While Bitcoin was created as a decentralised, digital currency focusing on being a store of value and a medium of exchange by solving the quintessential double spending issue, Ethereum was created to take full advantage of the blockchain and empower people to build and run applications on it via smart contracts.
The Rise of Ethereum
Ethereum calls itself “the world’s programmable blockchain”.
It has grown tremendously since its release in 2015. To date, it is the 2nd largest cryptocurrency by market cap (~US$481b) and has enabled many innovative use cases, such as the growth of NFTs, DeFi, Decentralised Autonomous Organisations (DAOs) and over 2894 dApps, according to State of the dApps.
Alas, as Ethereum’s popularity as an application layer grew, several issues have arisen as the volume of transactions significantly increased.
The Problem(s) with Ethereum
1) Rising Cost of Transaction (Gas Fees)
In 2017, Vitalik Buterin, co-founder of Ethereum, publicly stated that “The Internet of Money should not cost 5 cents per transaction.”
Today, his quote has been rehashed as a meme while dissatisfied crypto natives watch helplessly as gas fees spike.
Instead of 5 cents, we are now looking at ~$30-60 per transaction, as seen in the report below:
2. Need for speed
Another common complaint about Ethereum is its network speed, measured by the number of transactions it can process per second.
Currently, Ethereum handles about 13 transactions per second (TPS) and this has become a bottleneck as more dApps start relying on the blockchain.
Ethereum’s popularity has proven that smart contracts and dApps are successful use cases in cryptocurrency.
Hence, Ethereum’s problems have become opportunities for Ethereum Killers.
What exactly are “Ethereum Killers”?
Ethereum Killers are blockchains that have the potential to snatch Ethereum’s market share by providing better alternatives to Ethereum’s problems, such as high transaction cost, slow speed and security issues.
Quick note: There have been many alternative solutions to Ethereum’s issues. “Ethereum Killers” tend to refer to Layer 1 blockchain solutions instead of solutions that are built on Ethereum, such as Layer 2 scaling solutions like Arbitrum, Optimism or side chains like Skale or Ronin. In this article, we will focus on the former.
“Ethereum Killers” – Ethereum’s pain is everyone’s gain
There are always new blockchains popping up that are touted to be the next “Ethereum killer”. This article will focus on the more popular Ethereum Killers, how they resolve Ethereum’s bottlenecks and whether they are worth investing in.
But first, in a nutshell:
Comparison of Ethereum Killers
| Ethereum (ETH) | Solana (SOL) | Terra (LUNA) | Avalanche (AVAX) | Fantom (FTM) | Elrond (EGLD) | Near (NEAR) | |
|---|---|---|---|---|---|---|---|
| Market cap | $379B | $44.3B | $29B | $21.2B | $7.6B | $3.7B | $11B |
| Price growth in 2021 | 3.9x | 111.7x | 127.8x | 31.3x | 125.8x | 8.9x | 7.3x |
| TPS | 13 | 2,000 | 10,000 | 4,500 | 4,500 | 15,000 | 100k (target) |
| Txn Fee | ~$23.07 | $0.00025 | Capped at 1% | $0.0001 | <$0.1 | $0.001 | $0.01 |
*All numbers are in USD and were accurate as of 19 Jan 2022. But we know crypto never sleeps, so you should check official websites for the latest data.
1. Solana (SOL)
What is Solana?
Solana is a decentralised blockchain that enables scalable and user-friendly dApps. Its innovative Proof of History allows it to timestamp the blocks on its blockchain in a serial manner that is almost impossible to hack due to what is called a “Preimage Resistance”.
This allows the process to be permissionless, which greatly reduces transaction time because of the decentralised computers that power Solana don’t need to spend extra time trying to verify and validate time and sequence.
Alex shared his analysis of Solana and three reasons for its success in this article.
How is Solana better than Ethereum?
Powered by its unique Proof of History mechanism, Solana offers higher network speeds. It claims that it can handle 65,000 transactions per second, compared to Ethereum’s 14 TPS.
Moreover, it claims to have a time to finality (i.e. time taken to confirm transactions) of about 10 seconds.
Currently, Solana is handling an average of 2,000 TPS for an average cost of only $0.00025.
