Fusaka’s upgrade to Ethereum, expected to go live in early December, promises to bring the world’s second-most valuable blockchain into an era of institutional-level adoption. For too long, Ethereum has been too slow and too expensive to attract meaningful activity to Wall Street. This could change as Fusaka implements major improvements in the way the network verifies and compresses data, increasing its speed and capacity by 10 times.
Still, it won’t be easy for Ethereum to maintain its lead among developers as the preferred chain to build on; continued evolution will be essential for Ethereum to maintain its existing advantage as an on-chain finance platform.
Ethereum remains the preferred platform for institutions for asset tokenization, DeFi applications, and the creation of stablecoins, based on the strengths that arise from its maturity. However, it faces threats that will erode its advantage if it does not move to respond to the market: like a shark, if Ethereum stops moving, it will die.
Strength: Ethereum availability
However, Solana never really eclipsed Ethereum. One of the main reasons could be that in the last five years, Solana, as a blockchain system, has gone dark seven times. Ethereum, as Thomas Lee, chief investment officer of Fundstart Capital, said in August, has never collapsed in its 10-year history. Availability is appreciated by financial institutions; It’s not sexy, but it’s one of the key attributes that makes on-chain infrastructure attractive to market participants.
Strength: maturity of the Ethereum ecosystem
Another unsexy quality that institutions will demand: the availability and maturity of tools and developer talents. While Solana attracted the most new developers of any chain last year, Ethereum’s Solidity has the largest developer community by far, a lead recently confirmed in a16z’s State of Crypto report.
Risk: Scaling Ethereum
A persistent problem that has hurt Ethereum is the pace at which it moves, which is to say somewhat glacial. Fusaka will be a major upgrade, but it still won’t bring Ethereum and its rollup layers to the same transactions per second as Solana. In a world where a new GPT seems to be released every two months, Ethereum should have long ago achieved its goal, declared by its inventor Vitalik Buterin in 2017, of matching the scale of transactions on the Visa payment network, and currently far from Visa’s average of 24,000 tps. In contrast, Ethereum’s layer 2 (L2) blockchains can process between 1,000 and 10,000 transactions per second.
Risk: Heavyweights and innovators break with Ethereum regulation
New blockchains are increasingly backed by publicly traded companies, such as Circle’s Arc and Stripe’s Tempo. Arc and Tempo are layer 1 (L1) blockchains, like Ethereum. Instead of building a chain on top of Ethereum as an L2 like the foundation of Coinbase, Circle and Stripe decided to create their own settlement layer, albeit compatible with the Solidity programming language and the Ethereum virtual machine.
Another L1 is Hyperliquid, specifically designed as a decentralized exchange for trading perpetual futures. While it may seem niche, Hyperliquid, along with DEX Aster, earned 32% of all blockchain revenue in September, according to an analysis by VanEck, knocking Solana off its perch. Just as Solana once came to steal the spotlight from Ethereum, Hyperliquid appears to be doing the same. And although the October 10 crypto crash shook Hyperliquid and angered many traders when winning positions were used to finance losses, it nevertheless survived as expected. All this must attract the attention of Ethereum developers, eh?
Ethereum’s path to cater to the institutional market
There are plenty of opportunities for chains like Solana and Hyperliquid to take advantage of Ethereum’s shortcomings. A race for developer minds is underway as options from well-funded players like Circle and Stripe put pressure on Ethereum. Innovation is spread across multiple blockchain ecosystems, and liquidity follows it, creating deep trading pools alongside innovative new protocols. Will Ethereum lose the plot?
To avoid this, there is a lot of education to be done around Ethereum before it is fully adopted by traditional corporate treasurers and the general public. For financial institutions choosing their preferred tokenization, trading, and yield platforms, Ethereum’s human capital may be the ultimate decision-making factor. The core contributors and leaders of the Ethereum ecosystem have always been an idealistic group, while achieving major upgrades like the merge without issue, and now Fusaka is poised to take the network to the next level. For the health and future of the network, key contributors will need to nurture people who can guide multi-year relationships.
For now, at least, Ethereum is still a priority as to where institutional crypto infrastructure is being built. He has proven vulnerable due to his slow evolution, constant threat of newbie competitors, and he still has Solana and others to keep him in check. If others follow the institutional roadmap faster or better, Ethereum risks losing its advantage, regardless of the price of ETH.
