What are Ethereum Killers?
Ethereum killers are alternative open-source blockchains that seek to solve Ethereum’s current shortcomings, like exorbitantly high gas fees and the low number of transactions per second the blockchain is able to process. Even though Ethereum plans to solve its shortcomings through several upgrades, the upgrades’ implementation is not completed yet. Ethereum killers have capitalized on this delay, appealing to crypto users with faster transactions and cheaper fees.
The term “Ethereum killers” emerged in 2016/2017 as substitute blockchains such as Cardano began to appear. In 2018, EOS came forth as the next Ethereum killer, raising $4.1 billion in funds. That was the highest amount an ICO had ever raised. EOS endeavored to offer never-before-seen speed and efficiency in terms of processing transactions. In the coming months and years, more projects, namely Tezos, Solana, Fantom, Polkadot, Binance Smart Chain, and Avalanche surfaced as Ethereum competitors. BNB, ADA, SOL, and DOT are the top Ethereum killer coins, according to data on Coinmarketcap. On the other hand, Avalanche is among the highest-ranking decentralized finance (DeFi) platforms by market capitalization.
Why are there Ethereum killers?
Like every other blockchain network that exists, Ethereum isn’t perfect. It faces scalability issues, meaning that it can only process a mere 15 to 30 transactions per second. As a result, Ethereum users pay absurdly high gas fees to utilize the network and carry out transactions of all kinds. Since Ethereum is the go-to network for decentralized applications (DApps), non-fungible tokens (NFTs), and DeFi protocols, it experiences congestion from time to time. When Ethereum gets congested because of high usage, gas fees spike to insane levels.
Ethereum’s public blockchain runs into these problems because it prioritizes decentralization and security over transaction throughput, thus facing the typical blockchain trilemma. Trent McConaghy and Ethereum co-founder Vitalik Buterin coined the term to refer to the inevitable situation where developers have to trade off either security, scalability, or decentralization when developing a public blockchain. As a matter of fact, a blockchain cannot presently max out on all three factors at the same time.
As of Q2 2022, Ethereum still uses the Proof-of-Work (PoW) consensus mechanism to maintain a secure and decentralized network. Miners use a process called mining to verify and add transactions to the blockchain. Mining entails supplying a blockchain network with computing power through hardware like CPUs, graphics cards, and application-specific integrated circuits (ASICs). PoW requires large quantities of energy, leading to environmental concerns, particularly when miners are found to be using non-renewable sources of electricity.
Because Ethereum currently uses PoW, Ethereum killers are attempting to solve these flaws by coming up with new and innovative ways of building and structuring a blockchain. Developers recognized Ethereum’s shortcomings and saw a great business opportunity. They launched new blockchains as direct competitors to Ethereum, which set the priorities in the triangle of security, decentralization and scalability differently. They trade off decentralization for scalability, thus attacking Ethereum at its weakest spot, as they can offer higher transaction throughput and lower gas fees.
How to kill Ethereum
Rather than following Ethereum or Bitcoin in implementing PoW mining for consensus finding, most blockchains that came later adopted different consensus models. For instance, Binance Smart Chain uses both Proof-of-Authority (PoA) and Delegated Proof-of-Stake (DPoS), while Solana utilizes Proof-of-History (PoH). Such alternative consensus mechanisms are more energy-efficient than PoW. Here are more examples about how alternative blockchains are trying to kill Ethereum:
- Tezos: Tezos is self-governed, meaning that the development team isn’t responsible for governing the project. Instead, the users are in control of making decisions. The blockchain uses PoS and liquid PoS consensus mechanisms. Also, it is home to NFT and DeFi projects.
- Fantom: Fantom uses a PoS variant known as Directed Acyclic Graph (DAG). Its blockchain is different from traditional blockchains, making it cheaper, energy-efficient, and more scalable. Decentralized finance projects can be built on Fantom.
- Cardano: Cardano applies the Ouroboros consensus mechanism to facilitate more transactions than Ethereum. The network supports DeFi projects and smart contracts.
- Solana: Solana processes an average of over 2,000 transactions per second thanks to its Proof-of-History (PoH) model. Fees are also cheaper on this blockchain. Solana is a popular NFT and gaming platform.
- Polkadot: Polkadot is a smart contract blockchain that uses PoS and processes about 1,000 transactions per second.
- Avalanche: Avalanche combines three blockchains to achieve greater scalability than Ethereum. The blockchain uses PoS.
The delay of Ethereum’s upgrades means that competitors are taking a share of its NFT and DeFi markets, weakening its dominance. To illustrate this, Ethereum held 94.9% of the DeFi market on August 4, 2020. This share had dropped to 64.24% at the time of writing this article (May 23, 2022). The longer Ethereum’s upgrades will take to be implemented, the higher the chances are that Ethereum will keep on losing ground to other blockchains.
Scalability at the cost of security and decentralization
While many Ethereum killers are indeed more scalable, it’s essential to note: They have achieved better scalability and speed because they have prioritized scalability over decentralization and security. And this obviously can have dire consequences. Case in point, Solana faced several outages in 2022 due to an influx of inbound transactions. Other public blockchains have faced similar performance and security issues in the near past.
The undeniable truth is: While many projects have emerged intending to be bigger and better than Ethereum, none have solved the blockchain trilemma. That makes a network that checks all three boxes the holy grail of blockchain technology. Whether such a blockchain will exist one day is hard to tell. It might just be the case that — at least on the base layer — the trilemma will never be solvable.
What’s clear, however, is that Ethereum is far from being dead despite the ever-growing Ethereum killer list. The project has remained strong thanks to its first-mover advantage and widespread adoption. When it fully executes all of its upgrades, Ethereum could also become a stronger and bigger project than it presently is. This possibility is also supported by the fact that Ethereum is truly aiming to modularly scale its public blockchain — an approach that seems to be just right for digital technologies like the internet and blockchains.
That said, there’s room for more than one blockchain in the DeFi and NFT spaces. These markets are expanding every year, creating a place for multiple blockchains. For example, the DeFi market grew 88 times from May 2020 to May 2021, recording a total value locked of about $88 billion. By November 2021, the figure had risen to over $170 billion. Therefore, the future of DeFi and NFT could have multiple players, each providing unique benefits to users.