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Galaxy Digital Foresees Unprecedented Challenges for Ethereum in 2024 Amid Growing Layer-1 Competition

In its “Watch This Space” report, Galaxy Digital, the crypto bank led by Mike Novogratz, asserts that Ethereum is heading into uncharted territory, facing “unprecedented challenges” in 2024 due to the rise of alternative layer-1 networks, notably Solana.

While recognizing Ethereum’s commitment to supporting layer-2 networks and adopting technologies like restaking, the report acknowledges the emergence of competing networks such as Celestia. These alternatives promise a high degree of flexibility to meet diverse user needs related to privacy, cost, security, and compliance.

Galaxy Digital analysts emphasize the importance of closely monitoring the intensified competition and differentiation between Solana, Ethereum, and modular blockchains like Celestia in the coming year.

The report singles out Solana as the most distinct general-purpose blockchain that embraces a monolithic architecture, positioning it as the primary competitor against Ethereum. Galaxy Digital anticipates heightened competition in 2024 and notes that Ethereum’s modular architecture, specifically various rollup types, will introduce new challenges and technological risks due to their early stage of development.

Galaxy Digital also points out that Ethereum’s validator system, which secures the network, has limits on how many validators can join or leave the network within a specific time period (epoch). As Ethereum experiences growth, the limit for validator entries and exits has increased. Looking ahead, the report suggests that Ethereum developers may need to consider “drastic changes” to staking dynamics and monetary policy in 2024 if the network undergoes a surge in usage, leading to increased transactions and staking demand.

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