Challengers benefiting from slow Ethereum, reports a16z

By Raffaele Redi

Popularity of Ethereum may be “double-edged sword”, suggests venture capitalist firm

Challenger blockchains Solana, Polygon, BNB Chain, Avalanche and Fantom are benefiting from the slow and costly transactions of Ethereum, according a new report by US venture capital firm Andreessen Horowitz.

The 2022 State of Crypto report – by the tech and crypto start-ups investor also known as a16z – acknowledges Ethereum is dominating the Web 3.0 space at present because of its “early start and the health of its community”. It has the most builders with nearly 4,000 monthly active developers compared with Solana, which has nearly 1,000, and Bitcoin, which has about 500.

This, suggests the report, explains why its users have been willing to pay more than $15m in fees per day on average just to use the blockchain – presenting challenger blockchains with a golden opportunity.

“Ethereum’s popularity is also a double-edged sword. Because Ethereum has historically prized decentralization over scaling, other blockchains have been able to swoop in and attract users with promises of better performance and lower fees. And some might argue they do so at the expense of security,” said a16z.

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Ethereum at an early stage

According to the report, the scale of the Web 3.0 movement is still at a very early stage – but substantial growth is on the way. “We estimate there are somewhere between seven million and 50 million active Ethereum users today, based on various on-chain metrics.” said a16z.

“Analogizing to the early commercial internet, that puts us somewhere circa 1995 in terms of development. The internet reached one billion users by 2005 – incidentally, right around the time Web 2.0 started taking shape amid the founding of future giants such as Facebook and YouTube.

“Though it’s very hard to estimate, if the trendlines continue as depicted, Web 3.0 could reach one billion users by 2031.”

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