First and foremost, let me say that I don't think there are any "Ethereum killers" out there. I don't care if it's Stellar, Polkadot, Cardano, or Binance Smart Chain. None of these will "kill" Ethereum. I also don't care much for maxis. Anybody that grabs onto the "religion" of any blockchain is, in my eyes, unqualified to make educated decisions.
I want to go through the most common things that Ethereum maxis say and argue how they're not only wrong but missing the point entirely. All at the cost of the little guy, who wasn't privileged enough to be in this space years ago.
So let's jump into it.
Argument #1 — Ethereum 2 is coming soon, and proof-of-stake will solve the fees
There are firm misconceptions on how usable ETH2 is at this point. With the beacon chain's recent launch, many thought that better times are just around the corner.
In reality, ETH2 rolls out over several phases. There is no clear roadmap with firm time commitments. Major milestones (some people call them "phases") also shift around frequently as things evolve. The real progress is quite dynamic, and nobody knows when ETH2 will see the light of day for sure.
Newcomers should also know that the "ETH2 meme" has been around since 2017 when we thought ETH fees were high... 😢
ETH2 is also not an "upgrade" to ETH1 as many think. Both chains will continue to work in parity for many years, potentially forever. Even if ETH2 were released today, projects would still need to migrate over, and so would the users and their funds.
I do not doubt that it will solve the issues, but it will several years before the ETH2 chain is usable, and its ecosystem has evolved to a level to where ETH1 is today. MetaMask and other wallets require a complete rewrite, for example.
Argument #2 — Layer 2 solutions already exist and are ready to be used (roll-ups, side-chains, etc.)
Oh yes, Layer 2 solutions. I am often stunned by how little people know about them and how much misinformation is spread around these little miracles.
Let's get something straight: Layer 2 solutions are great and will likely alleviate fees for some very particular users and use-cases soon. Unfortunately, three significant hurdles will keep them from working their magic for the most of us, and for a considerable amount of time.
Firstly, adoption. Like everything else, the protocols currently existing or under development need to be chosen and adopted by applications. This will require some time, but to be fair, it has already started. A few DeFi projects have announced that they are going to implement L2 solutions.
Unfortunately, this brings us to problem number two: compatibility. There is an ever-increasing number of L2 protocols out there. All of which are incompatible with each other. If one protocol (e.g., Uniswap) uses L2 xDai and another one (e.g., Aave) uses L2 Hermez, they cannot talk to each other. Not without back through the Ethereum main-chain and incurring ever-increasing fees.
There are some talks about bringing broad compatibility to this space, but I think we can safely assume that this may take several years before it is accomplished.
And finally, user experience. Something few understand unless they have tried to interact with any Layer 2 themselves. To use your funds on an L2 protocol like xDai or Hermez, you first need to transfer funds into them. However, this locks you into this layer, meaning you can only interact with other users on this protocol. In the above example, which would mean that before you can use the funds you got from Uniswap, you first have to withdraw them from their L2 and then redeposit into the L2 which Aave is using.
It will take a while until wallet providers (e.g., MetaMask, Zen, Coinbase, etc.) support this. There is also a question on how eager players like Binance are to make Ethereum better since they have a competing product.
Argument #3 — Users will stay wherever the money is 🤑
This one is my favorite, as it brings a more philosophical question into the equation. It also displays the sheer selfishness of people that first and foremost care about getting themselves as rich as possible.
But yes, it is true. People will stay and accept high fees as long as the net sum of the transactions is positive. But there is a big caveat: you have to be wealthy enough even to afford the fees in the first place.
The number of fees we choose to collectively spend on Ethereum, particularly since the DeFi craze and Uniswap started, is insane.
It then becomes not a question just about money but also the philosophical aspect of blockchain technology. Weren't we supposed to bank the unbanked and help people get access to the global financial system? What happened? Did we all get so greedy that we forgot the bigger picture?
If your portfolio is worth $1,000 or even $5,000, how is it sustainable to pay $250 on a contract interaction on Harvest Finance? How does a simple trade on Uniswap now cost $50-100 on average?
With Ethereum now hovering around US$1,700 and people still talking about "infinite upside", Ethereum fees are going to become unacceptable even for the wealthier people.
And that is only considering about end-users. I haven't tried deploying a contract on Ethereum lately, but I wouldn't be surprised if it would cost me $1,000+ at this point. How is a newcomer to this space supposed to cough up this much money to deploy some contract they built to the main-chain?
With all this in mind, I think that this is our battle-zone.
What happens next?
That, of course, is the million-dollar question and part of why I am writing this. Over the past couple of days, I have played with Binance Smart Chain (BSC) again. Since the last time I've tested it, a lot has happened.
I've also spoken to many people with smaller portfolios that are desperately looking for ways to make money on BSC to avoid spending a significant % of their portfolio on every transaction they do on Ethereum.
One buddy said earlier today that he's stuck in a protocol because the fees are too high for him to withdraw.
gas price is so high.. stuck in [x] for a week now... going to do nothing about it. [...] not going to pay the high gas for such a small amount of 200bucks.
Another buddy, when I mentioned that I might start writing about BSC said:
pls pin when you post it somewhere, I'm fkn EAGER to move to bsc
While finishing this blog, another buddy of mine started talking to me about how he tried minting his first NFT on a major platform. This totaled about $100... 🙈
Considering all the options, Binance Smart Chain is the best positioned to take a significant chunk of the Ethereum user base. Mind you that the vast majority of wallets are much smaller than the biggest ones.
- Negligible fees (2-4 cents per transaction)
- Extremely fast (near-instant)
- Has official derivatives for off-chain assets (such as ETH or BTC)
- Compatible with Ethereum smart contracts
- Vast potential user base through the existing Binance ecosystem
- Highly centralized, you need to trust Binance
- Offers derivatives of off-chain assets that are NOT the real deal
- Lots of scams/rugs happening right now
The future of crypto for the average Joe with a small-ish portfolio of a couple of thousand bucks is, to me, very clearly in BSC. The alternatives (DOT, XLM, ADA & co) don't have the existing user base or ecosystem for now.
With all this in mind, I started accumulating BNB yesterday and will continue to do so. My price target is 0.1 ETH/BNB ($150-200 in the next couple of months), which I believe is conservative if a good chunk of users moves to BSC.
Ethereum continues to be my single largest position.
What do you think about the arguments above? And how do you feel about smaller users (investors and developers) being priced out of Ethereum? I'd love to hear your thoughts on Telegram.