana (SOL) and Avalanche (AVAX). Grayscale analyst Will Ogden Moore attributes this to Ethereum going through what he calls a “teenage” phase.
However, the analyst also acknowledges that Ethereum’s network security, total value locked (TVL), and its fee market have made it “arguably the safest, most reliable smart contract platform and also the largest by market capitalization.” The report highlights the network’s leadership in transaction fees, TVL, dApp count, and weekly developer count, as well as its lagging performance in transaction volume.
According to Ogden, Ethereum is facing issues such as slow transaction speeds, low throughput, and high user costs during its so-called “teenage” phase. However, Ethereum’s core developers are working towards realizing the vision of “Ethereum 2.0” and solving these user cost and scalability issues through a series of upgrades.
Grayscale believes Ethereum has several positives, including upcoming upgrades, net currency tightening supply, network revenue, the SEC’s decision on the Ethereum spot ETF application in May, and increasing use cases leveraging Ethereum’s network security features. The analyst also mentions the recent strong performance of Ethereum’s price.
Entering the maturity stage
The Grayscale report states that the Dencun upgrade will significantly reduce the cost of Rollups transactions and is expected to impact the usage of Layer 2 networks like Arbitrum and Base. At the same time, this upgrade will also enhance Ethereum’s role as a settlement layer, which has been challenged by emerging solutions like Celestia.
The report states that the rise of solutions like Eigenlayer may bring the “security as a service” vision to more projects.
In conclusion, Grayscale states that Ethereum is at a crucial turning point, preparing to transition from its teenage phase to maturity. The Dencun upgrade and the broader Ethereum 2.0 roadmap “mark an important milestone for Ethereum on its path to becoming a more scalable, efficient, and user-friendly platform.”
Source:
Related reports: “S&P Global: Ethereum spot ETF could increase Ethereum’s concentration risk” “SEC further delays Invesco Ethereum spot ETF application; analysts: May is the key!” “Ethereum’s next steps: Cancun upgrade, Layer 2 Rollup set to explode?”
