Ethereum is undoubtedly the leading blockchain in DeFi, but that may be about to change as analysts at JPMorgan have noted that asset dominance in space may already be deteriorating.
According to analysts, the rise of smart contract protocols like Terra, Avalanche, and Solana has shown that Ethereum’s lead is not complete in DeFi.
These projects have hampered his dominance, and could have a further impact in this new year.
Ethereum loses its dominant position in DeFi
To put that into perspective, Ethereum’s market share in DeFi TVL was almost 100% at the beginning of 2021. However, that number dropped to around 65% towards the end of the same year.
According to the note from JPMorgan the main cause of the land loss may be related to the scaling of the ETH network. The scaling Ethereum needs to maintain its dominance over space that may come too late.
” Ethereum is currently in a tough race to retain its dominance in the app space and the outcome of this race is far from clear. »
Because of this scaling issue, other independent blockchains like Terra, Avalanche, and Solana have received significant funding from investors and are encouraging the use of their platform.
Why is Ethereum losing its dominant position?
The number of transactions that each DeFi-supported blockchain can make in seconds shows that Ethereum is far behind its competitors.
According to the data, while ETH can perform between 15 and 45 transactions per second (TPS), competitors like Terra and Solana can make 1,000 TPS and 50,000 TPS respectively.
Otherwise, there is the problem of high gas charges which is quite common with the Ethereum blockchain. While the network has addressed this issue with its EIP-1559 upgrade, transaction fees on competitors like Solana are still much cheaper.
All of this may be part of JPMorgan’s analysts ‘conclusion that the Ethereum network could not take advantage of its current level of activity once its scalable update is complete, because users may have migrated towards its competitors’ ecosystems.
We’re already starting to see confirmation of what Bank of America recently said about Avalanche, which is a credible alternative to Ethereum for DeFi protocols, NFTs, and other activities. Since then, the TVL of projects on its blockchain has increased to over $ 11 billion, according to data from DeFiLlama.