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 business on Wall Street. That could change as Fusaka rolls out major improvements to the way the network verifies and compresses data, increasing its speed and capacity tenfold.
However, 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 preserve its current advantage as a platform for on-chain finance.
Ethereum remains the preferred platform among institutions for asset tokenization, DeFi applications, and stablecoin creation, building on the strengths arising from its maturity. However, it faces threats that will erode its advantage if it doesn’t move to meet the market: like a shark, if Ethereum stops moving, it will die.
Strength: Ethereum Uptime
However, Solana has never quite eclipsed Ethereum. One of the main reasons for this may be that in the last five years, Solana, as a blockchain system, has been shut down seven times. Ethereum, as Fundstart Capital chief investment officer Thomas Lee said in August, has never crashed in its 10 years of existence. Financial institutions value uptime; It’s not sexy, but it’s one of the core attributes that makes on-chain infrastructure attractive to market participants.
Strength: Ethereum ecosystem maturity
Another unattractive quality that institutions will demand: availability and maturity of tools and developer talent. While Solana attracted the most new developers of any chain last year, Ethereum’s Solidity has the largest developer community by a wide margin, an advantage recently confirmed in a16z’s State of Crypto report.
Risk: Ethereum Scaling
A constant problem that hurts Ethereum is the pace at which it is scaling, 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 appear every two months, Ethereum is far behind in its goal, stated by its inventor Vitalik Buterin in 2017, of matching the scale of transactions on the Visa payments network, and is currently nowhere near Visa’s 24,000 tps average. In contrast, Ethereum layer 2 (L2) blockchains can process between 1,000 and 10,000 transactions per second.
Risk: Heavyweights and innovators break Ethereum deal
New blockchains are increasingly backed by publicly traded companies such as Circle’s Arc and Stripe’s Tempo. Both Arc and Tempo are layer 1 (L1) blockchains, like Ethereum. Instead of building a chain on top of Ethereum like Coinbase’s L2, Circle and Stripe decided to build their own settlement layer, albeit compatible with the Solidity programming language and the Ethereum virtual machine.
Another L1 is Hyperliquid, which is specifically designed as a decentralized exchange for perpetual futures trading. While this may seem niche, Hyperliquid, along with DEX offender Aster, took in 32% of all blockchain revenue in September, according to a VanEck analysis, knocking Solana off its perch. Just as Solana once stole Ethereum’s thunder, Hyperliquid appears to be doing the same. And although the October 10 cryptocurrency flash crash shook Hyperliquid and angered many of its traders when winning positions were used to fund losses, it survived as designed. All this must be catching the attention of Ethereum developers, huh?
Ethereum’s path to reach the institutional market
There are many opportunities for chains like Solana and Hyperliquid to take advantage of Ethereum’s shortcomings. A real race for developer mindset is underway, as options from well-funded players like Circle and Stripe put pressure on Ethereum. Innovation spreads across multiple blockchain ecosystems and liquidity follows, creating deep trading pools alongside innovative new protocols. Will Ethereum lose the plot?
To avoid that, a lot of education needs to be done on Ethereum before it is fully adopted by mainstream corporate treasurers and the general public. For financial institutions choosing their preferred platforms for tokenization, trading and performance, Ethereum’s human capital may be the ultimate decider. The core contributors and leaders of the Ethereum ecosystem have historically been an idealistic group, while delivering major upgrades like Merge without a hitch, and now Fusaka is poised to take the network to the next level. For the health and future of the network, top contributors will need to elevate people who can guide multi-year relationships.
At least for now, Ethereum remains a priority as to where institutional infrastructure in crypto is being built. It has been shown to be vulnerable due to its slow growth rate, the constant threat of upstart competitors, and always counting on Solana and others to keep it in check. If others address the institutional roadmap faster or better, Ethereum risks losing its advantage, no matter how high the ETH price may go.
