Ethereum Losing Nft Market Share To Other Cryptos: Jp Morgan

The Ethereum network has lost ground in the non-fungible token (NFT) market space to rival blockchain network Solana due to high transaction fees and network congestion, according to a recent report by global investment bank JP Morgan.

JP Morgan analyst Nikolaos Panigirtzoglou estimates the non-fungible token asset trading has fallen off from 95 percent at the start of the year to roughly 80 percent now. According to Panigirtzoglou, the main culprit for this drop seems to be Ethereum networks’ high congestion (traffic on the network) and transaction fees.

“It looks like, similar to DeFi apps, congestion and high gas fees has been inducing NFT applications to use other blockchains,” Panigirtzoglou stated in a note sent to the bank’s clients last week, referring to apps built for decentralized finance.

JP Morgan’s markets’ team has found that most of Ethereum’s NFT market traffic is being seized by rival decentralized finance (DeFi) blockchain network Solana.

Panigirtzoglou also outlined the potential effect this loss of market share to Solana can have on the world’s second most popular blockchain network.

“If the loss of its NFT share starts looking more sustained in 2022, that would become a bigger problem for Ethereum’s valuation,” Panigirtzoglou said.

NFTs or non-fungible tokens are digital certificates of ownership of any pieces of digital art, video clips, and virtual clothing. They are stored on the blockchain to maintain security and interoperability.

In a booming market of $12 billion, NFTs are now starting to dictate the growth of blockchain networks. Competition from rival networks like Solana and Cardano (dubbed as ethereum killers) could hinder the development of the Ethereum network in terms of user adaption.

Networks like Solana and Cardano are seizing this opportunity and are attracting NFT marketplace developers due to their lower transaction fees. Another relatively lesser-known network like Tezos is also throwing its hat in the NFT marketplace ring.

Even when facing tough competition, Ethereum is still a powerhouse in NFT and decentralized finance (DeFi). The total value of the projects on the Ethereum network is worth around $156 billion.

Amidst this competition, the Ethereum network is still working on its transition from the proof-of-work consensus mechanism to proof-of-stake, dubbed Ethereum 2.0. The switch is predicted to address the high-transaction fee problem and the environmental impact that the proof-of-work model has had in the past.

Ether, the native token of the Ethereum blockchain, is trading at $2,251, a fall of 30 percent compared to last week, according to data from coinmarketcap.