The dominant position enjoyed by Ethereum (ETH) in decentralized finance (DeFi) will increasingly be challenged by other blockchain protocols until a scaling solution for the network is implemented next year, according to a private note by analysts at investment bank JPMorgan.
According to the note, the Ethereum network’s 70% market share in DeFi could continue to drop until the final phase of sharding, described by JPMorgan as the “most critical” scaling development for Ethereum, arrives in 2023, Bloomberg reported today.
The note with the comments about Ethereum’s role in DeFi was prepared by a team led by JPMorgan’s global market strategist Nikolaos Panigirtzoglou.
Further in the note, Panigirtzoglou wrote that the “optimistic view about Ethereum’s dominance is at risk,” with the main reason being that scaling “might arrive too late.”
The note went on to say that competing blockchains such as Terra (LUNA), Binance Smart Chain (BSC), Avalanche (AVAX), and Solana (SOL) have used various incentives to boost the use of their own chains, while at the same time receiving large amounts of funding. It added that some of these chains may have grown so much at Ethereum’s expense that activity may not return to Ethereum after scaling has been completed.
“In other words, Ethereum is currently in an intense race to maintain its dominance in the application space with the outcome of that race far from given, in our opinion,” the note said.
The comments about Ethereum this time follows similar warnings from the same analyst last year.
Back in September, Panigirtzoglou said that the network was facing growing competition from alternative smart contract chains, and that he is “struggling” with coming up with a fair ETH price of more than USD 1,500, given “the hashrate and the number of unique addresses.”
At 12:55 UTC, ETH stood at USD 3,351, down 11.6% for the past 24 hours and 8% for the past 7 days.
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