Ethereum Killers: Meet the 5 Cryptos Leading the Smart Contract Platform Wars
Ethereum (ETH) launched in 2015 with one of the largest ICOs (initial coin offering) in the history of the cryptocurrency market – collecting more than $16 million to create the project.
This event introduced a whole new way to do business without an intermediary through smart contracts.
Smart contracts are “self-executing” contracts that use cryptocurrency as both the defining and the enforcement mechanism. The contract executes when the software determines that the conditions set forth in the code (and agreed upon by the participants) have been met. Once executed, the smart contract is recorded as part of that cryptocurrency’s blockchain database – thus creating a permanent record of the contract.
As the world’s first smart contract platform, Ethereum created the foundation for building an internet-based, decentralized, trust-free, peer-to-peer, and censorship-proof alternative financial system.
And it has more than proved its value since. The Ethereum network already has more than 3,000 applications and processes more than 500,000 transactions per day, on average.
The problem is that, in its current form, Ethereum still doesn’t have enough capacity to handle such activity – the platform doesn’t handle much more than 15 transactions per second (TPS).
This limitation became clear when overwhelming demand for a CryptoKitties game congested the network in 2017, causing delays in transactions and a large increase in fees.
Then, during the so-called DeFi Summer in mid-2020, financial solutions created on the platform reached a significant audience for the first time. Fees per transaction reached $15 and made it impractical to use the network for low-value transactions. That was followed by even more notable spikes in 2021 as the average rate reached as high as $70.
Developers have been looking for solutions to deal with possible periods of high demand ever since that first incident – and this is no easy feat.
For Ethereum developers, increasing blockchain capacity without stopping the ecosystem built on top is like revamping a moving bus. The big milestone of this “renovation” will be the event known as “The Merge,” in which the network will start to work with a more scalable technology.
In the meantime, we’ve seen a number of cryptocurrencies that offer an alternative to Ethereum flourish. These alternatives – often referred to as “Ethereum Killers” – propose new platforms for smart contracts competing directly with Ethereum in what many call the “Smart Contracts War.”
Today, we’re going to take a closer look at Ethereum, along with five of the most significant “Ethereum Killers” competing in the “Smart Contracts War” – BNB (BNB), Solana (SOL), Cardano (ADA), Polkadot (DOT), and Avalanche (AVAX).
We’ll assess the pros and cons of each to help you determine which present the best opportunities for cryptocurrency investors.
Let’s jump right in – starting where it all began…
Ethereum: Where It All Began
Ethereum is a decentralized computing platform that can be understood as if it were a computer. But instead of running on a single device, it runs simultaneously on thousands of machines around the world. There is no owner; instead, it works in a completely decentralized way.
Over the course of Ethereum’s history, it has become evident that the biggest obstacle to this technology is its scalability. Since its conception, its main creator (Vitalik Buterin), did not believe that it would be possible to develop a blockchain base for decentralized applications (dApps) through the normal blockchain structure set out by Bitcoin (BTC) – and neither would it be possible to have a decentralized blockchain through theproof-of-work consensus algorithm.
The primary challenge for Ethereum, especially its soon-to-be-implemented update (Ethereum 2.0), is solving the scalability problem without compromising its decentralized character or creating a critical security flaw.
For this, its team of developers decided to make two significant and unconventional changes to the Ethereum blockchain: the implementation of the Shards system and the change of the consensus algorithm from proof of work to proof of stake.
While Ethereum works on its own solution, a number of cryptocurrencies were created as alternatives to create a better smart contract platform. Each of these “Ethereum Killers” has its pros and cons – although, as you’ll find out, some are more promising than others…
Ethereum Killer No. 1: BNB (BNB)
Created by the Binance exchange using Ethereum technology, BNB was the first alternative blockchain to gain significant adoption by DeFi (decentralized finance) protocols during peak demand in 2020. This was especially thanks to its technical efficiency (low costs and high speed), compatibility with Ethereum applications, and the exchange’s large user base, estimated at more than 25 million people.
Despite its power of scalability and efficiency with low fees, the downside of this blockchain is its high centralization – a challenge that Binance itself has been working to solve.
Ethereum Killer No. 2: Solana (SOL)
The Solana blockchain is built on innovative proof-of-history technology and is capable of processing an average of 2,790 transactions per second (TPS) with practically negligible fees. This explains the great growth of its ecosystem, especially regarding financial investments, online games, and NFTs (non-fungible tokens).
In addition to technical efficiency, Solana has the support of important institutions in the market, such as the FTX exchange, which has already raised millionaire funds to finance the development of solutions on the platform.
