TL;DR Breakdown
- Industry players say the Ethereum network (ETH) is to blame for its declining leadership within the $104B Defi sector.
- Other blockchains (BC’s) with better offerings are challenging ETH’s position within the Defi space.
The Ethereum network is at fault for its dwindling fortunes within the Defi sector. That’s according to analysts within the blockchain space.
They say ETH’s shortcomings have called into question its feasibility as a network. That questioning has seen several players migrate to other BC’s. The migrators see Solana (SOL), Avalanche (AVAX), and Binance Smart Chain (BSC) as more adept options.
The experts, including Nicholas Merten, have listed several factors explaining ETH’s current situation. In a string of Twitter posts, the DataDash YouTube creator explained where the network’s failings lie.
Merten takes issue with Etherrum’s push for layer 2 (L2) adoption. Instead, he says, ETH ought to focus on improving its Layer 1 (L1) network.
To him pushing L2 adoption doesn’t make economic sense. He holds that L2 BCs and Sidechains are way dearer than some L1 ones.
He says someone would readily pay $0.01 to trade on Solana than $0.04 on Polygon. The former is an L1 network, while the latter is the most affordable L2 solution on ETH.
Investing in L2 impractical
Merten goes on to term L2 networks impractical. That’s because they don’t offer enough incentive for their adoption. So to enjoy lower fees, there’s the need to move more L1 users to it.
That’ll require key players in the BC space to fund the bridging of current users. Another way would be to reward liquidity providers that shift to L2.
Merten also holds that Ethereum developers ought to seek solutions that’ll make it efficient. Again they should invest in making the network affordable.
Three Arrows Capital’s CEO Zhu Su weighed in on the situation, momentarily denouncing ETH. In a Twitter rant, the Chief Executive announced that his firm had ditched ETH for AVAX.
He has, however, made an about-turn on his words. Zhu feigns “the heat of the moment” for his scathing attack on ETH in follow-up tweets. He has apologized and asked his followers to work towards bettering the network.
Zhu’s Sunday rant provides insights into ETH’s failings regardless of his newfound faith in the network. In it, he claimed that the ecosystem suffered from the founder’s dilemma. He’d also alluded to the network’s high fees saying that newcomers can’t afford the chain.
Addressing the issues on Ethereum
Zhu’s backtracking tweets seem to lay credence to Merten’s claims about L2. Though supportive of L2, Zhu suggests that there could be better alternatives. He says he’d prefer the adoption of ETH1x.
Zhu says he’d rather they focused on the users’ welfare and not the holders on the upgrades. So despite “dialing back” on his earlier position, he’s actually emphasizing it.
Antonio Juliano, dYDX’s founder, also holds some of Zhu’s earlier views. He blames Ethereum for not executing in the past. He said he couldn’t think of one 10x handy advancement the network has deployed in the last few years.
Tim Beiko, a developer on Ethereum, acknowledges the platform’s shortcomings. He agrees that there are concerns about the high fees and low adoption of ETH.
He’s, however, quick to add that ETH has many intelligent people working on its platform. They’re aware of the issues and are working to fix them.
Ethereum says it’ll tackle the issues by adopting ETH 2.0. ETH 2.0 is a Proof of Stake BC that’s scalable and charges low fees. It has nonetheless lagged in implementation, leading to migrations.
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