The rising crypto tide of 2023 has lifted all boats, but some of those vessels are floating higher than others. Bitcoin, riding a wave of ETF optimism, is worth far more than all of the other digital assets combined and is up a handsome 132% on the year. Ethereum rival Solana appears to have shaken off its Sam Bankman-Fried association once and for all and this week eclipsed XRP to become the fifth-biggest token in the market while climbing over 400% in 2023. And Ethereum? It's up a relatively modest 66%.
Price movements are hardly the only way to judge a currency of course. Meme coins like Doge or BONK or whatever regularly pop up by crazy amounts on the heels of social media hype but still lack any logical value proposition. Still, price reflects sentiment—vibes if you prefer—and right now the vibe around Ethereum feels decidedly stale.
As we embark on what looks like a new crypto bull market, Ethereum is facing familiar problems of absurdly high gas fees that make simple transactions unviable. Meanwhile, its vaunted layer-2 solutions do make the blockchain affordable but also introduce an unwelcome layer of complexity for casual crypto users. It's the same old story and there are no signs it's going to change anytime soon.
Messari founder and crypto wiseman Ryan Selkis makes this case in his annual industry prognosis, writing that Ethereum is losing some of its luster:
"ETH is straddled. BTC outperforms ETH as digital money thanks to institutional allocators’ interest in the digital gold 'pure play' while broad availability of Ethereum substitutes (L0s, L1s, L2s) will likely lead to those substitutes’ outperformance as they sop up onchain volumes relative to the Ethereum main chain. I don’t see a scenario where ETH outperforms bitcoin AND its up-and-coming, higher-beta peers."
Selkis, however, also points out that Ethereum losing a step was likely inevitable as competition increased in the smart contract industry that it pioneered:
"If anything, being bearish on ETH relative to the field is not an indictment of Ethereum, but rather a clear-eyed realization that ETH as an asset has been incredibly dominant so far, and has set the bar impossibly high to maintain over a 60% market share in its network token peer group. When I think of Ethereum vs. Solana, I think of Visa vs. Mastercard, not Google vs. Bing in terms of relative strength."
That sounds about right. Ethereum has many strengths, including its inclusive developer ecosystem and the pedigree of integrity that its creator Vitalik Buterin bequeathed, but there was no way it was going to remain the only game in town. And for now, its role as the second-most-important blockchain remains unchallenged but, if the blockchain doesn't increase its vibe game in 2024, that could change.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
