Ethher (ETH) has had a lower performance of other cryptocurrencies in recent months such as the Ethereum block chain has faced an “intense” competition from other networks, Wall Street Bank JPMorgan (JPM) said on Wednesday in a research report on Wednesday .
Token lacks a convincing narrative like that of its largest peer bitcoin (BTC, the bank said, added that Bitcoin benefits from his perception as a value warehouse and as digital gold.
Despite the updates, such as Dencun, the activity has changed from the main Ethereum network to its layer 2, which is harmful to the growth of the block chain, according to the report. It is likely that the latest network update, sin, occurs in early April.
“Competitive pressures have led some decentralized applications (DAPPS) to migrate from Ethereum to other specific application chains for better performance,” wrote analysts led by Nikolaos Panigirtzoglou.
Examples include decentralized exchanges (DEX) such as Uniswap, Dydx and hyperlycides, the bank said.
Uniswap’s next movement to Unichain is important because it is one of the “largest gas consumption protocols in Ethereum, and its migration could lead to a significant loss for the network rates group, the bank said.
JPMorgan said that this DAPPS trend that moves to other layers 2 or the alternative layer 1 could negatively affect Ethereum by decreasing activity in the main network, which could result in lower transaction rates and validator income.
Layers 2 are separate blockchains built at the top of layer 1, or the base layer, which reduce bottlenecks with scale and data. In terms of supply, this could make Ether inflationary as “less transactions imply a reduced token burning,” the authors wrote.
The bank said that Ethereum’s growth is behind that of competitors like Solana, which saw an increase in activity linked to Memecoins.
Ethereum’s ecosystem still dominates stable spaces, decentralized finance (defi) and tokenization spaces despite these challenges, the bank said.
The network could see a greater institutional demand for tokenization companies, but “it is likely that the competition of other networks remains intense in the predictable future,” the report added.
Read more: how to solve the fragmentation problem of Ethereum
