Aug 13, 2023 5 min read

Can Shimmer Compete?

The Iota Foundation is launching a new EVM chain into the crypto market. But, is it too late?

The market is saturated.

There are 184 live alt-chains. Shimmer EVM is currently aiming to be the 185th. But, to be fair, most of their competitors are complete non-entities. The total value locked of Ethereum, Tron, Binance Smart Chain, and Arbitrum is 85% of the entire industry. Of the four, Arbitrum is the only one launched in the last four years. And it is a Layer 2 for Ethereum that pays gas in ETH.

That’s some really entrenched competition.

When we examine the success of these industry leaders, we come across three primary factors that we can point to for their success: security, accessibility, and integrations. To see if Shimmer has a fighting chance, we will compare Shimmer’s proposed performance across the metrics with a couple of its competitors. Specifically, BSC and Arbitrum. Two fundamentally different products with whom Shimmer will be directly competing.

It is quite difficult to compare existing projects with one that has not yet launched, but we will give it a go.

Security

Arbitrum performs very well here. It relies on Ethereum’s robust validator network and utilizes zk-rollup technology to secure communication between the two. This is a strong narrative, as Ethereum has a battle-tested history to back up its claims of security.

However, Arbitrum has one security weak point, its DAO. The Arbitrum DAO experienced intense backlash over its first proposal, which distributed tokens to itself. It disregarded the results of its own vote. Not a good sign for a project that claims to be decentralized.

BSC, on the other hand, secures itself using a system they call ‘Proof of Authority’. Basically, not just anyone can become a validator. They must meet specific requirements and be elected to begin producing blocks. Elections are decided by the amount of BNB (the chain’s native token) delegated to each validator. The purpose of this is to ensure there are no malicious validators manipulating the processing of transactions.

On paper, that sounds pretty good. But when you look at the wallets which hold the most BNB, you quickly find that Binance owns 71% of the total BNB in existence. This effectively means Binance controls the validators. This is fine if you trust Binance. But the company has been hit with numerous lawsuits in the last year, which call into question the legitimacy of their business.

Shimmer is unique and almost completely different from Arbitrum and BSC. The Shimmer EVM acts more like a platform for other projects to build their own chain. So, the selection of validators is defined by the chain creator. So security can be variable from chain to chain. Because of Shimmer’s unique validation process, there is some risk involved. The chain has not been stress tested on the open market and so it is impossible to say what unknown vulnerabilities may manifest.

Shimmer also has a DAO, which is very fairly decentralized. Proposals can be made by the community and voted on. But where Shimmer really shines is its distribution of the voting token, SMR. The token was airdropped to stakers of the Iota token. This guaranteed the token was distributed to users committed to the development of the chain. However, a third of all shimmer tokens are concentrated in 26 addresses. This implies few wallets will have a meaningful say in governance. Still, this is better than the BNB chain, which has no DAO. Shimmer governance is live and unlike Arbitrum, their Foundation has not overruled the community vote.

Accessibility

Arbitrum isn’t too difficult to access, although there are some steps involved. Many users onboard to Ethereum, and there is a bridge that seamlessly connects ETH to Arbitrum. It is still a bit of a pain to get there, but it's nothing too complicated for the average DeFi user to figure out. Arbitrum is also accessible from most alt chains thanks to the many bridge aggregators that have integrated the network.

I consider the efficiency of a network to be part of its accessibility and Arbitrum is very good at being efficient. Transactions settle faster, cost less gas, and they can process more of them than Ethereum.

BNB chain is by far the easiest to access. Many users onboard through Binance and can directly access the chain from that platform. Like Arbitrum, there are many bridges to BSC so native crypto users can easily access the chain.

The speed of transactions on Binance is many orders of magnitude less than Arbitrum. Arbitrum can process 40,000 transactions per second, while BNB can only do 2,200. This is still faster than Ethereum. BNB also has relatively low gas costs.

Shimmer EVM is, again, kind of weird. Currently, Shimmer’s token can only be purchased on two exchanges, Bitfinex and Bitforex. From there, users must send the SMR directly to Shimmer’s custom wallet, Firefly. Alternatively, users can buy the Iota token on Binance and bridge it BNB chain and then swap it for SMR on iotabee.com. This is kind of a process and much more work than the other options. Still, the EVM is not live, so this process may become easier on launch.

Shimmer is quite fast and efficient. Its unique DAG structure is much faster than its competitors. During Shimmer’s testnet campaign, they averaged 1.83M transactions a day with a block time of 0.7-0.8 seconds. This puts it mostly in line with Arbitrum, but the Shimmer block time was about double the amount of time.

Integrations

Arbitrum and BSC are both very much integrated into the crypto economy. Arbitrum has a very popular derivatives platform which has drawn many users to the chain. Arbitrum has also seen an explosion of DeFi projects over the last year, drawn as they are to the security of Ethereum with the speed of an alt chain.

BSC has many more projects integrated into its chain. With over 600 projects, BSC is second only to Ethereum. However, most of these projects are not very popular. The chain has a notorious reputation for rug pulls and scam tokens. Still, there is a thriving DeFi community.

Shimmer’s integrations are largely an unknown quantity as the chain is not yet live. Touchpoint is a community organized to facilitate collaboration between developers with the support of the Shimmer Foundation. The Touchpoint program has ensured that the EVM will launch various projects. There are 101 projects in the program and they run the gamut of crypto protocols. From Bridges to Gaming to DeFi and DAOs, there is a rich ecosystem ready to launch alongside the EVM. The challenge will, of course, be to capture users from other chains, but the existing Shimmer community ensures that there will be a user base of at least 200k wallets. Indeed, one of the strongest arguments for Shimmer’s success is its eager user base, who have been eagerly awaiting the launch of the EVM.

Conclusion

Shimmer is a little late to the scene. Old incumbents dominant in all metrics of success. The last wave of euphoria for alt chains died at the end of DeFi summer. Layer 2’s have dominated the narrative for the entirety of this year. Still, Shimmer has a strong technical foundation with a unique value proposition.

It seems unlikely that Shimmer will crack the top 10 active chains upon the launch of EVM, but it is not impossible. DeFi winter has been long and brutal. Users are hungry for an opportunity to present itself. Shimmer’s EVM may very well be that opportunity if it can capture the attention of jaded users.