Despite the network’s high transaction costs, Andreessen Horowitz (a16z), a crypto venture capital firm, has stated that Ethereum’s development and demand are “unmatched.”
The tremendous popularity of Ethereum explains why its users are ready to spend more than $15 million per day in fees just to utilize the blockchain. According to a16z, this was the case.
A Double-edged Sword
However, the company warns that its “popularity is a double-edged sword.” This is because Ethereum places a premium on decentralization over scaling. Competing blockchains will then steal market share with “promises of superior performance and reduced fees.”
The statements were made in response to a16z’s “State of Crypto” study for 2022. Daren Matsuoka, the firm’s data scientist, Eddy Lazzarin, the firm’s general partner Chris Dixon, and the firm’s head of content Robert Hackett collaborated to provide five important findings from the study.
The research covers subjects such as Web3 development, crypto acceptance rates, decentralized financing (DeFi), and stablecoins in addition to Ethereum.
According to the report’s findings, Ethereum outperforms the competition in terms of developer interest. The network has roughly 4,000 monthly active developers, compared to 1,000 for second-placed Solana (SOL). Furthermore, at around 500 and 400, respectively, Bitcoin (BTC) and Cardano (ADA) are the next in line.
Remarkable for a Young Project
Ethereum’s dominance is due in part to its early start and the strength of its community, according to the analysts. Despite the high transaction costs, it stressed the importance of development continuing to surge on the network.
The tremendous popularity of Ethereum explains why its users are ready to spend more than $15 million per day in fees just to utilize the blockchain. It’s impressive for such a new project.
The reports anticipated transaction fees paid on a blockchain over a seven-day average show that Ethereum is in high demand. Ethereum is worth $15.24 million, according to the data. BNB Chain, Avalanche, Fantom, Polygon, and Solana, on the other hand, account for around $2.5 million in fees.
According to the research, Layer-2 scaling solutions are competing to reduce Ethereum transaction fees and increase transaction speeds. Simultaneously, it states that Ethereum is getting long-awaited updates that will make the network more efficient and cost-effective.
Long Awaited Upgrades
However, the “long-awaited” enhancements can’t come fast enough, as a16z pointed out in the article, with a 30-day average. Competing blockchains such as Solana, BNB Chain, and Polygon have already surpassed Ethereum in terms of active addresses and transactions.
Ethereum has 5.5 million active addresses, accounting for 1.1 million daily transactions, according to the data. Solana, on the other hand, has 15.4 million active addresses and 15.3 million daily transactions. With 9.4 million and 5 million, BNB Chain is in third place, followed by Polygon with 2.6 million and 3.4 million. It won’t be a winner-take-all situation, according to the analysts.
Blockchains, like PCs and broadband in the 1990s and 2000s, are the hit product of a new computer wave. It’s the same as it was a decade ago with mobile phones. They believe there is plenty of room for innovation and that numerous winners will emerge.
The survey also revealed that the DeFi sector has a total value frozen of around $113 billion, making it the 31st largest bank in the United States. According to estimates, Web3 penetration might reach 1 billion users by 2031. On the other hand, NFTs have so far produced $3.9 billion in revenue for authors.