Solana’s growth
Solana gained traction in 2021 as Ethereum’s rising fees had NFT artists and dApp developers scrambling to find a cheaper alternative.
In 2021, it has grown significantly:
- Solana’s market cap had grown by ~754x
- Total value locked in DeFi protocols on Solana has grown by ~824x
- It is currently the 2nd largest blockchain in terms of NFT sales volume, according to Cryptoslam
You can buy Solana on most major crypto exchanges or use crypto to swap it on major DeFi protocols.
Solana’s risks / trade-offs
Let’s face it, blockchain technology is still new and we need to keep in mind that there is no perfect blockchain. Solana has to deal with the issue of being too centralised for comfort.
This is the biggest issue that Solana has to resolve if it wants to completely kill Ethereum. Although there are counterarguments, Solana is often said to be too centralised because of the following reasons:
- It is expensive to become a Solana Validator
This creates a barrier for the entry of new but small validators to help secure the blockchain and process transactions.
2. Token Distribution
According to Messari, insiders own 48% of Solana tokens. This distribution may change in the future, but for now, it is holding back Solana’s reputation as a decentralised blockchain.
3. Reliance on Solana Foundation
There is a saying “too many chefs can spoil the broth”, but in Solana’s case its reliance on a single core node developer, Solana Foundation, is something many crypto natives are worried about.
In the rare case that Solana Foundation goes down or exits the project, the blockchain could continue functioning. However, there may not be any further development or improvement seen in Solana’s future.
A brief note on Solana’s Tokenomics
The key issue with the fiat monetary system is that our ability to print more money can lead to inflation.
Bitcoin solves this by fixing a maximum supply of 21 million bitcoins. With its EIP-1559 upgrade last August 21, Ethereum controls the number of circulating Ether by burning a certain amount per transaction.
In comparison, Solana is inflationary, which means its inflation rate started at 8% and will be reduced to a long-term inflation rate of 1.5% over time.
Although the percentage is small compared to its recent growth, you should take note of this if you plan to hold on to this coin. You can read more about Solana’s inflation design here.
2. Terra (LUNA)
What is Terra?
Terra doesn’t brand itself as an Ethereum killer; instead, it sets out to create an independent financial ecosystem that could thrive on its own. Terra’s crazy ambition is to become the main currency in the crypto space, essentially similar to the USD, which is the currency accepted in many countries.
It calls itself the “programmable money for the Internet”, and the entire ecosystem is focused on functioning as digital money. As such, Terra has deployed algorithmic stablecoins which can be used across protocols in its ecosystem.
Unlike most Ethereum Killers that has a unique blockchain technology, Terra is built on the Cosmos network.
Terra vs. Ethereum isn’t a direct apple to apple comparison because of the reasons mentioned above. That said, it does check most of the boxes of an Ethereum Killer, which is why some investors regard it as such.
Here’s how they compare:
Terra vs. Ethereum
Speed and fees are important for a finance-focused blockchain. Customers and merchants do not want to pay hefty transaction fees nor do they want to wait several minutes for the money to be sent between parties.
Terra seems to have nailed it with these features:
- Terra fees are capped at 1%, although it is usually lower
- Transactions take about 2 seconds
- The network can handle about 10,000 transactions per second
In order to become the de facto currency within the crypto space, UST has to be easily moved across different blockchains. And Terra is constantly expanding its usability. Both the LUNA tokens and UST can be bridged and used across many blockchain networks such as Ethereum, Solana, Binance Smart Chain and more, allowing for ease of use, scalability and interoperability.
Terra’s growth
2021 has been a great year for Terra. If you held it from the 1st of January in 2021, you’d be holding onto a 146X profit by end of the year.
In 2021:
- Terra’s market cap had grown by ~91x
- Total value locked in DeFi protocols on Terra has grown by ~365x
- Its stablecoin (UST) has also grown to become the 4th largest stablecoin by market cap at the time of this writing.
You can buy Terra’s token, LUNA, on most major crypto exchanges or swap for it on major DeFi protocols.
The growth of Terra’s popularity has attracted developers who have built a wide range of dApps on Terra:
The ecosystem has also expanded beyond payments to include NFT marketplaces and even GameFi.
