Morgan Stanley’s Global Wealth Management Investment Office released a report on Ethereum (ETH) claiming that blockchain dominance could decline if strong market competition emerges.
The investment banking giant’s report is titled “Cryptocurrency 201: What Is Ethereum?” and that provides a detailed overview of the ecosystem with its advantages and disadvantages compared to Bitcoin (BTC).
“In part due to its more ambitious addressable market, Ethereum faces more competitive threats, scalability issues, and complexity challenges than Bitcoin. Additionally, Ether is more volatile than Bitcoin,” the report states.
Morgan Stanley has argued that Ethereum could lose smart contract superiority to cheaper and faster blockchains – something that has often been argued by proponents of Ethereum’s killer market which includes networks such as Cardano ( ADA), Solana (SOL), Polkadot (DOT) 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 from smart contract platforms to faster or cheaper alternatives.
The investment bank also suggested that Ethereum poses greater investment risk than Bitcoin because it faces greater competition in the smart contract market than “Bitcoin faces in the store of value market.” .
“Fewer transactions per user are required to ‘use’ Bitcoin, which is akin to a decentralized savings account. Demand for Ethereum is more closely tied to transactions. Therefore, similar scaling constraints harm demand for Ethereum more than they suppress demand for Bitcoin,” the report read.
Other concerns raised about the network include the changing regulatory status of applications built on Ethereum such as decentralized finance (DeFi) and non-fungible tokens (NFT) which could see strict regulations imposed on them at the time. future, leading to reduced demand for Ethereum transactions.
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While Ethereum’s centralization was also highlighted, with the report noting that the bulk of Ether’s supply is held by a “relatively small number of accounts”:
“It is less decentralized than Bitcoin, with the top 100 addresses holding 39% of Ether, compared to Bitcoin’s 14%.
On the bullish side of the equation, Morgan Stanley’s report argued that Ethereum has greater market potential than Bitcoin, exhibits deflationary characteristics via its transaction-based burn mechanism, and slows performance. will significantly improve after the eventual transition to a proof-of-stake consensus mechanism:
“Ethereum has a much larger addressable market than Bitcoin and can therefore be worth more than Bitcoin, which is simply the market for store-of-value products like savings accounts and gold.”