Thanks to smart contracts, such segments of the crypto-economy as NFTs (non-fungible tokens) andDeFi (decentralized finance).Since Ethereum was the first blockchain to fully support smart contracts, it has become widespread. However, with the growth of recognition and implementation of smart contracts, the network load has grown to critical values, which led to a record increase in fees among cryptocurrencies.
Image source: bitinfocharts.com
Ethereum is based on the proof-of-work protocol,where miners are responsible for assembling transactions into blocks. On average, it takes 13 seconds to include a new block in the network, 100-200 transactions are packed into a block, which is about 12 transactions per second and does not meet modern needs.
Image source: etherscan.io
Slow network operation and high commissions led toto the emergence of competitors who use the proof-of-stake protocol instead of the cumbersome proof-of-work method. For example, the Terra blockchain processes over 1,000 operations per second with fees ranging from 0.1 to 1.0 SDRs (1 SDR = $1.4). This year, Terra broke into second place in DeFi in terms of funds locked up with a 10% share, while the share of Ethereum continues to decline and will soon be below 50%.
Image source: defillama.com
Ethereum's loss of its position findsreflected in the value of the cryptocurrency. Thus, the LUNA coin (Terra blockchain) has already recovered after the winter correction and is preparing to test its historical maximum, while Ethereum is inferior in recovery even to Bitcoin.
Image Source: Cryptocurrency ExchangeStormGain
Ethereum is still the mostdecentralized network with support for smart contracts, but its share is gradually absorbed by faster blockchains. The situation can be corrected by the transition to proof-of-stake - the merger of two branches (ETH and ETH 2.0) is scheduled for the second quarter of this year. However, the event is delayed every year, which is why new projects are increasingly abandoning Ethereum as the underlying blockchain.
Analytical group StormGain
(platform for trading, exchanging and storing cryptocurrency)
