Morgan Stanley’s global investment asset management office has released a report on Ethereum (ETH) arguing that blockchain dominance could decrease if strong market competition emerges.
The investment banking giant’s report is titled “Cryptocurrency 201: What is Ethereum?” and it provides a detailed rundown of the ecosystem along with its advantages and disadvantages relative to Bitcoin (BTC).
“Partly because of its more ambitious addressable market, Ethereum faces more competitive threats, scalability issues, and complexities than Bitcoin. In addition, Ethereum is more volatile than Bitcoin,” the report says.
Morgan Stanley argued that Ethereum could lose the dominance of smart contracts over cheaper, faster blockchains – something that proponents of the Ethereum killer market, which includes networks such as Cardano (ADA), Solana (SOL), Polkadot (DOT) have often argued. ) and Tezos (XTZ):
“Ethereum faces more competition in the smart contract market than Bitcoin in the store of value market. Ethereum could lose market share of the smart contract platform to faster or cheaper alternatives.”
The investment bank also suggested that Ethereum poses more investment risk than Bitcoin as it faces more competition in the smart contract market than “Bitcoin faces in the store of value market.”
“To “use” Bitcoin requires fewer transactions per user, which is similar to a decentralized savings account. Demand for Ethereum is more closely related to transactions. Thus, such scaling restrictions hurt the demand for Ethereum more than they suppress the demand for Bitcoin,” the report says.
Other concerns raised about the network included the changing regulatory status of applications built on Ethereum, such as decentralized finance (DeFi) and non-fungible tokens (NFTs), which could be subject to strict regulations in the future, resulting in less demand for Ethereum transactions.
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While Ethereum’s centralization has also been highlighted, the report notes that much of the Ether supply is held by “a relatively small number of accounts”:
“It is less decentralized than Bitcoin, with the top 100 addresses accounting for 39% of Ether, compared to 14% for Bitcoin.”
On the bullish side of the equation, the Morgan Stanley report claims that Ethereum has more market potential than Bitcoin, it has deflationary traits due to its transaction-based burn mechanism, and its performance will improve significantly after an eventual transition to proof. Stake Consensus Mechanism:
“Ethereum has a much larger addressable market than Bitcoin and therefore can be worth more than Bitcoin, which is simply a market for value-added products like savings accounts and gold.”