Since its inception, smart contracts have been synonymous with Ethereum, and have brought revolution to blockchain technology through the use of self-executing agreements without the need for intermediaries. Ethereum has long established itself as the leader in decentralized finance (DeFi) and non-fungible token (NFT) ecosystems, attracting developers over the years in a vast ecosystem of applications. But with time, as the technology for blockchain is improving, Ethereum is losing steam as new platforms are promising faster, cheaper, and far more scalable solutions.
This article will investigate whether Ethereum will remain the dominant force or challengers will take its crown.
Ethereum’s dominance stems from its early start and Ethereum Virtual Machine (EVM) which offers developers an environment for developing decentralized applications (dApp). As of 2023, it dominates over 49% of the smart contracts market, making it the backbone of decentralized finance.
Ethereum’s network effect is another critical factor. Ethereum also has the biggest developer community in the blockchain industry, and the richest set of tools, frameworks, and decentralized applications, inspiring new decentralized innovations. Platforms like Uniswap, Aave, and OpenSea are already well-known in the crypto space helping Ethereum solidify its position as a trendsetter.
Despite its success, Ethereum has suffered from long-standing problems of scalability and high-proportioned transaction fees. High network traffic emanating from increased activities has pushed up the cost of gas fees making small transactions unprofitable and out of reach for the average user. For example, in 2021, the transaction fee reached more than $50 during high traffic load.
Enter the competitors: Such platforms as Solana, BSC, Cardano, and Avalanche have been receiving increasing attention. These networks are faster with transactions than Ethereum and cheaper also solving some of Ethereum’s shortcomings.
Solana: With a processing power of over 65,000 transactions per second (TPS), Solana stands to be a high-performance blockchain for projects seeking efficiency and scalability.
Binance Smart Chain (BSC): BSC is one of the popular choices for developers as it has a low transaction fee and works on the EVM
Cardano: Cardano has built a reputation as having strict rigorous peer-reviewed research and security-focused projects.
Avalanche: With flexible and customizable subnets and transaction finality, Avalanche offers developers scalability and flexibility.
Ethereum is not sitting with its arms folded either. It is perhaps one of the most groundbreaking upgrades in the entire history of blockchain technology ever, Ethereum 2.0. The change from proof-of-work (PoW) to proof-of-stake (PoS) is supposed to deal with the crucial problems of Ethereum’s scalability and energy intensity.
When it comes to scalability Ethereum 2.0 includes shard chains that split the network into segments making the transaction processing happen in parallel hence enhancing throughput. This upgrade is said to cut transaction costs and at the same time improve the use of the software. For now, Ethereum is also planning to reach more than 100,000 TPS by 2025, coming up to the speed of the recently created platforms.
However, the energy consumption of the Ethereum network is expected to reduce significantly in the next few years by about 99.95%. This is in line with global sustainability standards, or what institutional investors have in their minds.
The smart contracts market is developing and it was valued at $2.14 billion in the year 2024 and topped $12.55 billion in the year 2032 at a CAGR of 24.7%.
This growth is due to the integration of blockchain technology into different industries like finance, health, supply and logistics among others. This simply implies that with the growing market, there is the possibility of having many different platforms, each targeting unique categories of the market. Due to the already created environment around Ethereum and constant development, it has growth potential, although competition remains the factor by which no platform will reign over all applications.
Although Ethereum still holds the largest market share in the DeFi and NFT segments, this is fragmenting. Solana is popular among high-frequency trading applications now, and Cardano is used in scientific and sponsor blockchain projects. Being cost-effective, the Binance Smart Chain has been used mostly by small-scale investors.
The future is multi-chain, and connectivity is going to be a key determinant of the health of blockchains. Polkadot and Cosmos are connectivity platforms that cross over the chasms between blockchains so that assets and data can transfer from network to network. Therefore, Ethereum has to synchronize itself with this integrated environment to remain useful.
Ethereum continues to be the king of smart contracts because of the first-mover advantage, a large developer community, and a fitted ecosystem. Although it has been long on top, it is no longer unparalleled. Competition threats from Solana, Binance Smart Chain, Cardano, and Avalanche are rising as they all attend to problems like scalability and cost to make them attractive destinations for developers and users.
The upgrades to Ethereum 2.0 remain a necessity for Ethereum to remain on top, as explained below. If done successfully, it is likely to tackle scalability and environmental issues at the same time strengthen Ethereum as the go-to platform for decentralised development.