If I had to pick one word to describe the Bitcoin network, it would be “interoperability.” A decade after the cryptocurrency’s debut, Bitcoin continues to grow because of its success as a global, decentralized exchange network. On the other hand, Ethereum has been much more strict about maintaining a wall between its network and the rest of the world.
Bitcoin has continued to grow with fervor, despite recent criticism in the press. Mainstream media outlets love to bash Bitcoin, but it seems that none of their claims stick. Bitcoin is the currency of the future, and it has the potential to do more than just take the place of traditional money. The Lightning Network, for example, promises to revolutionize the way we transact online. It could change the entire Internet, and not just by bringing Bitcoin to the fore. The Lightning Network is an off-chain solution that allows for near-instant transfer of Bitcoin. It works by passing transactions along a chain of middlemen, eventually settling on the blockchain. Lightning has been called the best scaling solution for Bitcoin. It also has the potential
It may still remain an important network hub for definitions, smart contracts and NFTs, but bridges to competing networks like Tezos could seriously challenge Ethereum’s market share in these areas.
New solutions to old problems may undermine the strength of the network
Since its unveiling, it has been repeatedly claimed that Ethereum killers would supplant the network because of faster transactions, greater scalability, lower costs, and basically everything better.
Despite all the hype surrounding these answers to Ethereum’s flaws, no network has been able to completely supplant Ethereum’s appeal. Nevertheless, Ethereum’s vulnerabilities are currently under attack from all sides, more than ever before.
The WRAP protocol recently unveiled by Bender Labs is one of many arrows that could seriously cripple Ethereum’s status. This highly interoperable decentralized protocol will enable the conversion and transfer of Ethereum tokens, including ERC-20 and ERC-721 standards, to the Tezos blockchain.
Ethereum tokens are effectively locked on the blockchain with this protocol before a packaged version is created on the appropriate network, in this case Tezos. The base value of the wrapped version is bound to the actual token being copied, using $WRAP’s own token to start the conversion. All packaged Ethereum tokens will be compatible with Tezos’ FA2 standard, allowing them to be used freely on the network.
Serious threat to the status quo
While Bender Labs’ stated goal is not to beat Ethereum, the idea of creating a more open and interoperable decentralized financial system does challenge the network’s dominance, especially when it comes to Defi and smart contracts.
This new protocol bridge will enable token holders to move freely between ecosystems with minimal switching costs, providing greater freedom of choice and allowing users to vote with their feet.
Since Tezos offers a much more accessible ecosystem for developers and users than Ethereum thanks to its proof-of-stake consensus, this new ability to move seamlessly from one circuit to another is a serious threat. Furthermore, the self-renewing nature of Tezos means that future changes to the network are much easier to implement compared to Ethereum’s lengthy upgrade process.
Unpredictable path of decay
The hard-to-predict increase in fees on Ethereum is already a necessary catalyst for the exodus of developers and users. It’s hard to deny the appeal of Tezos’ lower transaction fees if the user experience doesn’t change in an obvious way.
While it may seem like an Ethereum killer in some ways, the WRAP protocol could have the opposite effect in the long run. By providing users with a virtually seamless way to move between ecosystems, Ethereum can truly benefit from increased usage.
How do you do that? It’s simple: As Defi becomes more competitive and the use of smart contracts increases, the two networks are likely to compete for demand as each continually upgrades and innovates to attract participants. If innovation leads to loss of value, even more users and developers will join in, effectively making the universe of cryptocurrency users larger rather than splitting it in half.
While rumors of Ethereum’s imminent demise will increase, the WRAP protocol is still a serious wake-up call that could affect the network in the short term, even if Ethereum’s potential is promising.
Do you think the fierce competition with Ethereum will hurt the network or make it stronger? Let us know your comments in the section below.
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