Ethereum (CRYPTO: ETH) has had a great run in 2021.
Although it's down some 22% from its 10 November all-time high of US$4,865, the world's number 2 token is up by 427% year-to-date.
At the current price of US$3,857, it has a market cap of some US$460 billion.
But faced with what crypto analysts are calling 'Ethereum killers", can it hold onto its mantle in 2022 and beyond?
For the answer to that question, the Motley Fool turned to Ray Brown, market analyst at crypto exchange CoinSpot.
Image source: Getty Images
What are Ethereum killers…and why investors should pay attention
Addressing the issues that are currently hindering Ethereum's growth, Brown told us:
Ethereum's scalability is one of the biggest hurdles that is currently limiting the success of its network and the countless dApps (decentralised applications) that run on the network. To be fair to the founder Vitalik Buterin and his team, they could not have anticipated the significant demand the platform has garnered since Ethereum launched back in 2015.
Brown pointed to the outdated working model and volatile fees as some of the problems Ethereum is working to overcome:
Ethereum's Proof-of-Work (PoW) consensus model has become outdated, as it can only handle around 13 transactions per second, leading to a congested network and highly volatile gas fees.
The current PoW model requires a significant amount of computational power, which means the energy required to maintain the network is extremely high. It's currently estimated to consume 54.57 TWh per year.
So, what's all this about Ethereum killers?
According to Brown:
While Ethereum 2.0 is being rolled out and being transitioned to Proof-of-Stake (PoS), the competition to take the DeFi [decentralised finance] crown is heating up by what some are labelling as the Ethereum killers.
Some of the contenders for the title of 'The Ethereum Killers' are considered to be Cardano (CRYPTO: ADA), Solana (CRYPTO: SOL) and Polkadot (CRYPTO: DOT).
What do these cryptos do?
Solana is the number 5 crypto by market valuation. And it's gained a whopping 8,864% in 2021, according to data from CoinMarketCap.
Cardano is the number 6 crypto by market cap. It's gained 616% this calendar year.
And Polkadot currently ranks as the number 9 crypto. Polkadot is up 217% year-to-date.
So, what do they do?
Brown told us:
Each of these cryptoassets tinker in the smart contracts space, each offering innovative advantages that Ethereum is currently lacking. They are all also building momentum quite quickly. Solana only launched in 2020 and is already the fifth biggest cryptoasset by market capitalisation.
Should crypto investors pay attention to this fast-changing trend?
"Certainly, there is even chatter that some of the Ethereum killers might someday overtake Ethereum in both utility and popularity, despite it being the first-mover," Brown said.
But he's not expecting the number 2 token to get bumped off its throne anytime soon.
"With Ethereum 2.0 on the horizon and its growing market cap, this may be unlikely," he said. "However, while Ethereum's dominance is clear in the DeFi industry, there's room for other cryptoassets to coexist and contribute to the future of Web 3.0 together."