Terra’s risks / trade-offs
- Stablecoin risk –
We wrote about the risks of stablecoins in the “What are Stablecoins?” article. However, I would like to touch on a major risk of algorithmic stablecoin – the death loop.
At the point of writing, the market cap of UST is at ~$9.6B, assuming that its price holds at $1, that’s $9B worth of UST coins in the market. Imagine a black swan event where UST is no longer valued as a stablecoin and all its holders decide to sell it, where would the $9.6B come from? In such an event, an oversupply of UST and undersupply of actual dollars or LUNA will result in a de-peg, causing UST to drop from $1 to possibly $0.
This was what happened in early June of 2021 when UST slipped to ~$0.94 for a few days. Terra has since implemented better safety measures against larger liquidation and launched Ozone insurance to help protect UST users from similar events.
That said, regardless of how a stablecoin holds its value, all hell will break loose when its holders start panic selling en masse, all at the same time.
2. Token distribution
Like Solana, a huge chunk of LUNA tokens are said to be held by insiders and the latest distribution ratios are not published. This exposes smaller investors to the risk of price volatility should any of the big insiders sell in large volumes.
3. Regulatory Risk
Stablecoins’ value is usually pegged as a real-world currency. This makes them easy targets for regulatory bodies and many governments have now started to regulate the use of stablecoins.
In addition, the SEC had ordered Do Kown, founder of Terra to appear in court with US regulators last September 2021 with regards to the Mirror protocol, a DeFi protocol within the Terra Ecosystem.
3. Avalanche (AVAX)
What is Avalanche?
Avalanche claims to be the fastest smart contract platform by time to finality and it does so by introducing a modular blockchain network with 3 interoperable chains. Each chain focuses on a key function:
- X-Chain for transactions
- C-Chain for smart contracts
- P-Chain for management of the platform and coordinating validators
We previously wrote about Avalanche and how it works in great detail in “What is Avalanche?”
How is Avalanche better than Ethereum?
With its unique modular blockchain network design, Avalanche offers faster speeds of 4,500 TPS (per subnet) at a time to the finality of about 3 seconds, all at a lower cost of 25 nAVAX (~$0.0001 currently).
Its subnet structure is actually a ‘Directed Acyclic Graph (DAG)’ structure which allows the formation of a network of blockchains, increasing its scalability.
It is also interesting to note that Avalanche allows its users to customise their own blockchains on the Avalanche network. This gives developers and companies more options to work with while enjoying faster and cheaper transactions. Additionally, this encourages interoperability as subnets are compatible with the Avalanche network.
Avalanche works on a modified version of Proof of Stake, which is leaderless. This means that every node has the same weightage of votes. A random, small group of validators are selected to validate each block and consensus can be achieved within the desired timeframe.
This complex consensus mechanism gives the Avalanche network greater security and makes it extremely difficult to attack. One needs to control 80% of the network in order to successfully attack and take control of it. In contrast, Bitcoin and Ethereum only require 51% control to attack.
How does Avalanche’s consensus mechanism really work?
It is a little complex and requires a full article but here’s a quick explainer video:
Avalanche’s growth
Avalanche has been rapidly gaining popularity and market share in the DeFi, crypto gaming and NFT space in 2021. And it has grown into the 3rd largest staked protocol at the time of writing.
In 2021:
- Avalanche’s market cap had grown by ~106x
- Total value locked in DeFi protocols on Avalanche has grown by more than 9000x
Avalanche’s TVL saw a surge in September 2021 after announcing its $180M incentive program which aims to attract developers to build DeFi projects on its blockchain. It also runs an accelerator program, Avalanche-X, that provides open grants to aspiring developers.
You can buy its token, AVAX, on most major crypto exchanges or use crypto to swap it on major DeFi protocols.
Avalanche’s risks / trade-offs
As we have mentioned, there are no perfect Ethereum killers. Here arethe challenges that Avalanche faces:
- May not be decentralised enough
Avalanche uses a ‘Directed Acyclic Graph (DAG)’ structure which allows for faster transaction speeds, but may be less decentralised than the traditional blockchain structure.
