Grayscale: Ethereum is like the best and worst of NYC

Digital asset management firm Grayscale released a report on smart contract platforms, comparing the Ethereum blockchain to the best and worst of New York City.

The report compared Ethereum, the granddaddy smart contract network, with newer competing blockchains such as Solana, Avalanche, Polkadot, Cardano and Stellar. The report follows the firm’s launch of a cryptocurrency fund focused on smart contract platforms other than ethereum.

In a chapter titled "Digital Cities," Grayscale analyzes Ethereum, Avalanche, and Solana. The firm compared Ethereum to New York City, noting that they both have similarities and issues that arise from their status.

“Ethereum is like New York City: it’s big, expensive, and crowded in some areas. Yet it also has the richest app ecosystem with over 500 apps worth over $100 billion — more than any other Any competing network is more than 10 times higher."

The report added: “Users and developers can rest assured that due to the size of its community and the amount of capital locked in the network’s smart contracts, Ethereum is likely to continue to be a hub for application innovation and liquidity. L2 solutions like Polygon can be integrated with New York City's skyscrapers are comparable: it expands by building upward."

The company went on to say that due to high gas fees and network congestion on Ethereum due to the huge demand for decentralized finance (DeFi) services and non-fungible tokens (NFTs) over the past two years, users migrated to competing blocks Chaining is like moving to a city with lower consumption.

“As fees on Ethereum began exceeding $10 per transaction, smart contract platforms such as Stellar, Algorand, Solana, and Avalanche saw strong growth in the number of on-chain daily transactions,” the report reads.

Grayscale called Solana similar to Los Angeles, noting that it is a "uniquely structured network that is faster and focused on different use cases," such as on-chain order books such as Mango Markets, which require fast transaction speeds and low cost to operate.

"Solana's architecture relies on a different consensus mechanism that prioritizes speed and lower fees, but at the cost of more centralization - rather than scaling through the L2 chain, Solana runs transactions through the fast L1 chain. As of 20223 On March 15, approximately 2,300 transactions were running per second," the report reads.

Avalanche has been likened to Chicago, with an economy similar to New York City, but with a smaller network, "cheaper transactions, less congested network, and more centralized development."

Grayscale wrote: “Gaming-focused subnets like Crabada, and partnerships with companies like Deloitte, should be able to provide more differentiation compared to other on-chain applications, helping Avalanche forge a unique identity, moving forward."

Despite the comparison, Grayscale highlighted a bullish use case for the future development of smart contract platforms, noting DeFi and the emerging Metaverse industry in particular:

“In our view, the combined market opportunity for DeFi and Metaverse applications could exceed the current $2 trillion market cap of the entire digital asset market.”

“Smart contract platforms are the operational layer on which DeFi and Metaverse applications are built and leveraged to transact, ultimately driving value to the underlying chain as users accumulate native tokens to earn fees,” the report added.

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