No more L1 from now on.
In the blockchain market, many Layer1 chains have emerged, each claiming superior speed and advancements over existing blockchains. However, most have not found success. The only ones that seem to have somewhat thrived are BNB Smart Chain and Polygon. I believe their survival is attributed to finding niche sectors. BNB, commonly used in blockchain gaming, became a go-to for new games seeking investment. Polygon, alternatively, became a popular secondary choice due to the high costs associated with the Ethereum blockchain. Solana also drew attention, especially for its rapid NFT transactions. Yet, most other initial Layer1 chains have since diminished, with even these three not performing exceptionally. Currently, Ethereum dominates, with 92% of NFT transactions occurring on its network in a 24-hour period.
Over the past few years, the Layer1 wars have concluded with Ethereum as the apparent victor, leading to the onset of the Layer2 wars, as many have predicted. This belief is gaining traction. While new Layer1 chains still emerge with reports of funding and coin sales, their likelihood of success seems negligible. Addressing the blockchain trilemma within a single chain is daunting, and it's considered too late to achieve success in both Layer1 and Layer2. The Ethereum-based Layer2 war, already several years in, is expected to intensify around 2024-2025 with the arrival of numerous ZK-Rollup chains. This period will likely see many new and existing small-sector Layer1 chains lose ground to Layer2. Some projects initially chose alternative Layer1 chains over Ethereum due to transaction costs and active support from these chains.
When launching a project like "A," you meet with various blockchains' marketing teams. Some offer connections to venture capital and community pools to showcase your project, while Ethereum offers none of these, attracting self-sustaining projects. Ethereum's larger network share made it a natural choice for projects like Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), and Blur Marketplace. Despite recent market slowdowns, 92% of NFT transactions still occur on Ethereum, with no killer apps emerging from other Layer1 chains. Now, the focus shifts to Layer2 chains, which will likely promote their coins to attract projects, mirroring the strategies of Layer1 chains. New L2 coins might have an edge due to their greater price elasticity and growth potential. Usability will be key for L2 coins, but those with it are poised to capture a significant market share from existing L1 chains. Without significant innovation, new Layer1 chains risk being redundant.
The emergence of various competitors in the nascent market is positive. However, many have had poor track records. EOS, initially promising scalability solutions, is now irrelevant. Terra, which offered guaranteed returns, has faded from prominence. Solana, closely tied with FTX, suffered significant setbacks. The market capitalizations of these struggling chains are surprisingly high: EOS at nearly 1 trillion won, Terra at 600 billion, and Solana at 3.3 trillion won. The top-ranking coins by market capitalization are still dominated by L1 coins, making them attractive targets for quick-profit schemes.
Apart from Solana, BNB, and Polygon, infrastructure support for non-EVM chains is scarce. When developing blockchain applications, you often rely on node services like Alchemy or Infura for transaction, NFT, or token information, which primarily support EVM chains. The support for L2 chains from these node services will outpace that for non-EVM L1 chains, influencing the developer community. It's simpler to resolve development issues on EVM-based blockchains due to the abundance of online solutions. From a developer's viewpoint, L2 chains offer more lucrative opportunities, easier access to infrastructure, simpler development processes, and readily available solutions. Additionally, there's a movement to enhance the Ethereum network's security foundation, increase Ethereum stakers' privileges, and build various infrastructure services atop it. Therefore, I foresee limited future opportunities for other L1 chains.
Image source: Generated through OpenAI's DALL·E.
