With the broader crypto bull market gaining momentum everyone is wondering about which are the best picks to select to get the maximum gains. This article is not aimed at recommending any altcoin picks but to share my views about how I see the fierce battle between Ethereum and BNB unfolding over the coming months as it seems to be getting more intense with each passing day.
Last year I wrote several posts about how Polkadot and Cardano had strong potential to dethrone Ethereum from it’s position of number 1 Altcoin, I had clearly not expected at that time that the coin which would finally rise in 2021 to challenge ETH would be BNB.
As you would have sensed by the introduction that this post is not going to be very pleasant for Ethereum maximalist so if you are a big fan of the Vitalik camp it would be prudent to skip this post.
What are the Problems ahead for Ethereum?
Ethereum for a very long time had been the de-facto leader when it came to the DeFI space. It had proven it’s stability and security over the years and had become the default choice for any project which wanted to build upon blockchain technology.
It’s ecosystem had grown so huge that it’s competitor despite having better technologies were not able to make a dent in Ethereum’s stronghold on the market.
Scalability was always the Achilles Heel of Ethereum and it had become quite apparent during the peak demand during the Crypto Kitties craze which jammed the whole blockchain and drove up transaction costs. Since then people started to notice the rising transaction costs on ETH but were bearing it silently as Ethereum basically had a monopoly on the market and if you wanted to do anything on the DeFI space it meant being willing to burn some ETH.
This shortcoming became more painful during 2020 when people started seeing basic transactions costing upwards of $100. It was also uncommon to see $500 transaction fee during peak times. This was unacceptable if blockchain was going to be a global phenomenon as $100 transaction fee was equivalent to a weeks salary for many people in the developing countries. This basically meant that by end of 2020 only whales were playing in the ETH environment as $100 fee was only justified when you were moving around $100K or above.
For along time people had been waiting for the elusive ETH2.0 which was supposed to miraculously solve all their woes but with the passing time people realized it might be much longer wait and it also started becoming apparent that it might not do a significant reduction to the transaction costs.
How Binance Took Advantage of this Opportunity?
While Ethereum was busy fiddling with the Trilemma of Security, Decentralization and Scalability Binance brought in the fourth factor of Agility by overnight re-designing the ETH DeFI platforms on BSC (Binance Smart Chain). BSC had existed for quite sometime now but only in the shadows of Ethereum so it never got any visibility.
Now as Ethereum was in a complacent position BSC went for the jugular. It basically did a copy paste of all popular platforms like SushiSwap, Harvest Finance, Uniswap, AAVE on BSC and came up with Pancake Swap, AutoFinance, BMX, Bunny Swap etc.
Initially people thought these BSC platforms were just a gimmick and will not be sustainable, many even ridiculed them. Soon the traffic on BSC started to soar and it was not something to be ignored. The first people to move were the retail investors as ETH had become unusable for them and BSC offered them opportunities to continue with DeFI Farming, Staking, Pooling which they enjoyed earlier on ETH.
Ethereum price is still pumping but it is mainly due to the fact that the whales are still holding in the expectations of future appreciation with 2.0. If you want to see how the momentum on the ground is already shifting you need to check the TVL in ETH and BNB over the last 3 months.
ETH TVL over 3 Months
BSC TVL over 3 Months
When you look at the charts above it is clear that ETH DeFI is stagnating for over 2 months now and once some of the whales start moving out it will start to collapse.
BSC on the other hand has grown rapidly over the last 2 months and is already touching $30 B while ETH is struggling to hold on to the $50 B mark.
If this trend continues, which most probably will unless Ethereum comes out with a game changer I see this gap narrowing during April 2021 and during May 2021 BSC will beat ETH in terms of TVL. Once this tipping point arises it might deal a blow to ETH bull run and will move to momentum to BNB and CAKE as these tokens will gain the most from what ETH loses.
Let me know what are your thoughts on this heavyweight competition going on.
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Cryptocurrency & Blockchain
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.