Morgan Stanley’s wealth administration international funding workplace has printed a report on Ethereum (ETH) arguing that the blockchain’s dominance may dwindle if robust market competitors emerges.
The investment banking giant’s report is titled “Cryptocurrency 201: What Is Ethereum?” and it provides an in depth rundown of the ecosystem together with its benefits and downsides in relation to Bitcoin (BTC).
“Due partially to its extra formidable addressable market, Ethereum faces extra aggressive threats, scalability points, and complexity challenges than Bitcoin. Moreover, Ether is extra risky than Bitcoin,” the report reads.
Morgan Stanley argued that Ethereum could lose sensible contract superiority to cheaper and quicker blockchains — one thing that has usually been argued by supporters of the Ethereum killer market that features networks comparable to Cardano (ADA), Solana (SOL), Polkadot (DOT), and Tezos (XTZ):
“Ethereum faces extra competitors within the sensible contract market than Bitcoin faces within the store-of-value market. Ethereum could lose sensible contract platform market share to quicker or cheaper alternate options.”
The funding financial institution additionally instructed that Ethereum poses a better funding threat than Bitcoin because it faces better competitors within the sensible contract market than “Bitcoin faces within the store-of-value market.”
“Fewer transactions per consumer are wanted to ‘use’ Bitcoin, which is akin to a decentralized financial savings account. Ethereum demand is tied extra carefully to transactions. Subsequently, related scaling constraints harm Ethereum demand greater than they suppress Bitcoin demand,” the report learn.
Different issues raised in regards to the community included the evolving regulatory standing of functions constructed on Ethereum comparable to Decentralized Finance (DeFi) and nonfungible tokens (NFTs) which can see strict laws positioned on them sooner or later, leading to lowered demand for Ethereum transactions.
Whereas the centralization of Ethereum was additionally highlighted, with the report noting that almost all of Ether’s provide is held by a “comparatively small variety of accounts”:
“It’s much less decentralized than Bitcoin, with the highest 100 addresses holding 39% of Ether, which compares to 14% for Bitcoin.”
On the bullish facet of the equation, the Morgan Stanley report argued that Ethereum has greater market potential than Bitcoin, it has deflationary traits through its transaction-based burning mechanism, and its efficiency will considerably enhance following the eventual transition to a proof-of-stake consensus mechanism:
“Ethereum has a a lot larger addressable market than Bitcoin and may due to this fact be price greater than Bitcoin, which is just the marketplace for retailer of worth merchandise like financial savings accounts and gold.”