Ether (ETH) has underperformed other cryptocurrencies in recent months while the Ethereum blockchain has faced the “intense” competition from other networks, the Wall Street Bank JPMorgan (JPM) said on Wednesday in a report research.
The token does not have a convincing story like that of its greatest Bitcoin by peers (BTC, said the bank, adding that Bitcoin benefits from its perception as a reserve of value and digital gold.
Despite the upgrades, such as Dencun, the activity went from the main Ethereum network to its layers 2, which is detrimental to the growth of blockchain, according to the report. The last network upgrade, Pectra, should occur in early April.
“Competitive pressures have led certain decentralized applications (DAPP) to migrate from Ethereum to other channels specific to applications for better performance,” wrote analysts led by Nikolaos Panigirtzoglou.
The examples include decentralized exchanges (DEX) such as Uniswap, Dydx and Hyperliquid, said the bank.
The future move from Unichain to Unichain is important because it is one of the “largest gas consumption protocols” in Ethereum, and its migration could lead to significant loss in the network of the network, noted the bank.
JPMorgan said that this DAPP trend moving to other layers 2 or layer alternatives could have a negative impact on Ethereum by reducing activity on the main network, which could cause lower transaction costs and income from validators.
Says 2 are separate blockchains built on top of layer 1, or the base layer, which reduce the bottlenecks with the scale and data. In terms of supply, this could make the inflation of the ether because “fewer transactions involve a reduced burn of the tokens”, wrote the authors.
The bank noted that Ethereum’s growth is behind that of competitors such as Solana, which has seen an increase in activity linked to the same.
Ethereum’s ecosystem still dominates stablecoin, decentralized finance (DEFI) and tokenization spaces despite these challenges, the bank said.
The network could see an increased institutional demand from token companies, but “competition from other networks is likely to remain intense in a predictable future,” added the report.
Read more: how to solve the problem of fragmentation of Ethereum
