Due to notably high Ethereum transaction fees, JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, believe that the largest smart contracts platform is already losing ground to rivals such as Solana in the non-fungible token (NFT) sector.
JPMorgan pointed out that Ethereum’s volume share of NFT trading has fallen from around 95% recorded at the start of 2021 to 80%.
In a research note sent to clients about a week ago, referring to apps built for decentralized finance (DeFi), Panigirtzoglou wrote:
“It looks like, similar to DeFi apps, congestion and high gas fees has been inducing NFT applications to use other blockchains.”
According to the major bank’s findings as stated in the report, the Solana network had been seizing market share from Ethereum in recent weeks.
Panigirtzoglou emphasized that if Ethereum keeps losing ground to rivals blockchain, it would become a big problem for the market value of Ethereum:
“If the loss of its NFT share starts looking more sustained in 2022, that would become a bigger problem for ethereum’s valuation.”
JPMorgan pointed out that Solana is starting to attract NFT developers due to much lower transaction fees compared to Ethereum. In the note, the bank says other networks such as Tezos are also competing in this aspect.
However, Ethereum still remains the dominant blockchain in the industry. Ethereum NFT marketplace OpenSea recently reached a valuation of $13.3 billion.
Also in December 2021, $2.5 billion worth of NFT sales were recorded across various blockchains. It’s not a surprise that Ethereum accounted for $2.5 billion of all the NFTs sold. And to cap it all, Ethereum 2.0, a major upgrade expected to boost the scalability of the network, is coming, probably before the end of the year.