Ethereum beats rival crypto networks with trade-offs, Pantera Capital’s Krug says

The explosion of growth of crypto networks vying for market share of Ethereum is unlikely to threaten the dominance of the world’s most widely used blockchain.

The explosion in the growth of crypto networks vying for market share of Ethereum is unlikely to threaten the dominance of the world’s most widely used blockchain, according to Joy Krogh, chief investment officer at digital asset investment firm Pantera Capital. “If you spin the clock forward 10-20 years, a very large percentage, maybe even north of 50%, of global financial transactions in some way, shape or form will touch Ethereum,” Krug said in an interview. Ether, the parent currency of the Ethereum platform, is among the top three positions for Pantera Capital Management LP across funds, according to Krogh. The token is the second largest by market capitalization after Bitcoin. Pantera is one of the first digital asset investment firms and ranks among the top five crypto-focused funds with $5.8 billion in assets.

Ethereum’s critics say it has exorbitant fees and slow transaction speeds as traffic clogs the network. Plugins, known as Layer 2 networks, appeared as fixes but can be complicated to use, or have other flaws.

So-called “ETH killers” are gaining traction with developers using blockchain technology to build so-called decentralized finance, or DeFi applications. Coins of the same name of some networks have risen in returns along with usage, including Solana and Polkadot. These coins have risen about 7000% and 150% respectively over the past year even with the recent dip in several token prices, according to data tracker CoinGecko.

Ether had a huge hit in 2021, hitting a record high while up nearly 400%. This came on top of a gain of around 500% in the previous year, and fueled speculation that it might one day surpass Bitcoin, which is currently twice the market cap of Ether.

Krug, one of the early DeFi developers, believes that competitors will eventually rely on Ethereum as a base, assuming the blockchain successfully transforms into Proof of Stake: a way to validate transactions that are being promoted as more efficient and environmentally friendly than the current Proof of Work system.

“There are a lot of trade-offs that other chains that Ethereum does not do in the decentralization aspect and they are very important,” Krug said, citing security concerns. “I don’t know if they are best suited as the new global financial settlement class.”

Pantera is led by Dan Morehead, a veteran Bitcoin investor who was an executive at Julian Robertson Tiger Management earlier in his career.

“All boats” in the sector can be lifted, says David Grider, head of research at Grayscale Investments. Greider said many competitors performed strongly in the second half of 2021. Grayscale Investments LLC is offering clients a Solana investment fund. It also explores products related to other competitors.

“I don’t think this type of market is a winner-take-all,” Grider says. “Ethereum has this leading influence in the network. It has such a large community, but other communities have emerged that fill the various market spaces.”