3 Reasons for Ethereum’s Growing Market Cap Dominance

Ethereum has held the top spot for smart contract and decentralized application (Dapp) networks since its launch. An evaluation of Ether’s price (ETH) and its market capitalization demonstrates that the blockchain has been steadily increasing its market share.

As demonstrated above, Ether’s market capitalization has increased over the last couple of years, from an average of 18% in July 2021 to the current 20%. When not counting Bitcoin (BTC), Ether currently holds 40.6% of the market share, with the next closest competitor, BNB, having a 7.2% share.

The difference between the leading Dapp-focused network and the existing networks is clear when looking at the total value locked (TVL) on their respective smart contracts. Ethereum is the clear leader with a TVL of $24.6 billion, followed by Tron’s $5.4 billion and BNB Chain’s $3.3 billion.

The chart above shows Ethereum’s TVL market share dropping from 70.5% in June 2021 to 49.5% in May 2022, as Terra and Avalanche rose to a combined 20% in smart contract deposits. Nevertheless, when the Terra-Luna system crashed in May 2022, leading to developers ceasing network operations, Ethereum quickly recovered to a 58% market share.

Despite the appearance of Dapps on the BNB and Tron blockchains, Ethereum has stayed in the lead over the past year. This data demonstrates the insignificance of the total amount of distinct active wallets engaging with smart contracts (UAW) per chain.

According to DappRadar, WAX boasts 363,600 active users, whereas BNB Chain has 517,300 30-day Unique Active Wallets. This is much higher than the Ethereum network’s 66,300 active addresses, but the lower transaction fee associated with these blockchain networks leaves room for manipulation.

Decentralization matters, and Ethereum stands out among its competitors

Ethereum has the most active developers of any ecosystem, with a total of 1,870, which is more than the combined number of developers for Polkadot (752), Cosmos (511), and Solana (383).

At present, the Ethereum network boasts more than 700,000 validators, with 99% of the funds locked in staking involved in the system. The 32 ETH limit per validator has certainly contributed to this high number, yet Lido, the largest known staking pool, has a 32% share of the staking, with Coinbase trailing behind at 9.6%.

Hence, it can be concluded that Ethereum is much less centralized in terms of creation and verification when compared to Tron, BNB Chain, and Solana.

One of the other reasons for Ether’s increasing dominance, even as Bitcoin attained a 50% market share on June 19, is due to derivatives activity and its control of the NFT market.

Derivatives markets are essential to institutional investors

Ether’s cash-settled futures were welcomed to the Chicago Mercantile Exchange in February 2021, making it the only cryptocurrency, apart from Bitcoin, to ever reach the world’s largest derivatives exchange. This is significant as these futures are essential for institutional trading practices such as hedging and trading with leverage.

In the futures market, the number of longs and shorts is always equal, but having a larger amount of active agreements – open interest – enables institutional investors to take part, since they need a certain minimum market size. The total open interest of Ether futures is at $5.4 billion, while BNB has $380 million and Solana only $178 million.

Ethereum is still the market leader in NFTs

Nonfungible tokens (NFTs) demonstrate that quicker and less expensive transactions do not necessarily lead to a greater uptake. There is nothing preventing NFT ventures from moving between blockchains, either for existing collections or new listings. As a matter of fact, y00ts and DeGods both migrated to Polygon earlier in the year 2023.

Despite the high gas fees that can often exceed $10, Ethereum continues to be the clear leader in terms of the number of buyers and total sales. According to CryptoSlam!, the foremost network achieved $380 million in sales in the last 30 days, while the trio of Solana, Polygon and BNB Chain had a combined total of $93 million.

Ultimately, the evidence points to Ethereum being the superior choice among smart contract-focused blockchains. Ethereum’s 20% market capitalization share is currently unrivaled, but this positive trend could potentially fade in the future if the planned upgrade to enable parallel processing (sharding) does not materialize.