It is also backed by the distinguished venture investment manager Andreessen Horowitz and validated by major institutions such as JPMorgan and Bank of America – which published a report projecting that Solana could become the “Visa of the Digital Asset Ecosystem.”
On the other hand, Solana is not decentralized sufficiently enough for its users. The Ethereum network has over 200,000 validators, while the Solana network has only 1,000 validators as of this writing. The greater the number of validators, the more secure the network will be.
It also has fewer projects. Solana claims to have around 350 projects on its network, including DeFi, NFTs, and gaming applications. However, as more people become aware of fast transactions and low transaction fees, more new projects will be able to choose Solana.
While most digital currencies have an established maximum supply – which is a hard cap on how many coins will ever be created – Solana doesn’t have a fixed supply of coins. Creators have started to increase the annual supply of SOL tokens by 8%, and the inflation rate will decrease by 15% each cycle until it reaches 1.5%. From then on, the inflation rate will stop decreasing.
And finally, the platform’s reputation took a hit when the Solana Foundation tweeted that its network was experiencing some instability. Since reliability is key for crypto investors, this could set Solana apart from its biggest rivals.
Ethereum Killer No. 3: Cardano (ADA)
Cardano was developed in 2015 by one of the co-founders of Ethereum. The platform is supported by a strong team and passionate community.
Network integrity is guaranteed by the proof-of-stake mechanism, which demands considerably less energy than the proof-of-work mechanism that is currently used by Bitcoin.
The development of the technology has been solid, with experts reviewing each improvement closely – but at the expense of being faster. Despite its appeal and market value of more than $36 billion, the Cardano platform only started to run smart contracts in 2021 and still has a small variety of applications.
Despite the launch of smart contracts, the Cardano blockchain presented few uses. It remains to be seen whether the dApps being released on the blockchain will see any significant adoption.
The Cardano network’s fee income is still relatively low compared to other proof-of-stake blockchains such as Ethereum 2.0. Unless the network can increase new application fees or substantially increase usage, ADA’s valuation cannot be calculated based solely on its staking.
Ethereum Killer No. 4: Polkadot (DOT)
Polkadot is another proof-of-stake crypto created by a co-founder of Ethereum, first launched in 2016.
Its development is based on the premise that no single blockchain will be able to support all use cases of the technology, which would explain the coexistence of different platforms. To permit interaction between these blockchains, Polkadot is made up of a main network and parallel networks – called parachains – that focus on specific niches. The first parachains began to be coupled to Polkadot in 2021 when the auctions of “slots” for these networks took place.
Given the early stage of the ecosystem, there is still little usability – making Polkadot a bet for the future, should it host a first major project.
Polkadot has hundreds of projects in development. But as of today, it lacks the network stress test, among other factors that will attest to its real security, scalability, and good performance in times of high network demands.
Ethereum Killer No. 5: Avalanche (AVAX)
Avalanche behaves as a platform for dApps as well as custom blockchain networks. The native token of the Avalanche blockchain system is AVAX, and its main objective is to dethrone Ethereum from the most popular blockchain rank for smart contracts.
Avalanche’s advantage over Ethereum is its high transaction output without any compromise on its scalability: it can process up to 6,500 transactions every second (TPS).
There are three different and individual blockchains: X, P, and C chains have different use cases as well as different consensus mechanisms based on these same use cases.
Avalanche tries to solve the problem of decentralization, security and scalability that stands as a major obstacle to the large-scale decentralization of blockchain.
The project is very promising and has been working on developing its ecosystem of dApps and DeFi after its mainnet launch in 2020. However, like other innovative projects, Avalanche still needs to prove itself in time and pass the stress tests that may prove its main features.
And the Winner Is…
There are several alternatives to Ethereum that aim to solve the problem of decentralization, scalability, and security. In addition to the networks discussed above, the smart contract platform ecosystem has other alternatives such as Algorand (ALGO), Cosmos (ATOM), and Tezos (XTZ). However, like the ones discussed today, most of these solutions are very new and have not yet passed the stress tests that the Ethereum network accumulates.
Precisely for this reason, the maturity of these technologies and the number of applications on their networks will have a decisive impact on their technical capabilities and the appreciation that their tokens can achieve.
So far, only one of the five “Ethereum Killers” discussed today has made its way into the coveted model portfolio of “buy” recommendations hand-picked by our team of experts exclusively for Alternative Wealth Network subscribers.
Click here to join Alternative Wealth Network today and find out which “Ethereum Killer” makes the cut.
All the best,
Advisory Board Member, American Institute for Crypto Investors
So your picking solana then.
My guess: (DOT).
My guess would be: (DOT).
Time will tell.
I’m surprised OX (ZRX) and Compound didn’t make the cut. We’re they considered?
They were not.