Why An "ETH Killer" Isn't Likely

Why An "ETH Killer" Isn't Likely


Anyone who grew up playing King of the Hill knows that it's hard to stay on top for long; everyone wants to dethrone the king so they can be the new king. As we grow up and get older, that competitive drive still pushes us to try and compete for the number one spot. That's why world records are always getting broken, and it also explains why countless cryptocurrency projects have promised to be an "ETH Killer "and take Ethereum's spot as the leader of the decentralized web. In this article, I'd like to point out that 1) this is the prime time for a chain to challenge ETH but that 2) they probably won't be successful. 

It is common sense that in order to dethrone ETH/Ethereum any potential competitor would have to do two things. Number one, they would have to compete for the same market share. If ETH is a public blockchain that fuels the decentralized web, it isn't likely to be dethroned by a private blockchain that verifies academic credentials. Secondly, any competitor has to be significantly better than Ethereum at its current function. We know that there is a strong inertia bias, and people aren't likely to try new things if it's not significantly better than what they are already used to.

So, if a cryptocurrency must be better than ETH, we have to ask 'What is ETH good at?" ETH does a lot of things, but it really shines in the DeFi arena. If you head over to ETH gas station and check the largest transaction volumes, you will find that most of them are related in some way to DeFi. Some of the biggest spenders are Tether and USDC (DeFi stablecoins), Uniswap and 1inch Exchange (Decentralized Exchanges), and dYdX (DeFi protocol). Similarly, if we look at DeFi Pulse, we can see that the top 11 DeFi spots are occupied by Ethereum based systems and the only competitor, Bitcoin's Lightning Network, doesn't even come in till number 12. 

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I want to point out that none of this means that ETH is the best crypto or that Ethereum is the best blockchain. I only point this out to show that any crypto/blockchain that wants to dethrone must be a better ETH, and ETH is currently the DeFI champ. By extension, that means that any crypto/chain that wants to dethrone ETH must be a better DeFi token/chain

If any ETH competitor needs to be good at DeFi, then we must ask "What makes a good DeFi token/chain?" While there are a lot of requirements for a DeFi chain, I think that there are several key requirements. It needs to have low transaction fees and high speed (to support frequent trading) and it must have a well-developed DeFi infrastructure complete with a stablecoin, DEXs, Lending Protocols, etc. 

I'd like to make the case that NOW is the best time for a new coin/chain to challenge and dethrone ETH. As it currently stands, network congestion is high, and transaction fees have spiked. Even basic transactions are almost 12 cents, and wait times have peaked as well. The higher transaction fees have made high frequency trading and exchange rate arbitrage cost-prohibitive as it would take significant profits just to offset the transaction fees. I know that the high transaction fees have pushed me more towards reviewing Bitcoin Cash based projects simply to avoid spending a lot of ETH to review protocols and Dapps. As the ETH network remains saturated, now is the time for projects with higher Transactions Per Second (TPS) and lower fees to make their move, but where are the competitors?

Two Potential Competitors

At one point, Tezos was predicted to be the "ETH Killer." Although it does have low transaction fees, it is roughly comparable in terms of TPS.  A key requirement of a DeFi ecosystem is a stablecoin, and although Tezos does have its own USDtz stablecoin, it is well behind ETH based stablecoins such as Dai. MakerDAO, who creates the ETH based Dai stablecoin, has over 46,000 Twitter followers while USDtz has less than 800. I wasn't able to find any Tezos based DeFi protocols, but just based on the stable coin comparison, it appears that Tezos has quite a way to go to catch up with ETH. I consider myself to be somewhat involved in the crypto space and found it interesting that of the crypto gurus that I follow, 14 of the people that I follow also follow Maker while none of them follow the Tezos stablecoin. 

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Bitcoin Cash has sometimes been called an "ETH Killer", and it does have a few advantages going for it.  It is a well known coin, and its large block size means very low transaction fees. But, it also has a long block time that makes high frequency trading impossible. A robust smart contracting language is at the heart of any DeFi ecosystem, and while Tezos has its well developed "SmartPy" contracting language, Bitcoin Cash uses the Cashscript contracting language which is considerably less well known. Most articles about Cashscript date from 2019, so I'm not sure how many developers are currently working to implement Cashscript based smart contracts. As with Tezos, I couldn't find any DeFi protocols based on the Bitcoin Cash blockchain, which indicates that BCH has a long way to go if it wants to replace ETH. 

Again, none of this means that Tezos or Bitcoin Cash are "bad" coins/chains by any stretch of the imagination. It just means that they aren't in a place to seriously challenge ETH for the top DeFi chain. And that is quite unfortunate in my opinion. I think that having lots of competing options is what makes the crypto space so great. I'd love if there was an "ETH Killer" or even two or three. It would bring more freedom of choice and more options to the end users, but just looking at the crypto landscape, I don't see a viable challenger at this point.

Conclusion...Long Live The King

In fact, I believe that the most likely ETH Killer will be ETH 2.0. If/When ETH 2.0 ever gets launched, it will dramatically improve on some of its existing weaknesses. The massive increase in TPS will be a huge improvement and will make ETH that much better than it currently is. Every day that ETH remains king is one more day that its inertia bias grows. Each new DeFi app that is launched on ETH means one more app that any "ETH Killer" will have to emulate and improve upon. I don't see any "ETH Killers" out there, but now would be the perfect time to challenge ETH. The network is clogged and transaction fees are skyrocketing. Potential challengers would be well advised that this might be their last chance to challenge ETH. If consumers are unwilling to migrate to other chains NOW given ETH's currently high fees and slow transaction times, they will even be less likely to migrate once ETH lowers fees and cuts transaction times.

 

References

https://twitter.com/MakerDAO

https://twitter.com/usdtz?lang=en

https://cryptonews.com/news/ethereum-vs-eos-vs-tron-vs-tezos-how-do-they-compare-3949.htm

https://defipulse.com/

https://ethgasstation.info/

 


The Part Time Economist
The Part Time Economist

Hi everyone. I'm just a simple man trying to make my way in the universe. I am passionate about cryptocurrency and hope that I can make at least some small contribution towards promoting wider crypto adoption and understanding.


The Part Time Economist
The Part Time Economist

Hi everyone. This is just a place for me to post some of my thoughts and analysis. I hope that someone finds them useful.

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