TL;DR
- The price of Ether has fallen by 36% over the past seven months due to competition between layer 1 (L1) blockchains.
- Solana stands out as a significant threat to Ethereum thanks to its monolithic approach and scalability.
- New developments in other L1 blockchains are creating attractive and diversified alternatives for investors.
The price of Ether (ETH) has been on a downward trend for the past seven months, registering a 36% drop from its highest point of the year in March 2024, when it hit $4,111, to settle at $2,600.
This downward trend has raised concerns among investors, who are observing how competition in the layer 1 (L1) blockchain market is significantly affecting the performance of the largest cryptocurrency after Bitcoin.
According to an analysis published by crypto analyst Ignas, the fight for dominance in the L1 market has weakened Ethereum, which used to be seen as the undisputed leader in the sector.
— Ignas | DeFi (@DefiIgnas) October 16, 2024
In his analysis, Ignas highlighted how the emergence of new L1 blockchains, such as Solana, Avalanche and Fantom, has challenged Ethereum’s leadership, offering innovations in scalability and operating costs that have captured the attention of investors and developers.
Ignas explained that one of the main problems facing Ethereum is the fragmentation of its ecosystem due to the emergence of layer 2 (L2) solutions.
While L2s attract investments in their native currencies, blockchains like Solana have gained popularity for their monolithic design, which avoids fragmentation and offers a more unified user experience.
This has led to many investors who previously bet on Ethereum, now migrating to other alternatives such as Solana, due to its more direct and efficient approach.
New alternatives and the future of L1 blockchains in Ether
L1 blockchains competing with Ethereum are not only innovating, but also redefining their visions and goals to appeal to a wider audience.
Avalanche, for example, has launched Avax9000, which enables the creation of new L1 blockchains for specific applications, offering seamless cross-chain communication. These types of advancements position Avalanche as a strong contender in the L1 space, by focusing on clear value for its mainnet.
Solana, which has recovered quickly after the collapse of FTX, has established itself as a viable option for those looking for a more stable and efficient alternative to Ethereum.
This network has demonstrated that the monolithic approach can be a valid solution to the scalability problems faced by traditional blockchains.
In the case of Near, the network has opted for a combination of monolithic and modular design, with innovations such as chain abstraction towards L2s and the implementation of sharding, which Ethereum has left aside.
Other networks such as BNB Chain and Fantom are also betting on new technological strategies, with a focus on data monetization and transaction speed optimization, respectively.
Despite these challenges, Ethereum remains a leading platform, but its dominance is threatened by the rapid advance of these L1 alternatives.
The growth of L1 blockchains and innovations in L2s suggest that the war for market control is far from over. The ability of these platforms to evolve and offer new solutions will determine who comes out on top in the coming years.
