“Ethereum is similar to New York City in that it is big, costly, and congested in some sections. It does, however, have the most robust application environment,” Grayscale noted.
Grayscale, a digital asset management, recently produced a paper on smart contract platforms in which it compares the Ethereum (ETH) blockchain to New York City’s greatest and worst neighbourhoods.
The paper compares Ethereum, the grandfather of smart contract networks, to newer competitors like as Solana (SOL), Avalanche (AVAX), Polkadot (DOT), Cardano (ADA), and Stellar (XLM). The storey follows the firm’s establishment of a crypto fund focused on smart contract platforms other than Ethereum.
Grayscale examined Ethereum, Avalanche, and Solana in a section labelled “digital cities.” The firm compared Ethereum to the Big Apple, arguing that both cities face comparable difficulties associated with their size:
“Ethereum is similar to New York City in that it is big, costly, and congested in some sections. However, it also boasts the most robust application ecosystem, with over 500 apps worth more than $100 billion—more than 10 times the value of any other competitive network.”
“Users and developers can take solace in the fact that Ethereum will almost certainly continue to be the centre of gravity for application innovation and liquidity, owing to the network’s size and the amount of cash locked up in the network’s smart contracts. “An L2 solution, such as Polygon, is akin to a skyscraper in New York City: it scales higher,” the research continued.
The corporation continued by implying that customers migrating to competing blockchains is akin to moving to a cheaper city as a result of the high gas fees and network congestion on Ethereum caused by the two-year surge in demand for decentralised finance (DeFi) services and nonfungible tokens (NFTs).
“As Ethereum transaction costs began to exceed $10, smart contract platforms such as Stellar, Algorand, Solana, and Avalanche saw rapid rise in daily on-chain transaction counts,” the paper stated.
Grayscale compared Solana to Los Angeles, stating that it is a “structurally distinct network that is faster and focuses on distinct use cases,” such as on-chain order books like Mango Markets, which require fast transaction rates and minimal fees to operate.
“Rather than scaling through L2 chains, Solana’s architecture relies on a novel consensus process that promotes speed and cheap fees at the expense of increased centralization.” Solana processes transactions via a lightning-fast L1 chain. As of March 15, 2022, the system is capable of processing around 2300 transactions per second,” the paper states.
Avalanche was compared to Chicago in that its economy is similar to that of New York City but with a smaller network; “transactions are less expensive and congested, and development is more centralised.”
“Game-specific subnets like Crabada, as well as relationships with firms like Deloitte, should help Avalanche differentiate itself from other chains in the future,” Grayscale stated.
Regardless of the analogies, Grayscale underscored the bullish use cases for smart contract platforms in the future, referring specifically to DeFi and the emerging Metaverse sector:
“According to our estimates, the market opportunity for DeFi and Metaverse applications combined is likely more than the $2 trillion market cap of the whole digital asset market today.”
“Smart contract platforms serve as the operating layer over which DeFi and Metaverse applications are built and used to conduct transactions, ultimately adding value to the base chain as users earn native tokens for transaction fees “Additionally, the paper stated.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.