While it is still the main network hub for defi operations, smart contracts and NFTs, bridges built with competing networks such as Tezos can pose a serious challenge to Ethereum’s market share in these areas.
New solutions to old problems can undermine the potential of the network
In the time since the network’s unveiling, Ethereum killers have been rife with claims that they would crowd out the network with faster transactions, more scalability, lower costs, and effectively do just about anything better.
Despite all the hype surrounding these responses to Ethereum’s shortcomings, no network has been able to displace the appeal of the network as a whole. Still, Ethereum’s flaws are under attack from all sides right now, and more than ever before.
Bender Labs’ recently unveiled WRAP protocol is one of many arrows that could seriously erode Ethereum’s status. This highly interoperable decentralized protocol enables the transformation and transfer of Ethereum tokens, including ERC-20 and ERC-721 standards, to the Tezos blockchain.
Ethereum tokens are effectively locked to the blockchain through this protocol before a “wrapped” version is created on the associated network, in this case Tezos. The underlying value of the wrapped version is associated with the actual token being copied, using the $ WRAP native token to orchestrate the transformation. All wrapped Ethereum tokens will then be compatible with Tezos’ FA2 standard, allowing them to be used freely within the network.
A serious challenge for the status quo
While defeating Ethereum is not the goal set by Bender Labs, the idea of building a more open, interoperable decentralized financial system challenges the network’s dominance, especially in Defi and smart contracts.
The “bridge” of this new protocol allows token holders to move freely between the two ecosystems with minimal switching costs, providing greater choice and allowing users to vote with their feet.
Considering that Tezos now boasts a much more affordable developer and user ecosystem compared to Ethereum, this new ability to migrate seamlessly between chains, thanks to the consensus of proof of stake, poses a serious threat. Additionally, Tezos’ self-upgradeable nature means that future modifications to the network will be much easier to implement compared to Ethereum’s lengthy upgrade process.
An unpredictable adoption path
Rising fees on Ethereum that are difficult to reliably predict are already the necessary catalyst for an exodus of developers and users. The appeal of Tezos’ lower transaction costs without demonstrable changes to the user experience is hard to deny.
While it may seem like an Ethereum killer in some ways, in the long run the WRAP protocol can have the opposite effect. By providing users with a virtually frictionless method to move between ecosystems, Ethereum can actually benefit from extensive use.
How? Simply put, as the fi gets more competitive and smart contract use expands, the two networks will likely compete for demand as they each continuously upgrade and innovate to attract participation. If the resulting innovation cuts costs, it will invite even greater participation from users and developers alike, effectively expanding the universe of crypto users rather than splitting it in two.
While talks about Ethereum’s impending demise will increase, the WRAP protocol is still a serious shot ahead that could have short-term implications for the network, even with Ethereum’s forward-looking potential.
Do you think the fierce competition against Ethereum harms or makes the network stronger? Let us know in the comments below.
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