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Can Ethereum Compete With Its Rivals This Year? Coinbase Looks at State of ETH in New Report

Coinbase, the top US cryptocurrency exchange, is valuing the future of Ethereum (ETH), a leading smart contract platform that is at a loss for the start of the new year.

In a detailed report, David Duong, Head of Institutional Research at Coinbase To tell Ethereum is at a critical time both in its own attempt to deploy ETH 2.0 and in the face of pressure from other blockchain projects.

“As Ethereum’s scalability challenges continue to grow, L1’s traction is [layer-1] Alternatives mainly depend on how quickly the emergence of ETH 2.0 and L2 can be seen. [layer-2] solution.

This means that you may see continued growth in the alternative L1 network. [the first half of] A bridge to connect these chains as in 2022. However, the opportunity for an alternative to L1 is [the second half of] As expected of ZK in 2022 [zero-knowledge] Roll up for more widespread use with proof technology to improve. “

Zero-knowledge proof allows one party to prove the authenticity of the information to the other without revealing the information itself. Cryptographic engineers use the ZK method to increase the level of security and data privacy.

The report highlights how the high cost of using the Ethereum protocol has adversely affected its widespread growth, but a significant amount of development is still underway using ETH. It also mentions that there is.

“Ethereum network gas tariffs are one of the biggest obstacles to the general mass adoption of both ETH and smart contract platforms. In 2021, Solana (SOL), Avalanche (AVAX), This is one of the reasons why layer 1 alternatives such as Terra (LUNA) have received so much attention.

Still, most of the active app development across the L1 network still seems to be done on the Ethereum blockchain, with a total value of $ 156 billion locked across 214 projects. “

Ethereum competitors Solana, avalanche When Terra Everything has grown significantly last year, but has not been affected by the overall slump that impacted the crypto market in 2022.

Ethereum It was worth $ 3,730 in the New Year, but has seen a series of price cuts that are now down 32.9% in total, trading at $ 2,501.

Coinbase’s analysis concludes that the move to Ethereum’s Proof of Stake may result in fewer ETH being issued to miners and then sold, but without affecting blockchain functionality. The report does not show a definitive winner this year.

“But we believe that the culmination of L2 scaling solutions combined with upgrades such as beacon chain merging and sharding could limit the progress of the current form of alternative L1.

As ETH becomes more scalable, DApp [decentralized application] For example, users can refrain from looking for faster and cheaper alternatives to Ethereum.

Nevertheless, we believe that there is room for multiple chains to coexist in the crypto space in the short term, driven by cross-chain interoperability and the need for alternative consensus mechanisms. “

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Featured image: Shutterstock / Mr Dasenna

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