What crypto investors should know about these ‘Ethereum killers’

There’s stiff competition amongst cryptos in the growing smart contracts space.

| More on:
A woman holds her hands to the side of her face as she sits back in shock at something she is reading or seeing on her computer screen.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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Brown pointed to the outdated working model and volatile fees as some of the problems Ethereum is working to overcome:

Ethereum’s Proof-of-Work (PoW) consensus model has become outdated, as it can only handle around 13 transactions per second, leading to a congested network and highly volatile gas fees.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.”

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Ethereum.  The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Cryptocurrencies

A bitcoin trader looks afraid and holds his hands to his mouth among graphics of red arrows pointing down
Cryptocurrencies

How did the price of crypto assets perform in June?

Here's what went on in the world of cryptocurrency last month...

Read more »

a close up of a woman's face looks skywards as she is showered in a sea of graphic symbols of gold and silver coins bearing the bitcoin logo.
Cryptocurrencies

Here’s what will impact the Bitcoin price in July: expert

Cryptos are likely to rise or fall in line with other risk assets in the month ahead.

Read more »

a man with his back facing the camera sits at a computer displaying a screen of code with an electric power contraption on the desk near him as he sits in concentration while appearing to mine cryptocurrency.
Cryptocurrencies

Ethereum price falls after hackers begin laundering $100 million bridge exploit

Crypto bridges enable the transfer of tokens between different blockchains, but can provide hackers with opportunities.

Read more »

A shiba inu dog lying on the sand at a beach.
Cryptocurrencies

What’s going on with the Dogecoin price?

The meme token received a fresh round of support from Elon Musk.

Read more »

A young woman lifts her glasses with one hand as she takes a closer look at the news that the US SEC is ready to label Bitcoin a commodity
Cryptocurrencies

What did the SEC just say about Bitcoin?

Commodities and securities face significantly different regulations in United States markets.

Read more »

A man sits at his computer with his head in his hands while his laptop screen displays a Bitcoin symbol and his desktop computer screen displays a steeply falling graph.
Cryptocurrencies

How crypto miners are squeezing the Bitcoin price

Higher-cost crypto miners could be out of pocket more than US$20,000 for every Bitcoin they mine.

Read more »

A green-caped superhero reveals their identity with a big dollar sign on their chest.
Bank Shares

ASX 200 bank ANZ turns to crypto for carbon credit settlement

The carbon trading market is forecast to grow as the world continues work to slash greenhouse gas emissions.

Read more »

A man sits wide-eyed at a desk with a laptop open and holds one hand to his forehead with an extremely worried look on his face as he reads news of the Bitcoin price falling today on his mobile phone
Cryptocurrencies

The Bitcoin price is struggling. When will cryptos see a bottom?

Crypto investors may need to wait for the US Federal Reserve to ease the pace of its tightening before the…

Read more »