After surging nearly 12,000% in the past year, Solana and Polygon – dubbed ‘Ethereum killers’ as they are faster and cheaper than the world’s second-largest cryptocurrency – have stolen headlines this year.
And the party is just getting started with the fast-growing networks and a slew of rivals poised to see even bigger gains as they innovate to draw a growing base of investors enamored with digital currencies.
“Ethereum needs to do something quickly as others with faster and more novel consensus [transaction confirmation] mechanisms are gathering lots of funding from VCs,” says Rosh Singh, founder of crypto trading start-up Quadency. He notes, however, that Ethereum’s 2.0. upgrade, if executed on time by early 2022, should boost its competitiveness.
Avalanche, Fantom and Terra
Singh expects Ethereum alternatives Avalanche, Fantom and Terra to deliver strong gains as their networks bring innovative ways to solve problems with proof-of-stake (POS) consensus and stable coins.
Avalanche’s magic stems from a new technology called directed acyclic graphs (DAGs). For a transaction to be confirmed, 80% of a DAG’s nodes must validate it, eliminating the probability that one dominant node or miner as can happen in POS blockchains will control the process. This form of market manipulation is referred to as miner extractable value (MEV) and has caused losses for decentralized finance (DeFi) and non-fungible token (NFT) investors.
Fantom, meanwhile, uses a similar mechanism called Lachesis but has a smaller circulation supply that should help prop up its FTM token’s future price, analysts say. Built for decentralized applications (dapps), transactions occur in less than 2 seconds. This compares to a reported 5 minutes and as high as four hours for Ehereum.
Up 14,380% in the past year, Singh says Fantom could gain another 4X to 5X in the foreseeable future.
He also likes Terra, which he notes is doing a good job at solving the current stablecoin dilemma of proving a network’s 1-to-1 crypto-fiat reserves.
“We have Tether, USDT, Dai and many other stablecoins out there but most of them still rely on some form of formal funds’ verification,” he explains. “Terra (LUNA coin) is solving this by using other verification methods [through a proprietary algorithm that matches supply and demand] than relying on third parties.”
Asked for views of other Ethereum-killer Cardano, the number six coin in the $2.7 trillion cryptocurrency market, Singh says he’s ‘not a big fan,’ adding: “They had a huge amount of funding and time to catch up with Ethereum and when they finally launched smart contracts they were full of bugs and issues that continue to linger to this day.”
$12 billion of smart contracts
Solana too has experienced hiccups, recently crashing for 14 hours as its protocol – which boasts it can process 50,000 transactions per second compared to 15 or less for Ethereum – was maxed out, showing that faster speeds are useless without network reliability.
Matthew Siegel, who heads cryptocurrency research at VanEck, agrees Fantom will likely do well. The firm is a member of its fledging MVIS list featuring 13 of the world’s top smart contract protocols seen returning $12 billion for investors in 12 months. The club also includes Avalanche, Solana, Cardano and Polkadot as its top five holdings.
These and other Ethereum alternatives are rushing to execute smart contracts – blockchain-coded agreements that execute (often by issuing a payment) once pre-determined conditions are met – better and faster than rivals as they scramble to lead the crypto race.
But Siegel says the metaverse or fast-growing virtual universe – could provide more excitement in coming months. This after a handful of protocols have soared in recent weeks, notably The Sandbox, which sells metaverse properties and islands through NFTs.
Up 1,663% since last November, The Sandbox has grown rapidly, drawing 12,000 unique virtual land owners including rapper Snoop Dogg and the Walking Dead show, where players can use avatars of their favorite characters to play a game. It also garnered $93 million in a Softbank-led capital injection last week to develop its properties beyond gaming and into virtual concerts, fashion and architecture.
“The metaverse [asset class] has doubled in the past month and the pure play coins such as The Sandbox, Axie Infinity, Enjin and Flow are massively outperforming traditional gaming players offering metaverse experiences such as Roblox, Electronic Arts or Activision,” adds Siegel.
Ethereum to $10,000?
Whatever happens in the metaverse, which Meta (formerly Facebook) is now also rushing to dominate, Ethereum is not dead.
“They [Eth] have a giant lead over the competition [as the biggest/original home for dapps and NFTs) so it’s going to be very difficult for them to lose that,” says Oanda analyst Ed Moya, adding that the 2.0. upgrade should bring 100,000 transactions per second in two years.
He also envisages an Ethereum ETF hitting the market soon, further propping up its price.
“Ethereum is up 500% this year and I think $9,000 to $10,000 is very attainable in the next two to three years,” Moya concludes.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.