Ethereum’s Problems are Hindering its Leadership in the Defi Ecosystem, Experts Say

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The debate over the feasibility of using Ethereum as the Swiss Army of the crypto-verse is heating up again now that DeFi, gaming, and NFT are enjoying a recent surge in popularity.

But the outlook is not very positive considering the current state of affairs. The impact of xcessive fees, long confirmation times, and slow updates is starting to worry retail users, techies, and large investors.

Ethereum Developers Should Focus on L1

Faced with the difficulties of delivering a satisfactory user experience, Ethereum developers are beginning to move to rival blockchains that have capitalized on this app migration to expand their reach and increase their own market capitalization.

Blockchains like Solana, Binance Smart Chain, and Avalanche have seen a significant rise during 2021, cementing themselves as more efficient alternatives to Ethereum and its upgrade to Proof of Stake that is not quite there yet.

According to Nicholas Merten, creator of the YouTube channel DataDash, Ethereum’s advantage of being the blockchain used by all is losing ground as time goes on.

In a Twitter thread, Merten explains that the arguments in favor of Ethereum may not hold up over time. He believes that in the end, L2s (scalability solutions built on top of the original blockchain) are impractical and generate little incentive for adoption.

For example, Merten claims that people would rather pay $0.01 in Solana fees instead of paying $0.04 to transact on Polygon —the cheapest L2 solution on Ethereum.

For Merten, Ethereum developers should focus on solutions to make L1s (on-chain transactions) more efficient and less expensive. As smart contracts become more complex, people must pay more fees.

Merten believes that Ethereum needs better marketing. In addition to technical developments, there should be a team capable of keeping the community together and excited.

Three Arrows Capital Abandons ETH and Bets on Avalanche (AVAX)

Interestingly enough, this view seems to be spreading among institutional investors.

Within hours of Merten’s tweet, Zhu Su, CEO and CIO of Three Arrows Capital announced that he had abandoned Ethereum to focus on investments in rival blockchain Avalanche. In fact, his Twitter bio already describes him as an investor in “AVAX, crypto, DeFi, (and) NFTs.”

Zhu Su’s words weren’t exactly pretty:

Zhu Su explains that basically, under current conditions, Ethereum benefits OGs. But within a global adoption framework with new users experimenting with the technology, prohibitive network fees should not be something to deal with on a day-to-day basis.

And Zhu Su is not alone. Even Antonio Juliano, founder of dYdX – a DeFi protocol running on Ethereum – agreed with him (even if the harshness of his words was painful).

Ethereum promises to solve these problems by implementing Ethereum 2.0, a new Proof-of-Stake blockchain that will have minimal fees and a very high level of scalability.

However, this solution is taking a long time, and large investors can only hope that it is not too late once it launches.

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