Ethereum has always made headlines for its high gas fees. ETH competitors on the other hand were a big hit in 2021 affecting the mass adoption of Ethereum itself. As for the ETH price, it started the new year with a bullish note at $3730 but at the time of writing the coin is trading at $2455 down more than 30 percent.
Although the market is in chaos right now Coinbase analysis reveals that there will be room for multiple chains to exist under one roof that is the crypto space and there will be no coin with the tag of “clear winner” this year.
Coinbase’s head of institutional research David Duong said that Ethereum is at a crossroads, both in terms of its own efforts to roll out ETH 2.0 and in terms of pressure from other blockchain projects.
He further went on to say that with growing scalability challenges for Ethereum he thinks that traction for L1 [layer-1] alternatives will depend on how quickly they see the emergence of ETH 2.0 and L2 [layer-2] solutions.
That is, they may expect alternate L1 networks to continue to grow in [the first half of] 2022, as well as bridges to connect them. However, as ZK [zero-knowledge] proof technology improves and rollups become more widely used, the window of opportunity for L1 alternatives may start to close significantly in [the second part of] 2022.
A zero-knowledge proof allows one person to establish the authenticity of a piece of information to another without exposing the information itself. The ZK technique is used by cryptographers to strengthen data security and privacy.
The research discusses how the high cost of using the Ethereum network has hampered its wider adoption, but it also points out that ETH is still used for a significant amount of development.
According to him, high gas fees on the ETH network is one of the biggest reasons why there is no mass adoption. This is also the reason why layer-1 alternatives like Solana (SOL), Avalanche (AVAX) and Terra (LUNA) have gained traction in 2021.
In conclusion, Ethereum’s switch to proof-of-stake will likely result in fewer ETH being issued to and sold by miners, but will have no effect on the blockchain’s operation. According to the research, there would be no clear winner this year.