Moreover, Avalanche currently has over 1,190 validators and there are plans to reduce the requirements to become a validator in the future. This means that it will become more decentralised over time as more validators join the network.
- May not be as secured as it sounds
Although it would take 80% control to attack the network as a whole, there have been questions raised on the lack of penalties for bad actors. This may cause issues in the future as validators are not deterred from validating false transactions.
- No guarantee of low transaction cost over long term
Although it is currently faster and cheaper than Ethereum , Avalanche’s transaction fee structure has a dynamic component which is priced based on the volume of transactions.
At the time of writing, Avalanche’s DeFi TVL is only about $12.5B compared to Ethereum’s $158B. As volume on the Avalanche network increases, it is likely that fees will increase as well. The question that remains is: Would the fees be kept within an acceptable range by its modular structure, or would they soar to crazy levels, creating a similar conundrum as Ethereum?
Currently, the reported highest gas fee on AVAX was 30 nAVAX, even as its popularity exploded this year. If Avalanche can maintain such low fees even as its network grows, it could prove to be a challenge to Ethereum’s market share.
4. Fantom (FTM)
What is Fantom?
Fantom is described as a fast and high throughput smart contract platform that provides speed, security and scalability.
How is Fantom better than Ethereum?
If the Ethereum network can be visualised as a single decentralised computer, the Fantom network is similar to a network of many computers.
Each computer can be used independently, allowing the experience to be faster and more scalable. Fantom is said to be able to handle 4,500 transactions per second with a time to finality of 1-2 seconds -which is very, very fast.
Transactions are also cheap. Based on the latest transactions on FTMScan, at the time of writing, transaction costs averaged at less than $0.1.
Fantom uses a consensus mechanism called Lachesis, which uses a ‘leaderless’ Proof of Stake (PoS) in combination with a concept termed “Asynchronous Byzantine Fault Tolerance” (aBFT).
Basically, blocks can be formed independently without having to wait for everyone else to validate it, making it quite fast.
But is it secure and decentralised?
The aBFT is said to be able to tolerate up to ⅓ of bad validators and the leaderless PoS gives equal weightage to all the nodes, reducing centralisation.
Fantom’s growth
Launched on 27 Dec 2019, Fantom has been under the radar for a while until recent months.
In 2021:
- Fantom’s market cap grew by 124x
- Total value locked in DeFi protocols on Fantom has grown by 1,000,000x!
In the first week of 2022, it has been seeing good growth of at least 30%.
To grow its ecosystem and encourage developers to build on the Fantom network, the Fantom Foundation announced a 370M FTM incentive program which led to a surge in its DeFi TVL in October 2021. Like Avalanche, Fantom also provides grants to attract innovative projects to its network.
You can buy its token, FTM, on most major crypto exchanges or use crypto to swap it on major DeFi protocols.
At the point of writing, there are 80+ dApps on the Fantom network, as seen below:
Many more dApps are in the works. There seems to be a theme of building multi-chain or cross chain projects on Fantom. If this trend continues, interoperability (aka the ability to work across different blockchains) may just become Fantom’s USP in the future, allowing it to tap into bigger markets like NFTs and even projects related to the Metaverse.
Fantom’s risks / trade-offs
Fantom’s trade-offs could possibly be the main reasons for its slower growth.
- Less decentralisation
Firstly, its PoS requires a single node to own at least 500,000 FTM, which is quite a lot. Smaller FTM stakers can delegate their holdings for rewards, with approved validators. Fun fact: APY at the time of writing is ~13% on a lock-in period of 1 year.
As the barrier of entry is quite high (500,000FTM is about US$1M currently), the Fantom network only has 66 validators at the point of writing. This has led to worries about the network being too centralised.
As mentioned above, the Fantom network can only tolerate up to ⅓ of bad validators, which means if 22 of the current validators decide to take over the network or spam fake transactions, it can be done with relative ease.
Secondly, instead of a ‘chain’ where every block is linked to another in sequence, the Fantom network uses a ‘Directed Acyclic Graph (DAG)’ structure (similar to AVAX) which looks more like a spiderweb network.
Although it allows for faster transaction speeds, it may be less decentralised than the traditional blockchain structure.
