“Comparisons are hateful,” says a popular saying. Although this surely has some truth (or a lot), it is also true that comparisons often serve to understand the characteristics of something or someone by contrasting it with what we have more in mind or know better. Thus, for example, the comparison between Ethereum and New York is born.
This analogy was proposed in a document published by Grayscale, an investment management company that is a reference in the world of digital business and cryptocurrencies. The post title is Get Smart on Smart Contracts Platforms or “Get smart on smart contract platforms.”
In that writing, it is compared to several networks specialized in smart contracts with various cities in the world. Ethereum, the second network with the largest market capitalization behind Bitcoin, it is contrasted with New York, the most populous city in the United States, with more than 8.5 million inhabitants.
Why is Ethereum like New York?
“Ethereum is like New York City: it is vast, expensive and congested in certain areas,” says Grayscale on the eighth page of his text, under the subtitle Digital Cities or “Digital Cities.” In this section, a theory proposed by Dragonfly Research researchers is shared to better understand blockchains and their functions.
The thesis is based on blockchains can choose which aspect to focus on, whether in infrastructure, speed, security, among others. The same happens with cities: some are better organized, others have more efficient transport, and there are also those that are more ecological.
The first quality that is pointed out, that of size, has to do with the fact that Ethereum has the largest application ecosystem, with more than 500 developments with a total value of USD 100,000 million. This is ten times more than any network that can compete, says the document.
It’s no news that New York is also huge. The continental part of the city has 785 km2, and if the water surface is taken into account, it reaches 1214 km2. Although it is not the largest city in terms of extension, it is the most populous city in that country.
The second characteristic pointed out has to do with the economic part. Ethereum is an expensive network to operate. According to the CriptoNoticias price index, at the time of writing this article the minimum fee for transactions with ether (ETH), the network’s cryptocurrency, is USD 1.87; that of other networks, such as Bitcoin, is $0.64 at the moment according to mempool.space. For smart contracts and tokens, Ethereum fees are usually much higher.
Similarly, New York is one of the most expensive cities to live in the United States. and in the world. According journalistic publications In recent years, the cost of living in the “Big Apple” is 129% higher than in cities in the rest of the country.
However, the Grayscale post clarifies that, despite its high costs, those who use Ethereum can rest assured that it will remain “the center of gravity” for application innovation and liquidity, given the size of its community. Identical to what happens with New York, “the city that never sleeps”.
Finally, although Closely linked to the previous two, the problem of congestion. In recent years, with the proliferation of decentralized finance (DeFi) protocols and non-fungible tokens (NFT), Ethereum has often been overwhelmed by the number of users trying to trade on it. This, of course, had an impact on commissions for miners and raised them significantly, as this medium reported on more than one occasion last year, although they have been reduced recently.
At present, minor congestion is seen, which can be due to several factors. First, because the NFT fever has passed and the trading volume of these tokens has been falling since the beginning of the year, as can be seen in this chart from TheBlockCrypto.
On the other hand, DeFi platforms are being “purged” and a natural selection process takes place that makes only the safest and most efficient ones proliferate. Added to this, other networks such as Terra, BNB Chain (ex Binance Smart Chain) and Avalanche begin to dispute the ground. In fact, the dominance of Ethereum is already less than 55% in this area, according to data from defillama.com.
And what about New York? According to a study carried out and published by the consulting firm Inrix, this It is the most congested city in the United States. In 2020, even despite the confinement due to the Covid-19 pandemic, its inhabitants lost an average of 100 hours of their lives stuck in city traffic. Thus, it ranks as one of the 5 most congested cities in the world, a ranking led by Bucharest, with a delay of 134 hours.
Ethereum is New York, and the other networks?
Following the technological-geographical analogy, Grayscale and Dragonfly Research compare the other blockchains with other cities in the world. For example, the Avalanche network is equated with the city of Chicago, since they have “similar economies” to Ethereum and New York (in operation, not in volume), but they are less congested and imply lower costs for those who live or operate in them.
On the other hand, Solana looks like the city of Los Angeles. It is a “structurally different” network, faster and focused on various use cases. Los Angeles is also a very varied city, with buildings from the most modern to palaces and classic mansions. For all tastes, as they say.
As a last resort, the Polygon sidechain is compared to a New York skyscraper, that “scale by building up.” Polygon combines many transactions internally before settling them on the Ethereum mainnet. With this, it manages to give users the security that Ethereum provides along with the low fees that a centralized network would offer.
In short, the theory of these researchers proposes a more graphic way of understanding the ecosystem of blockchains, how they work and what each one offers. With this panorama, you can take a map and, like a tourist who chooses his vacation destination, choose the one that best suits your possibilities and purposes.