Morgan Stanley’s global investment office has produced research on Ethereum (ETH), stating that the blockchain’s dominance might be endangered if market rivalry becomes fierce.
Morgan Stanley said that Ethereum’s smart contract dominance might be lost to cheaper and quicker blockchains, a claim made by advocates of the Ethereum killer market, which includes networks like Cardano (ADA), Solana (SOL), Polkadot (DOT), and Tezos (XTZ):
“Ethereum is now facing more competition. The competition in the smart contract sector is higher than Bitcoin in the store-of-value market.” The market share of Ethereum’s smart contract platform might be lost by competitors that are faster or less costly.”
Risk Factor in Ethereum
Ethereum is a higher-risk investment than Bitcoin, according to the investment bank, since it faces greater competition in the smart contract business than “Bitcoin does in the store-of-value market.” Fewer transactions per user are necessary to ‘use’ Bitcoin, which is analogous to a decentralized savings account. The demand for Ethereum is becoming more and more correlated with transactions. As a result, according to the research, scaling constraints have a greater influence on Ethereum demand than they do on Bitcoin demand.
Other concerns about the network included the changing regulatory status of Ethereum-based apps like as Decentralized Finance (DeFi) and nonfungible tokens (NFTs), which might be subject to stricter rules in the future, resulting in decreasing demand for Ethereum transactions.
The paper also emphasized Ethereum’s centralization, saying that the majority of Ether’s supply is held by a “very small number of accounts”: “It’s less decentralized than Bitcoin, with the top 100 addresses controlling 39% of Ether, compared to 14% in Bitcoin.”
The Morgan Stanley report claimed that Ethereum has a larger addressable market than Bitcoin, that it has deflationary characteristics thanks to its transaction-based burning mechanism, and that its performance will improve significantly once it switches to a proof-of-stake consensus mechanism: “Ethereum has a considerably larger addressable market than Bitcoin and thus has the potential to be worth more than Bitcoin.