That said, these risks can be reduced in the future as the network grows and if it allows smaller nodes with its equal weightage consensus.
- Reliance on Ethereum’s technology
Lastly, Fantom is built on Ethereum’s underlying programming language (Solidarity) and systems. Although this allows for compatibility with Ethereum, it also means Fantom’s success is possibly closely tied to that of Ethereum’s.
5. Elrond (EGLD)
What is Elrond?
Elrond is…not a half elven.
In crypto, Elrond is a relatively lesser known blockchain with an experienced team and has been a work in progress since 2018.
It had raised about $5M in an ICO and later on its main net was launched on 30 Jul 2020. This blockchain is said to have combined the scarcity of Bitcoin, the programmability of Ethereum and the speed and scalability of blockchains like Solana and Avalanche.
How is Elrond better than Ethereum?
Elrond uses “adaptive state sharding” to improve the speed and scalability of the network. The blockchain is ‘broken’ into smaller components known as ‘shards’. Each “shard” runs parallel to the main blockchain, handling more independent transactions at the same time. All the information is then synced and written on the blockchain, using the modified Secure Proof of Stake mechanism.
Elron’s adaptive state sharding uses three types of sharding methods to ensure that transactions are handled smoothly on shards. These are coupled with parallel processing which reduces the transaction speed and capacity of the network. At the time of this writing, Elrond can process 15,000 transactions per second at $0.001 per transaction.
In line with its aim to build the new internet economy, Elrond’s smart contract can be written in several languages (C, C++ and Rust). This means that developers can start building on Elrond without having to pick up a new language.
Elrond’s growth
In 2021:
- Elrond’s price has grown by 8.9X
- Its market cap grew by 12x
- Total value locked in DeFi protocols on Elrond is currently at 1B
Although it rarely makes the headlines, Elrond has silently grown its user base to 1.17M users since it launched its main net on 30 July 2020. At the moment of writing, 10.3M EGLD is being staked to support the network and that’s approximately US$2.66B.
It underwent a 100 days of hypergrowth campaign in early 2021 where it aimed to grow the ecosystem through partnerships and onboard its target of a billion people on its network.
Elrond actively attracts developers through its unique ‘royalty distribution mechanism’ which gives 30% of the gas fees back to the writer of the Elrond smart contract. This means developers using Elrond will receive a cut on the smart contracts they write, whenever someone interacts with it.
You can buy its token, EGLD, on most major crypto exchanges or use crypto to swap it on major DeFi protocols.
Elrond’s risks / trade-offs
- Token Distribution
Many investors have raised concerns over Elrond’s token distribution, citing that the top holders own a significant portion of EGLD. This has been disputed by Elrond supporters by showing that most of the wallets belonged to exchanges, as seen below:
- Weak marketing
Although Elrond has grown steadily, it remains relatively unheard of as it rarely gets mentioned by the crypto media. Despite its hypergrowth campaign, it is still quite far from its goal of having a billion users.
This could mean that we are still in the early stages of development, but it could also mean that Elrond is leaving a lot on the table in the Ethereum Killers’ battle for market share.
6. Near Protocol (NEAR)
What is Near?
Near is a developer friendly, low cost platform that aims to be fast and affordable for its users. It reports a block time of 1.03seconds, time to finality of 2 sec and a typical transaction cost of $0.01.
As of Jan 2022, NEAR had taken off as crypto investors started to take notice of it due to its recent funding round of $150m, the launch of its cross chain Aurora mechanism and a growth of new projects on the network.
How is Near better than Ethereum?
Near uses a sharded version of Delegated Proof of Stake (DPoS) as their consensus mechanism which allows the network to scale up and speed up transactions. Their aim is to be able to process 100,000 transactions per second.
Accessbility
To bring a new technology to the masses, it has to be easy to understand, trust and use. Near places an emphasis on accessibility and user-friendliness by downplaying the technical side of blockchains, pretty much since they were founded.
In their whitepaper, they mentioned that “applications deployed to the platform should be seamless to use for end users and seamless to create for developers.”
This could allow NEAR to reach a greater market.
