The token lacks a compelling tale like its larger Peer Bitcoin (BTC, the bank said, adding that Bitcoin benefits from its view as a value of value and as a digital gold.
Despite upgrades, such as Dencun, the activity has changed from the most important Ethereum network to its layer 2s, which is harmful to blockchain’s growth, the report says. The network’s latest upgrade, Pectra, is likely to happen in early April.
Examples include decentralized exchanges (DEXS) such as Uniswap, Dydx and Hyperliquid, the bank said.
Uniswap’s upcoming move to Unichain is important because it is one of Ethereum’s “largest gas consumption protocols” and its migration can result in a significant loss for the network’s fee pool, the bank noted.
JPMorgan said that this trend with DAPPs moving to other layers 2S or alternative layers 1s could have a negative impact on Ethereum by reducing the activity of the main network, which could result in lower transaction fees and validator revenue.
LAG 2S are separate blockchains built on top of layer 1S or the base layer that reduces bottlenecks with scaling and data. In terms of supply, this could do etherinflationary as “fewer transactions involve reduced token combustion,” the authors wrote.
The bank noted that Ethereum’s growth is behind it for competitors like Solana, who saw an increase in the activity linked to Memecoins.
The Ethereum -Ecosystem still dominates stableecoin, decentralized funding (defi) and tokenization spaces despite these challenges, the bank said.
The network could see increased institutional demand from tokenization companies, but “competition from other networks is likely to remain intense in the foreseeable future,” the report added.
Read more: How to solve Ethereum’s fragmentation problem
