Kyle SamaniManaging Partner at Multicoin Capital, offered a candid assessment of the recent price underperformance of Ethereum (CRYPTO:ETH) compared to its competitors like Solarium (CRYPTO:SOL).
What happened
In an interview with the Cryptocurrency podcast BanklessSamani attributed the poor performance to two main factors:
- Lack of interoperability at layer-2:Users face a frustrating experience when trying to move assets between Ethereum’s various layer-2 blockchains, such as Arbitrum (CRYPTO:ARB) and Optimism (CRYPTO:OP). Many therefore prefer the simpler, more unified experience on chains like Solana. Samani is doubtful that Ethereum can fully solve this problem, given the divergent incentives of various layer-2 projects.
- Shifting value capture to layer-2: Samani argues that by outsourcing execution to layer-2s, Ethereum has given up on its primary source of value capture: miner extractable value (MEV), i.e. the amount paid to miners for ordering transactions. He believes transaction fees will trend to zero, leaving MEV as the only real source of value for blockchains.
Samani rejects the idea that Ethereum can become “money” or a store of value, arguing that its volatility makes it unsuitable for everyday transactions or long-term contracts.
He believes that non-productive assets have no place in investment portfolios, and is skeptical of narratives about the monetary premium of Bitcoin (CRYPTO:BTC) and Ethereum.
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Why is it important?
Overall, Samani paints a grim picture for Ethereum’s future, suggesting that its current $300 billion valuation may be difficult to justify given these structural issues.
While he acknowledges Ethereum’s strong network effects, he believes competitors like Solana offer a superior user experience that will continue to attract capital over time.
What’s coming
Ethereum’s influence as an institutional asset class is expected to be explored in depth at Benzinga’s upcoming Future of Digital Assets event on November 19.
Image: Shutterstock
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