Ethereum dominated the crypto market in 2017 as the smart contract platform of choice for ICOs and blockchain projects. In 2017, over 95% of projects decided to run their token sale and/or build their decentralized application using Ethereum’s ERC20 standard (or some form of it).
While Ethereum clearly has first mover advantage, it seems to be slowly losing support over time from dApp developers in favor of newer, faster, more feature rich smart contract platforms. Its flaws are becoming more clear as the crypto market matures; with scalability being a hot topic in 2018. A significant amount of commercial grade decentralized applications require a higher throughput, or the capacity to process more transactions per second (TPS). While an Ethereum smart contract is a decent tool for raising funds via an ICO, it is less than satisfactory when it comes to running and deploying apps. In a nutshell, Ethereum is slow and requires expensive gas fees paid by the end user, making the smart contract platform landscape ripe for disruption.
This graphic shows how Ethereum is losing market share to its competitors over time in 2018:
Interestingly enough, it does not seem that another smart contract is directly cannibalizing Ethereum or “winning” the race to have the most adoption and/or development activity. Instead, other smart contract platforms are designing their features to cater to specific use cases, while Ethereum markets itself as “featureless.” Therefore, for the time being, the smart contract platform ecosystem appears to not be a winner take all market. Ethereum is still the clear market leader, and there are a great deal of resources and documentation available for developers to get started programming in Solidity, which gives Ethereum its edge over competition.
Out of 3,928 ICOs launched in the last 18 months, 91% of them have used Ethereum to run their token sale. Furthermore, 3.1% of ICO projects have opted to build their own blockchain.
Data from icoalert.com
Behind Ethereum, the platform with the second most ICOs is the Waves platform. Waves finds its niche by being quick, low cost and easy to use; an ICO can be run on its platform without the need for technical know-how. Furthermore, Waves helps address the liquidity problem with its built-in decentralized exchange.
Stellar has the third most ICO traction and caters to financial applications by allowing cheap and fast value transfer. Not far behind in fourth and fifth place are NEO and EOS. NEO has gained popularity in Asia due to its scalability and support for many programming languages. EOS, which launched its main-net in June, boasts new features such as readable account names, hacked account recovery, and more. EOS has fewer nodes in its system which makes it arguably less decentralized than Ethereum, but much more scalable. EOS is also the largest ICO in history, raising over $4 billion in its year-long token sale.
EOS, NEO, Waves, and Stellar all have the ability to scale to hundreds (if not thousands) of transactions per second, compared to Ethereum’s approximate 10 tx/s currently. However, what Ethereum lacks in scalability it makes up for in decentralization(and security). Similar to Bitcoin, anyone can become an Ethereum miner, and every node is required to process every transaction.
In conclusion, Ethereum now has some very real competition with the introduction of new consensus mechanisms and governance models. This does not mean Ethereum is destined to fail, however, it must adapt in order to survive in this dynamic market. Ethereum is currently evolving to include emerging concepts to solve the scaling dilemma such as plasma, sharding, and the Casper protocol. Will Ethereum be able to implement these improvements in time? Or is the Ethereum killer out there lurking? Only time will tell.
An interesting note — all of this software is open source; each project can easily copy features (such as readable account names) from others. However, consensus models and governance structures are fundamental changes in the protocol, and are NOT easily copied without starting from scratch.
For a more in depth analysis on competing smart contract platforms, check out my colleague Peter Keay’s articles here.