Ethereum has been the dominant network for smart contracts and decentralized applications (Dapps) since its inception. An analysis based on the price of Ether (ETH), and its market capitalization, shows irrefutable proof that the blockchain has been gaining market share over time.
As shown above, Ether’s dominance in terms of market capitalization has grown over the past two years, from an average of 18% in July 2021 to 20% today. Excluding Bitcoin (BTC) from the analysis, Ether’s market share currently stands at 40.6%, while the next competitor, BNBhas a share of 7.2%.
This shows the disparity between the leading Dapp-focused network and the incumbents, which also becomes apparent when looking at the total value locked (TVL) in each network’s smart contracts. Ethereum is the absolute leader with $24.6 billion in TVL, followed by Tron with $5.4 billion and BNB Chain with $3.3 billion.
The chart above shows how the Ethereum network’s TVL market share decreased from 70.5% in June 2021 to 49.5% in May 2022. The move came as Terra and Avalanche earned a combined 20% market share in deposits. of smart contracts. However, following the collapse of the Terra-Luna ecosystem in May 2022, culminating in developers shutting down the network, Ethereum quickly regained a 58% market share.
Despite the appearance of Dapps on the BNB and Tron blockchains, Ethereum’s leadership has remained unchallenged for the past 12 months. This data demonstrates the irrelevance of the total number of unique active wallets interacting with smart contracts (UAWs) per chain.
For example, according to DappRadar, WAX has 363,600 active users, followed by BNB Chain with 517,300 active wallets in 30 days. These figures are well above the 66,300 unique active addresses on the Ethereum network, but reflect a much lower transaction rate, leaving room for manipulation.
Decentralization matters, and Ethereum stands out among its competitors
Ethereum is the ecosystem with the largest number of active developers, exceeding 1,870, which is more than the next three competitors combined: Polkadot (752), Cosmos (511) and Solana (383).
Currently, the Ethereum network has more than 700,000 validators, with 99% of the balances locked in staking participating in the process. The limit threshold of 32 ETH per validator undoubtedly inflates this figure, but Lido, the largest known staking pool, controls 32% of the staking, and Coinbase follows with 9.6%.
Consequently, it is safe to say that Ethereum is much less centralized in terms of development and validation compared to Tron, BNB Chain, and Solana.
Other reasons why Ether’s dominance has been increasing, even as Bitcoin hit 50% market share on June 19, are derivatives activity and Ethereum’s dominance of the NFT market.
Derivatives markets are essential for institutional investors
Ether futures contracts are essential for institutional trading practices such as hedging and leveraged trading. Cash-settled Ether futures were listed on the Chicago Mercantile Exchange in February 2021. To date, no other cryptocurrency other than Bitcoin has ever made it onto the world’s largest derivatives market.
In the futures markets, long and short positions are balanced at all times, but having a greater number of active contracts -open interest- allows the participation of institutional investors who require a minimum market size. The aggregate open interest of Ether futures stands at $5.4bn, while its competitors BNB owns $380m and Solana barely $178m.
Ethereum remains the NFT market leader
Non-fungible tokens (NFTs) are a perfect example of how cheaper and faster transactions don’t always translate into higher adoption. There is nothing preventing NFT projects from switching between blockchains, either for new listings or existing collections. In fact, y00ts and DeGods moved to Polygon in early 2023.
Despite facing gas fees that often exceed $10, Ethereum remains the absolute leader in number of buyers and total sales. According to CryptoSlam, the leading network reached USD 380 million in sales in the last 30 days, while Solana, Polygon and BNB Chain added USD 93 million.
Ultimately, the data favors Ethereum over competing smart contract-focused blockchains. The positive trend in Ether’s dominance could fade over time if the promised upgrade to enable sharding doesn’t come to fruition, but for now, Ether’s 20% market cap share remains undisputed.
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