The king of all blockchains – Ethereum (ETH) – was once slow and costly. It led to the quick development of rival blockchains. But now Ethereum has corrected much of its problems, developed its own layer 2 chain like Optimism, is improving the capabilities of its layer 1 chain, and its gas fees have fallen from a June 2020 high of around 709 Gwei (the price in blockchain lingo) to 5.08 Gwei as of May 29. Gas fees have fallen 67% from this time last year, reducing prices for complex smart contracts hundreds of dollars. Why bother investing in an alt-chain now?
“The predicted developer exodus from Ethereum never materialized,” said Alex Loktev, Chief Commercial Officer at P2P.org, a blockchain infrastructure company that provides staking services primarily for institutional clients.
Ethereum consistently supports over 6,000 monthly active developers, dwarfing the combined developer activity of layer 1 chain rivals Solana (~3,200) and Avalanche (~406). Monthly active developers numbers reflect the number of software engineers that are building applications on a particular blockchain, opposed to monthly active users, which measures things like active wallets, or trading and gaming on the blockchain. “Ethereum’s has a deep bench of talent and they are not chasing transient yield farms,” Loktev said. “They are focused on building scalable infrastructure with real-world use cases.”
Loktev said Ethereum still offers “unmatched benefits” for users. He named a unified security model and integrated liquidity layers. “When you’re staking (coins) or securing billions in value, architecture isn’t a footnote—it’s the main story,” he said. “Ethereum continues to make the right choices for long-term institutional trust.”
Unfortunately investors have not done well holding ETH this year, and over the last 12 months, despite relatively strong news for Ethereum. Spot Ethereum exchange traded funds recorded cumulative net inflows of $493 million in May, with a record streak of 9 consecutive days of positive inflows and $321 million in just the last week of May.
Technological advancements like the Pectra upgrade have not helped investors here. Ethereum has experienced a significant decline of approximately 31.9% over the past year. Within its big rivals, only Avalanche (AVAX) has done worse, down around 38%.
Solana (SOL): -5.7%
Cardano (ADA): +54.2%
Binance Smart Chain (BNB): +7.4%
Disclosure: 82% of retail CFD accounts lose money
What’s Good for Ethereum, is Good for All
Falling gas prices on Ethereum are a welcome improvement, said Shahaf Bar-Geffen, Chief Executive Officer of COTI (COTI), a fintech platform for digital payments, “but Ethereum’s transactions per second limitations persist.”
This and other bottlenecks keep competitive blockchains going, making it easier for them to attract developers and commercial clients. Most of them will have their own specific spin on what makes their blockchain unique. Privacy is a favorite for Coti users.
COTI developers were involved in the design of the Digital Euro, and is a founding member of the $140 billion Saudi Arabia AI & Blockchain Center.
“Ultimately, developers need infrastructure that scales with their ambitions, so using a blockchain goes beyond just worrying about fees,” he said. “Our approach isn’t just about being a cheaper option to Ethereum; it’s about creating a privacy infrastructure that is needed if you want to scale open (public) systems,” he said.
The COTI token is down 39% year-to-date.
Progress in the industry is always a good thing, said John Wang, Head of Neo Ecosystem Growth and Managing Director of Neo Ecofund.
“Healthy competition drives innovation, and that benefits everyone,” Wang said.
For Neo, a better Ethereum isn’t a threat, though the NEO token has taken a hit this year worse than ETH. “It reinforces what we’ve believed from the start, that developers deserve performance, affordability, and a user-friendly infrastructure. Some blockchains may have gained attention purely due to Ethereum’s high gas costs, but our value proposition goes beyond being an alternative,” he said.
Falling Ethereum gas prices are not undercutting its rivals, even if their token prices are underperforming. The speculative nature of the cryptocurrency market doesn’t always match the fundamentals of the company that issued the token in the first place.
As of now, there are 472 smart contracts built on Neo N3, and 1,842 smart contracts on Neo X — following the launch of their Ethereum Virtual Machine-compatible sidechain.
Solana attracted interest from institutional investment houses lately, the Financial Times reported. Several major banks are now working with Solana to tokenize traditional financial assets like stocks and bonds; another sign that the Ethereum alternatives are viable.
BlackRock, VanEck Global and Wisdom Tree are working with the Avalanche blockchain to tokenize real world assets, Avalanche said on April 30.
“Ethereum has raised the bar now,” said Wang. “We’re more than ready to meet their challenge.”
Disclosure: The writer of this article is an investor in Cardano.
