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The downsides say that the current demand for cheap alternatives to ethereum will drive more layer 2 projects to prioritize reducing costs for the end user this year.
ethereum will face increased competition in the blockchain space in 2024, driven by persistent demand for cost-effective alternatives and the proliferation of ethereum Virtual Machine (EVM)-compatible Layer 2 networks, Flipside, a blockchain data platform, said in a statement. recent research crypto-user-report” target=”_blank” rel=”noopener”>report.
According to analysts, a substantial portion of EVM users are now actively exploring alternative options to ethereum due to the appeal of lower fees and faster transactions offered by emerging Layer 2 solutions. The importance of this shift is underlined by patterns historical, where past bull runs fueled by ethereum-based protocols resulted in skyrocketing transaction costs.
“The continued need for cost-effective alternatives to ethereum, in addition to the growing number of EVM-compatible Layer 2s, will pressure more Layer 2 projects to focus on reducing end-user costs.”
Another face
The competitive landscape is further shaped by a growing number of EVM-enabled Layer 2 networks, forcing Layer 2 projects to pivot toward prioritizing cost reduction for end users. As part of this evolution, layer 2 network governance tokens such as Optimism (OP), Arbitrum (ARB), and Polygon (POL) are gaining renewed attention.
“The ability of these governance tokens to impact each network’s competitive advantage will play a central role in the layer 2 narrative.”
Another face
Adding to the momentum, ethereum's planned Dencun upgrade, which introduces a new feature known as “blobs” that will allow large amounts of data to be stored in ethereum blocks via EIP-4844, is anticipated to amplify competition. Flipside says blobs will improve block space on the mainnet and increase the performance of layer 2 networks, further challenging ethereum's dominant position.
Analysts at Mike Novogratz's crypto bank Galaxy Digital echo a parallel sentiment, forecasting a pivotal 2024 for ethereum amid rising stakes raised by other Layer 1 blockchains.
Galaxy Digital highlights ethereum's modular architecture, specifically the various types of rollups, as a source of potential challenges and technological risks due to its early stage of development. Highlighting Solana as the top contender with its distinctive monolithic architecture, Galaxy Digital positions it as the top competitor against ethereum this year.
