Ether (ETH) has underperformed different cryptocurrencies in current months because the Ethereum blockchain has confronted “intense” competitors from different networks, Wall Road financial institution JPMorgan (JPM) stated in a analysis report on Wednesday.
The token lacks a compelling narrative like that of its bigger peer bitcoin (BTC, the financial institution stated, including that bitcoin advantages from its notion as a retailer of worth and as digital gold.
Regardless of upgrades, reminiscent of Dencun, exercise has shifted from the principle Ethereum community to its layer 2’s, which is detrimental to the blockchain’s development, the report stated. The community’s newest improve, Pectra, is prone to occur in early April.
“Aggressive pressures have led some decentralized purposes (dapps) emigrate from Ethereum to different application-specific chains for higher efficiency,” analysts led by Nikolaos Panigirtzoglou wrote.
Examples embrace decentralized exchanges (DEXs) reminiscent of Uniswap, dYdX and Hyperliquid, the financial institution stated.
Uniswap’s upcoming transfer to Unichain is essential as a result of it’s one in every of Ethereum’s “largest gasoline consuming protocols,” and its migration may end in a major loss to the community’s payment pool, the financial institution famous.
JPMorgan stated this development of dapps transferring to different layer 2s or different layer 1s may negatively influence Ethereum by lessening exercise on the principle community, which may end in decrease transaction charges and validator income.
Layers 2s are separate blockchains constructed on prime of layer 1s, or the bottom layer, that cut back bottlenecks with scaling and knowledge. By way of provide, this might make ether inflationary as “fewer transactions suggest diminished token burning,” the authors wrote.
The financial institution famous that Ethereum’s development is behind that of opponents reminiscent of Solana, which noticed a surge in exercise linked to memecoins.
The Ethereum ecosystem nonetheless dominates the stablecoin, decentralized finance (DeFi) and tokenization areas regardless of these challenges, the financial institution stated.
The community may see elevated institutional demand from tokenization enterprises however “competitors from different networks is prone to stay intense within the foreseeable future,” the report added.
Learn extra: Repair Ethereum’s Fragmentation Drawback
