For Morgan Stanley, ethereum is less decentralized and more volatile than bitcoin
Morgan Stanley Wealth Management, in a note, explained how the network is less decentralized for ethereum than for bitcoin, with the top 100 addresses holding 39% of ether compared to just 14% for bitcoin, analysts led by Denny wrote. Galindo in the report released last month.
Ethereum currently enjoys dominant market share in the decentralized finance (DeFi) and non-fungible token (NFT) sectors, but this may decline over time as challengers emerge, the report says, and prominent competitors include Binance Smart. Chain (now BNB Chain), Solana and Cardano.
DeFi is a general term used for lending, trading and other financial activities carried out on a blockchain, without using traditional intermediaries. NFTs are digital assets on a blockchain that represent ownership of virtual or physical objects.
DeFi and NFT, which make up the bulk of the business on Ethereum, are subject to rapidly changing regulations and any new rules that restrict areas, such as finance, could see a reduction in demand for transactions on the network, Morgan Stanley said.
The other big specific risk of ethereum is “blockchain bloat and scalability,” he added. As a global smart contract platform, ethereum needs to store massive amounts of data, and the network needs to be faster and cheaper to use per transaction than its competitors, the report said.
The ethereum network is growing faster than bitcoin, and its memory requirements have surpassed those of bitcoin in half the time. Unless changed, its storage demand will likely outweigh its resources, the report added.
“The high transaction fees create scalability problems and threaten user demand,” analysts said, adding that the high costs make the platform too expensive for small-value transactions.
Volatility is also a major risk factor for ethereum as it has been more volatile than bitcoin, Morgan Stanley explained, adding that since 2018, ethereum has been about 30% more volatile than bitcoin.
by Alessandro Crea
Friday 18 February 2022 17:00