While it is the primary network hub for businesses like DEFI, smart contracts and NFTs, bridges built using competing networks like Tezos could pose a serious challenge to Ethereum's market share in these areas.
New solutions to old problems could undermine the power of the network
In the time since the network was introduced, the Ethereum killers have claimed that they would replace the network with faster transactions, more scalability, lower fees, and practically everything better.
Despite all the hype surrounding these responses to Ethereum's flaws, no network has been able to shift the appeal of the network as a whole. However, Ethereum's shortcomings are currently under attack from all sides, and more than ever.
The WRAP protocol recently unveiled by Bender Labs is one of the many arrows that could seriously mutilate the state of Ethereum. This highly interoperable decentralized protocol will allow the transformation and transfer of Ethereum tokens, including the ERC-20 and ERC-721 standards, to the Tezos blockchain.
Ethereum tokens are effectively locked onto the blockchain via this protocol before a “wrapped” version is created on the corresponding network, in this case Tezos. The underlying value of the wrapped version is tied to the actual token being copied, using the native $ WRAP token to orchestrate the transformation. All encapsulated Ethereum tokens are therefore compatible with Tezos' FA2 standard, allowing them to be used freely within the network.
A real challenge to the status quo
While defeating Ethereum is not Bender Labs' stated goal, the idea of building a more open and interoperable decentralized financial system challenges network dominance.
The "bridge" of this new protocol will allow token holders to move freely between the two ecosystems with minimal costs. Providing a greater abundance of choice while giving users the opportunity to vote with their feet.
Given that Tezos now boasts a much more affordable ecosystem for developers and users than Ethereum, thanks to its proof-of-stake consensus, this newfound ability to seamlessly migrate between chains poses a major threat. Additionally, Tezos' self-upgradeable nature means future network changes are much easier to implement than Ethereum's lengthy upgrade process.
An unpredictable path of adoption
The growing commissions on Ethereum already represent the necessary catalyst for an exodus of developers and users. The attraction of Tezos' lower transaction costs without demonstrable changes in the user experience is hard to deny.
However, while it may seem like an Ethereum killer in some respects, the WRAP protocol could have the opposite effect in the long run. By providing users with a near-frictionless method of moving between ecosystems, Ethereum could actually benefit from extensive use.
How? Quite simply, if Defi becomes more competitive and the use of smart contracts expands, the two networks will likely compete for demand as each continually updates and innovates to attract participation.