Interoperability
Another key focus of Near is interoperability. With that in mind, they launched the Aurora Network which is compatible with the Ethereum Virtual Machine. This allows projects built on other layer 1 protocols to quickly and seamlessly move onto Near.
This has lead to an exponential growth in the number of projects on the network.
Near’s growth
Although Near was relatively unheard of previously, its growth in 2021 was significant.
In 2021,
- Near’s market cap had grown by ~2675x
- Total value locked in DeFi protocols on Near has grown by ~280x
The NEAR token price had also grown by 624%, and it has ranked #19 by market cap at the point of writing.
You can buy Near on most major crypto exchanges or bridge your Ethereum to Near using their Rainbow Bridge.
Near’s risks / trade-offs
Tokenomics
In general, crypto investors prefer deflationary tokens because they believe that such cryptocurrencies would appreciate over the long term.
Near tokens are designed as such:
5% of additional NEAR supply is released yearly and 90% of these will be used to support the network by rewarding its validators. 10% of the new supply will go to the protocol treasury. 30% of transaction fees will be given back to the developers of the contracts and 70% of the fees will be burnt.
If Near captures a good amount of projects, the burnt NEAR could outweigh the 5% yearly supply, making it deflationary. The risk here is if Near fails to continually attract developers, the balance of their tokenomics could shift towards being inflationary, and this may cause investors to leave.
Funding lockup period
As mentioned above, Near raised a significant amount in their early days. The backers were given convertible notes which could be converted to NEAR tokens with a 5 year unlock schedule, from the launch date in 2020.
If these backers decide to sell off their tokens, NEAR’s price could be affected temporarily.
So…will Ethereum put up a fight?
Despite the misgivings that the community has against Ethereum, it remains the main blockchain that powers NFTs and DeFi among many other use cases.
Let’s take a look at:
Ethereum’s use cases in 2021
- NFTs
Ethereum is responsible for 97% of NFT sales in 2021.
- DeFi
As of 4 Jan 22, Ethereum holds 62% of the Total Value Locked (TVL) across DeFi protocols according to DeFi Llama:
But Ethereum Killers have been gradually eating away at Ethereum’s market share. In DeFi alone, Ethereum’s TVL has dropped from 97.6% in January 2021 to its current 62% share.
Will Ethereum lose its position in the cryptomarkets and should investors like us stop buying it?
For now, there’s no need to panic sell because the Ethereum team continues to improve on its blockchain.
EIP-4488
On 26 November 2021, Buterin proposed EIP-4488, a short term solution to reducing gas fees before the roll out of Ethereum 2.0.
The original piece was too technical, but based on what others have summarised, Buterin proposes to do batch transactions from Layer 2 (L2) rollups* and to introduce sharding to rollups in stages.
*Layer 2 rollup solutions allow users to carry out transactions off chain for a lower cost, the transactions are summarized then submitted and recorded on-chain in one single block. The two common rollup solutions are Optimistic rollups and ZK-rollups.
Ethereum L2 solutions have been gaining traction in recent months due to high Ethereum gas fees. At the time of writing, here are some of the key L2 solutions:
Popular solutions like Arbitrum One has experienced a crazy growth in total value locked (TVL) since September 2021:
Ethereum 2.0
At the point of writing, Ethereum is still powered by Proof of Work – i.e., miners help to validate transactions of a fee, paid in Ether (ETH). This means that the validation process is driven strongly by supply and demand. In other words, the more transactions, the higher fees.
They are in the midst of transiting to Proof of Stake under Ethereum 2.0. This change is estimated to go live in 2022.
Sharding will also be introduced as part of Ethereum 2.0 to increase speed and lower costs.
More Ethereum Killers are coming
There will always be new blockchains being launched that are touted to be the next Ethereum killers. In fact, at the point of writing, Harmony, Algorond, Stratos, Chronos, Tron and many more are being touted as the next big Ethereum killers.
Ultimately, I believe Ethereum will continue to remain in the game as it has the first mover advantage. However, it could see its market share in specific niches like DeFi drop over time as newer, faster and cheaper blockchains are launched. It’s up to Ethereum to stay in the game by innovating their existing protocol.
What are some Ethereum killers you’re keeping an eye on?
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