“Ethereum is similar to New York City in that it is big, costly, and congested in some sections.” It does, however, have the most diverse application ecosystem,” Grayscale noted.
In a paper on smart contract platforms, digital asset management Grayscale compares the Ethereum (ETH) blockchain to the greatest and worst portions of New York City.
The paper compares Ethereum, the original smart contract network, to newer blockchains such as Solana (SOL), Avalanche (AVAX), Polkadot (DOT), Cardano (ADA), and Stellar (XLM) (XLM). The news comes after the business announced the establishment of a crypto fund focused on smart contract platforms other than Ethereum.
Grayscale looked at Ethereum, Avalanche, and Solana in a section headed “digital cities.” The organization likened Ethereum to New York City, stating that they both face comparable difficulties as a result of their size:
Ethereum is similar to New York City in that it is big, costly, and crowded in some sections. It does, however, have the greatest application ecosystem, with over 500 apps worth over $100 billion—more than 10 times the value of any other competitive network.
“Because of the scale of its community and the amount of cash locked within the network’s smart contracts, users and developers can rest certain that Ethereum will likely continue to be the center of gravity for application innovation and liquidity.” “An L2 solution like Polygon is like a skyscraper in New York City: it scales by growing upwards,” according to the research.
Due to high gas prices and network congestion on Ethereum created by overwhelming demand for decentralized finance (DeFi) services and nonfungible tokens (NFTs) during the past two years, the business went on to argue that customers transferring to rival blockchains is like relocating to a cheaper city.
“As Ethereum transaction costs surpassed $10 per transaction, smart contract platforms like Stellar, Algorand, Solana, and Avalanche saw a significant increase in daily on-chain transaction counts,” according to the research.
Solana is a “structurally unique network that is faster and focuses on other use cases,” according to Grayscale, such as on-chain order books like Mango Markets, which require rapid transaction rates and cheap costs to function.
“Rather than scaling through L2 chains, Solana’s design depends on a new consensus process that promotes speed and lower fees at the cost of higher centralization.” Solana uses a fast L1 chain to process transactions. As of March 15, 2022, it was processing about 2300 transactions per second,” according to the article.
The economy of Avalanche is comparable to that of New York City, although it has a smaller network, “transactions are cheaper and less crowded, and development is more concentrated.”
“Game-specific subnets like Crabada, as well as relationships with businesses like Deloitte,” Grayscale noted, “could offer more difference than applications on other chains, helping Avalanche establish a separate brand moving ahead.”
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Regardless of the parallels, Grayscale stressed the positive future use cases for smart contract platforms, referring to DeFi and the up-and-coming Metaverse sector in particular:
The total market opportunity for DeFi and Metaverse applications is likely bigger than the $2 trillion market value of the whole digital assets industry now, in our opinion.
According to the research, “Smart contract platforms are the operational layer that DeFi and Metaverse apps build on and utilize for transactions, eventually bringing value to the base chain as users amass native tokens for fees.”