According to the CoinShares’ Digital Asset Monthly Fund Manager Survey, investors are boosting their digital asset allocations to Cardano, XRP, and Polkadot while decreasing their allocations to Ethereum.
Investors added digital assets to their portfolios for speculative motives, good value, and Distributed Ledger Technology expansion.
A variety of factors, ranging from speculation and investor attitude to recent developer activity across the different blockchains, could be contributed to the greater investor interest in Cardano and XRP compared to Ethereum.
The higher potential upside to the all-time high price for Cardano and XRP than Ethereum may be an incentive for speculators to channel their asset allocations into these digital assets, although for the long term.
Ethereum was designed to be an open-source platform on which other applications might be created. Because it pioneered smart contracts, Ethereum had a first-mover advantage over rival blockchains. As a result, the Ethereum platform has grown fast throughout the years, with an increase in the volume of transactions.
The platform’s scalability issue, on the other hand, resulted in higher gas fees, particularly during busy network periods. Another problem of the Ethereum network was its lack of compatibility between blockchain systems.
Solutions to the aforementioned difficulties eventually lead to the concept of “Ethereum Killer” blockchains. Competitor blockchains were quickly established in response to the Ethereum platform’s issues. Among these blockchains were Cardano and Polkadot, to mention a few. Several developments have occurred on these blockchains.
In September 2021, the Alonzo Upgrade on the Cardano Network offered fully functioning smart contract functionality, permitting the minting of NFTs (Non-Fungible Tokens) and the operation of many Decentralized Applications (DApps). With better speeds and reduced transaction costs, the Cardano ecosystem has become a direct competitor to the Ethereum Network. Higher transaction costs and scalability issues are likely to have contributed to investor funding pouring into Cardano rather than Ethereum.
The Polkadot ecosystem was one of the largest and fastest-growing ecosystems, with over 250 active monthly developers, according to the Electric Capital Developer Report 2021. At the same moment in time, the Polkadot ecosystem was said to be growing faster than the Ethereum Network. In comparison to the Ethereum Network, this could have influenced the flow of investor funds into the Polkadot ecosystem.
Since late 2020, Ripple has been embroiled in a legal battle with the US Securities and Exchange Commission (SEC), alleging that Ripple committed illegal security offering through the sale of its XRP token. The preliminary court verdicts appear to be tilting Ripple’s way toward victory in its battle against the SEC. Speculators believe that if Ripple wins its case against the SEC, the price of XRP will rise. As a result, investor confidence in XRP will increase.
Should we expect further Ethereum fund outflows towards Cardano, Polkadot, and XRP? The contest to become the preferred blockchain is merely getting started. Developer engagement on blockchains is projected to increase in order to make them more efficient and secure.
In May 2022, the average Ethereum transfer gas fee was less than R48,08 per transaction, a ten-month low. Though this is good news for Ethereum Network users, it is unclear how long this gas charge level will be maintained. Some crypto experts link the decrease in gas fees to the recent overall collapse in the crypto market, which resulted in fewer transactions on the Ethereum network.
The Ethereum co-founder, Vitalik Buterin, has disclosed that the long-awaited Ethereum Merge Upgrade will take place in August 2022. The update would transition Ethereum from a Proof of Work consensus mechanism to a Proof of Stake consensus mechanism. The Ethereum Merge Upgrade could provide the spark that the Ethereum network needs to maintain its first-mover advantage over competitor blockchains.