Ethereum’s market cap dominance is increasing due to 3 reasons.

Ethereum has been the leading network for smart contracts and decentralized applications (Dapps) since its inception. An analysis based on Ether’s price (ETH) and its market capitalization shows strong evidence that the blockchain has been gaining market share over time.

As shown above, Ether’s market capitalization dominance has grown over the past couple of years, from an average of 18% in July 2021 to the current 20%. Excluding Bitcoin (BTC) from the analysis, Ether’s market share currently stands at 40.6%, while the next competitor, BNB, holds a 7.2% share.

This demonstrates the contrast between the leading Dapp-focused network and the incumbents, which is also evident when analyzing the total value locked (TVL) on each network’s smart contracts. Ethereum is the clear leader with $24.6 billion in TVL, followed by Tron’s $5.4 billion and BNB Chain’s $3.3 billion.

The chart above shows the Ethereum network’s TVL market share declining from 70.5% in June 2021 to 49.5% in May 2022. During this time, Terra and Avalanche gained a combined 20% market share in smart contract deposits. However, after the Terra-Luna ecosystem collapse in May 2022, which resulted in developers halting network activity, Ethereum quickly regained a 58% market share.

Despite the emergence of Dapps on the BNB and Tron blockchains, Ethereum’s leadership has remained unquestioned over the past 12 months. This data shows the irrelevance of the total number of unique active wallets interacting with smart contracts (UAW) per chain.

For instance, according to DappRadar, WAX has 363,600 active users, followed by BNB Chain’s 517,300 30-day UAW. These figures are much higher than the Ethereum network’s 66,300 unique active addresses, but they reflect a much lower transaction fee, opening room for manipulation.

Decentralization matters, and Ethereum stands out among its competitors

Ethereum has the highest number of active developers, surpassing 1,870, which is more than the next three competitors combined: Polkadot (752), Cosmos (511), and Solana (383).

Currently, the Ethereum network has over 700,000 validators, with 99% of the balances locked in staking participating in the process. The 32 ETH threshold limit per validator undoubtedly inflates this number, but Lido, the largest known staking pool, controls 32% of the staking, with Coinbase coming in second with 9.6%.

Therefore, it is safe to say that Ethereum is far less centralized in terms of development and validation compared to Tron, BNB Chain, and Solana.

Other reasons why Ether’s dominance has been on the rise, even as Bitcoin reached a 50% market share on June 19, are derivatives activity and Ethereum’s dominance of the NFT market.

Derivatives markets are essential to institutional investors

Ether’s futures contracts are crucial for institutional trading practices like hedging and trading with leverage. Ether’s cash-settled futures were added to the Chicago Mercantile Exchange in February 2021. To date, no other cryptocurrency, apart from Bitcoin, has ever reached the world’s largest derivatives exchange.

In futures markets, longs and shorts are balanced at all times, but having a larger number of active contracts — open interest — allows the participation of institutional investors who require a minimum market size. Ether futures aggregated open interest stands at $5.4 billion, while competitors BNB hold $380 million and Solana a mere $178 million.

Ethereum is still the market leader in NFTs

Nonfungible tokens (NFT) are a perfect example of how cheaper and faster transactions do not always translate to increased adoption. There’s nothing stopping NFT projects from shifting between blockchains, whether for new listings or existing collections. In fact, y00ts and DeGods moved to Polygon earlier in 2023.

Despite the fact that gas fees, which often exceed $10, remain a challenge, Ethereum is still the clear leader in terms of the number of buyers and total sales. According to CryptoSlam!, the leading network achieved $380 million in sales in the last 30 days, while Solana, Polygon, and BNB Chain combined for a total of $93 million.

In the end, the data is in favor of Ethereum compared to other smart contract-focused blockchains. Ether’s dominance trend may weaken over time if the promised upgrade to allow for parallel processing (sharding) does not materialize, but for now, Ether’s 20% market capitalization share remains unchallenged.