Digital asset management company Grayscale believes that Ethereum may become the market focus as the final decision date for the SEC’s Ether spot ETF application approaches in May. Additionally, the Dencun upgrade scheduled for March 13 is expected to help Ethereum compete with other smart contract platforms in terms of scalability.
In a research report released on Friday (23rd), Grayscale pointed out that Ethereum is facing increasing competition from other blockchains such as Solana. The performance of Ether (ETH) in 2023 is not as good as other smart contract networks such as Solana (SOL) and Avalanche (AVAX). Grayscale analyst Will Ogden Moore attributes this to Ethereum going through what is called “adolescence”.
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 trusted smart contract platform and also the largest by market capitalization.” Grayscale’s report highlights the network’s leadership in transaction fees, TVL, number of dApps, and weekly developer count, as well as its lag in transaction volume.
According to Ogden, Ethereum is facing issues such as slow transaction speed, low throughput, and high user costs in its “adolescent” stage. However, Ethereum core developers are working towards realizing the vision of “Ethereum 2.0” by addressing these user cost and scalability issues through a series of upgrades.
Grayscale believes that Ether (ETH) has multiple positives, including upcoming upgrades, net supply tightening, network revenue, the SEC’s decision on the Ether spot ETF application in May, and increasing use cases leveraging Ethereum’s network security features. The analyst also mentions the recent strong performance of Ether’s price.
Entering the maturity phase, the Grayscale report states that the Dencun upgrade will significantly reduce the cost of Rollups transactions, which 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 was previously challenged by emerging solutions like Celestia.
Grayscale also believes that the rise of solutions like Eigenlayer may bring the “security as a service” vision to more projects.
In conclusion, the institution states that Ethereum is at a critical turning point, preparing to transition from adolescence to maturity. The Dencun upgrade and the broader Ethereum 2.0 project “mark an important milestone on Ethereum’s path to becoming a more scalable, efficient, and user-friendly platform,” the report states.
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Related reports: “S&P Global: Ether spot ETF could increase concentration risk for Ethereum” “SEC further delays Invesco Ether spot ETF application; analysts: not surprising, May is key!” “Ethereum’s next steps: Cancun upgrade, Layer 2 Rollup set to explode?”
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