introduction
The past glory is gone, and the competitiveness is gradually weakening. Ethereum was once the king of public chains, but now under the influence of many factors, its core competitiveness is gradually lost and its market position is facing severe challenges.
Multi-dimensional perspective on the competition landscape
Compared with Bitcoin, Ethereum has certain disadvantages in terms of decentralization. Nearly half of Ethereum's nodes are located in the United States, and a considerable number of them are subject to regulation. The consensus client Prysm accounts for 45% of the consensus layer, and the execution client Geth accounts for 85% of the execution layer, both of which are far beyond the 33% security threshold. In contrast, Bitcoin is more decentralized, and large investors are more inclined to hoard Bitcoin. Compared with Solana, although Ethereum is more mature in technology, Solana, as the third generation of blockchain technology, hopes to improve Ethereum's problems, and in terms of market sentiment, because Solana is young and has room for imagination, some investors would rather choose Solana than Ethereum in addition to Bitcoin. Ethereum is at a disadvantage in terms of transaction speed and fees, and these public chains pose competitive pressure on Ethereum.
In the past, Ethereum attracted a large number of developers and projects with the advantages of its smart contract platform. However, as time goes by, its problems are gradually exposed. On the one hand, Ethereum's transaction speed is relatively slow. Compared with some emerging public chains, Ethereum can only process about 15 transactions per second, which easily leads to network congestion and soaring transaction fees during peak periods. For example, since July 2018, Ethereum has frequently experienced network congestion, tens of thousands of transactions waiting to be packaged and unable to be confirmed, and the transaction fee has soared to 5,862 ETH at one time, which is more than 10 times the normal transfer fee. On the other hand, Ethereum's gas fee is high, which is too costly for some small transactions and ordinary users. According to market data, the cost of Ethereum network congestion is as high as 15 million US dollars. In addition, Ethereum is relatively slow to respond to market competition. When competitors launch better functions and speeds, Ethereum's response is not timely, resulting in a gradual erosion of market share. As DappRadar data shows, the market share of Dapps has been quietly shifting.
The future is a mystery, and change is imperative
Explore the uncertainty of Ethereum's future development and emphasize that it needs to undergo major changes to regain its core competitiveness. The future direction of Ethereum is full of uncertainty. On the one hand, Ethereum faces pressure from many competitors. For example, Solana has performed well in terms of technical advantages, MEME craze and user experience, which poses a huge challenge to Ethereum. Solana's high transaction speed and low fees make DeFi projects more promising on it, and its MEME coin ecosystem will also usher in an explosion in 2024, attracting the attention of a large number of investors. On the other hand, Ethereum itself also has some technical problems that need to be solved urgently. For example, V God talked about four concerns about Ethereum's POW to POS on Reddit, including the participation rate of verification nodes is lower than expected, equity mining will be more popular and bring troubles, sharding technology is more complicated than expected, and the cost of running nodes is more expensive. These problems all indicate that Ethereum needs to undergo major changes to cope with the current predicament and regain its core competitiveness. In the future, Ethereum may need to make great efforts in technological innovation, ecological construction and user experience in order to gain a foothold in the fierce market competition.
Macroeconomics and Crypto Market Correlation
The macroeconomic situation has a profound impact on the cryptocurrency market. As cryptocurrencies mature as an asset class in their own right, their prices are increasingly intertwined with the broader financial markets. For example, the price growth of stocks and cryptocurrencies is more highly correlated than ever before. ETH's intraday volatility is nearly 12% higher than all other days, driven by macroeconomic trends in the United States, such as economic growth, inflation, interest rates, employment rates, and geopolitics. Changes in interest rates affect the market value of securities. Changes in official interest rates can increase or decrease the value of a country's currency. When interest rates fall, it promotes exports, leading to higher asset prices, including cryptocurrencies.
Tracking the latest technological trends
The progress of Ethereum's sharding technology and POW to POS is not smooth. The practical application of sharding technology faces many technical difficulties, such as data availability sampling (DAS) in the actual p2p network construction, it is not easy to instantiate efficiently and robustly. There are also some problems with POW to POS, such as the participation rate of verification nodes is lower than expected, the equity mining will be more popular and bring trouble, the complexity of sharding technology is beyond expectations, and the cost of running nodes is more expensive. These problems all show that Ethereum faces huge challenges in technological development.
Insights into the evolution of investor demand
Changes in investor demand for Ethereum are mainly affected by market sentiment and technological development. When Ethereum technology develops smoothly and market sentiment is optimistic, investor demand for Ethereum increases and prices rise. Conversely, when Ethereum faces technical difficulties and market sentiment is pessimistic, investor demand for Ethereum decreases and prices fall. For example, the recent decline in Ethereum prices is partly due to changes in market sentiment and the impact of technical issues. Changes in regulatory policies can also affect investor demand for Ethereum. Some countries have taken strict regulatory measures on the cryptocurrency market, which has led to increased investor concerns and uncertainty about the market, thus having a negative impact on Ethereum prices.
Ethereum’s response strategy
Technical improvements: Ethereum can accelerate the progress of sharding technology and POW to POS, solve technical problems, increase transaction speed and reduce fees. For example, by optimizing data availability sampling (DAS), efficient and robust instantiation can be achieved in actual p2p network construction. At the same time, the participation rate of verification nodes can be increased, the problems caused by equity mining can be solved, sharding technology can be simplified, and the cost of running nodes can be reduced. In addition, Ethereum can also explore other technical innovations, such as zero-knowledge proofs, Layer 2 expansion solutions, etc., to improve its performance and competitiveness.
Ecosystem expansion: Ethereum can strengthen the construction of the developer ecosystem and attract more outstanding developers to participate in the construction of Ethereum's ecosystem. For example, by holding developer competitions, providing development tools and resources, and establishing developer communities, developers' enthusiasm and participation can be improved. At the same time, Ethereum can expand its application areas, not only limited to DeFi and NFT, but also explore other fields such as supply chain finance, Internet of Things, games, etc., to expand its user base and market share. In addition, Ethereum can also strengthen cooperation with other public chains and projects to achieve interconnection and jointly promote the development of blockchain technology.
