Coinbase, the largest cryptocurrency exchange in the United States, is evaluating the future of Ethereum (ETH), a leading smart contract platform, at a loss from the start of the new year.
In a detailed report, David Duong, Head of Institutional Research at Coinbase, said that Ethereum is facing its own attempt to deploy ETH 2.0 and pressure from other blockchain projects. It states that it is at a critical turning point.
“As the scalability challenges of Ethereum continue to grow, the strength of L1’s attraction is [layer-1] The alternatives mainly depend on how quickly ETH 2.0 and L2 appear. [layer-2] The solution.
This means that you may see continued growth in the alternative L1 network. [the first half of] A bridge to connect these chains as it was in 2022. However, the chance of a replacement for L1 is [the second half of] As expected from ZK in 2022 [zero-knowledge] Roll up for more widespread use with proof technology to improve. “
Zero-knowledge proof allows one party to validate information to the other without disclosing the information itself. Cryptographic engineers use the ZK method to increase the level of security and data privacy.
The report highlights how the high cost of using the Ethereum protocol is negatively impacting its growth at scale, but there is still a significant amount of development with ETH. There is also mentioned.
Gas tariffs on the Ethereum network are one of the biggest obstacles to mass adoption of both ETH and smart contract platforms. In 2021, Solana (SOL), Avalanche (AVAX), this is one reason why tier 1 alternatives like Terra (LUNA) have received so much attention.
However, it still appears that most active application development across the L1 network is taking place on the Ethereum blockchain, with a total value of $156 billion locked across 214 projects. “
Ethereum competitors Solana, Avalanche, and Terra grew significantly last year, but were unaffected by the general recession that hit the crypto market in 2022.
Ethereum traded at $3,730 in the new year but saw a series of price cuts and is now trading at $2,501, down 32.9% overall.
Coinbase’s analysis concluded that moving to Ethereum’s Proof of Stake could result in miners being issued less ETH and then selling it, but without affecting the functionality of the blockchain. The final winning report does not appear this year.
“But we believe that peak Tier 2 scale solutions combined with upgrades such as beacon chain integration and hashing can limit the progress of the current variant of the L1 variant.
As ETH becomes more scalable, DApp [decentralized application] For example, users can refrain from looking for faster and cheaper alternatives to Ethereum.
However, we believe that there is scope for multi-chain coexistence in the coding space in the short term, driven by cross-chain interoperability and the need for alternative consensus mechanisms. “
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