Morgan Stanley Report Claims ETH May Lose Dominance to Competitors

In a report issued by Morgan Stanley’s wealth management global investment office, the financial services giant warns that Ethereum could lose its position as the dominant smart-contract platform as more efficient competitors emerge.

The report, entitled “Cryptocurrency 201: What is Ethereum?”, provides an in-depth analysis of the Ethereum blockchain ecosystem and summarises its relative strengths and weaknesses compared to Bitcoin.

Dominance Challenged by Faster, Cheaper Alternatives

Several vulnerabilities were identified in the report, the most significant of which was the sheer number of competitors Ethereum now faces in the smart-contract space – many of which are currently cheaper and faster. The report found that:

Ethereum faces more competition in the smart-contract market than Bitcoin faces in the store-of-value market. Ethereum may lose smart-contract platform market share to faster or cheaper alternatives.

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Morgan Stanley report

Some high-profile alternatives looking to wrest market share away from Ethereum include Solana (SOL), Cardano (ADA), Algorand (ALGO) and Hedera (HBAR).

Ethereum Scalability Questioned

The second major concern identified in the report was scalability, with concerns being raised that the Ethereum network may start to buckle under the weight of its own success. If it doesn’t find ways to use its resources more efficiently, the report warns, the demands on the network may outstrip its resources:

“Ethereum’s blockchain, measured in gigabytes, is growing faster than Bitcoin’s, and its memory requirements have surpassed Bitcoin’s in half the time. Over time, Ethereum’s storage demand, unless changed, will likely outstrip its resources.”

Coming Regulation, Centralisation Raise Concerns

Additional concerns included the potential for Ethereum to be hobbled by regulation as governments around the world look to police the smart-contract and DeFi sectors and Ethereum’s relative centralisation: the top 100 Ethereum addresses currently own 39 percent of Ether (for Bitcoin that figure is just 14 percent).

This report is by no means Morgan Stanley’s first foray into crypto, having last year started offering Bitcoin to some of its wealthier investors and encouraging investors to pay attention to the metaverse, declaring it the next big trend in investing.