As a seasoned crypto investor with over a decade of experience in this ever-evolving digital frontier, I find myself constantly scrutinizing the balance between decentralization and centralization within various blockchain ecosystems. The recent findings by Santiment highlighting the high degree of centralization among top Ethereum-based projects have raised some concerns for me, as a proponent of true decentralization.
The Ethereum (ETH) network has expanded significantly over the years, becoming a significant hub for Web3 applications, with numerous rollups to enhance scalability. This top-notch smart contract network is recognized for addressing the blockchain trilemma effectively through its layer-two scaling approach. Nevertheless, a recent investigation conducted by market research platform Santiment indicates that Ethereum projects continue to exhibit high levels of centralization, particularly from an investor’s perspective.
Top Centralized Projects on the Ethereum Network
As a researcher delving into the world of DeFi and meme coins on the Ethereum network, it’s striking to observe that the decision-making power is largely concentrated among the top 10 investors. Despite many ETH-based projects relying on community Decentralized Autonomous Organizations (DAOs) for governance, these leading investors often have the final say, shaping the direction of investments for the broader community.
At the forefront is Polygon (MATIC), an efficient layer-two scaling solution boasting a total value locked amounting to $890 million and a substantial market capitalization of over $2 billion in stablecoins. Remarkably, the top 10 token holders collectively control approximately 69.4% of the entire supply.
Approximately 50.8% of Uniswap’s (UNI) total token supply is managed by the ten largest token holders within their decentralized exchange platform, which operates primarily on the Ethereum network.
Approximately 61.2% and 46.1% of Shiba Inu (SHIB) and frog-themed Pepe (PEPE) tokens, respectively, are held by the ten largest wallets.
Since Ethereum switched from a proof-of-work consensus mechanism to proof-of-stake, the proportion of Ether held by the top ten wealthiest holders has grown to 44 percent. This significant ownership is primarily due to staking programs like Lido (LDO).
“The concept of ‘Centralization’ has frequently sparked debate and criticism in cryptocurrency circles. Essentially, it involves a centralized control over decision-making within the protocol, a small group owning the majority of coins, or a high concentration of ownership.”
— Santiment (@santimentfeed) August 29, 2024
Market Picture
1. The Ethereum network now boasts over 281 million distinct accounts, yet it’s been surpassed by other initial-layer networks, particularly BNB Chain. The green light for spot Ether Exchange-Traded Funds (ETFs) in the U.S. and Hong Kong has significantly boosted Ethereum’s acceptance among mainstream users, largely due to institutional investors.
Since the approval of spot Ethereum ETFs, there’s been a noticeable downtrend in Ether’s price relative to both Bitcoin and the U.S. dollar. This has fueled the theory that investors might be cashing out following the good news, creating a sell-the-news scenario.
Ethereum is in a bullish trend
Even though Ethereum has experienced a significant drop in price over the last five months, it hasn’t fallen below its realized price it surpassed earlier. Remarkably, this realized price now serves as a supportive foundation for Ethereum.
Historically, altcoin bull markets have started when Ethereum is stronger than its…
— CryptoQuant.com (@cryptoquant_com) August 30, 2024
Despite a bearish trend over the past five months, experts at CryptoQuant remain optimistic about Ethereum’s long-term bullish trajectory.
As a potential reduction in U.S. interest rates is on the horizon before the general elections, the movement of Ethereum prices might spark the long-awaited “altcoin season.”
Furthermore, it appears that Bitcoin’s dominance is shaping up as a large-scale reversal pattern. On a weekly basis, there’s an upward sloping wedge formation, and this trend is contrasted by a bearish divergence seen on the Relative Strength Index (RSI).
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2024-08-30 16:49