cryptoknowmics.com
Analysts at the multinational investment bank JPMorgan said that Ethereum’s dominance in Defi is fading at the risk of losing out to rival blockchain networks.
In a note published Wednesday, Managing Director, Nikolaos Panigirtzoglou noted that Ethereum currently accounts for nearly 65 percent of DeFi’s market share. At the beginning of 2021, the network’s DeFi share was almost 100 percent.
Panigirtzoglou explained that Ethereum will reclaim its position as a DeFi leader only when the final phase of sharding which is crucial for scaling the ETH network gets completed in 2023. Until then, the network will continue losing its market share to alternative blockchains like Terra, Binance Smart Chain, Avalanche, and Solana, also known as 'ethereum-killers.'
By the time sharding gets implemented, these alternative blockchain platforms would have grown by so much that Ethereum could lose its DeFi dominance permanently. Such 'ethereum-killers' have already been receiving large amounts of funding, public attention, and creating a community behind them.
In fact, just last month, Bank of America said that Avalanche is a viable platform to Ethereum for DeFi, NFTs, gaming and other projects.
“In our mind, this optimistic view about ethereum's dominance is at risk. This is because the scaling of the ethereum network, which is necessary for the ethereum network to maintain its dominance, might arrive too late," the JPMorgan analysts said.
Sharding is the process of data partitioning that breaks down a large database into smaller, more manageable pieces to boost the efficiency of the whole. This decreases the workload of network validators by requiring each validator to only store and manage one shard of the network instead of the whole blockchain.
When implemented, the Ethereum network will transition from its current proof-of-work (PoW) consensus to a more energy-friendly proof-of-stake (PoS) consensus.