As a seasoned observer and participant in the crypto space, I find myself awestruck by the dynamic evolution of these L1 blockchains we’ve been discussing. Over the years, I’ve seen bull markets come and go, and each time, they’ve taught me valuable lessons about the resilience, adaptability, and innovation that drive this industry.
As a researcher delving into the dynamic world of blockchain technology, I am constantly intrigued by the question: Why are Layer 1 blockchains taking center stage during this ongoing bull run, and do they offer more than just speculative value?
Layer 1s hit $2.8 trillion
In the current cryptocurrency market surge, Layer 1 blockchains are taking center stage. As per statistics from CoinGecko, these fundamental systems have witnessed a remarkable increase of approximately 7,000% in value since the beginning of 2024.
This significant event follows closely after the election of Donald Trump, seeming to rekindle excitement within the cryptocurrency sector.
Currently, as of November 29th, the combined market capitalization of layer-1 blockchains surpasses an impressive $2.8 trillion. Among them, Bitcoin (BTC) takes the lead, accounting for approximately 70% of this significant market share. At present, Bitcoin is trading at around $98,300 and reached a new peak of $99,600 on November 22nd.
Ethereum (ETH), often hailed as the backbone of decentralized applications, has also seen significant gains. Up by over 34%, ETH is currently trading at $3,630.
Other platforms similar to L1 are also experiencing a surge in value. For instance, Solana (SOL), often seen as Ethereum’s rival, peaked at an all-time high of $263.83 on November 23, but subsequently dipped slightly to $244, indicating a significant monthly increase of around 40%.
In a surprising turn of events, the price of Cardano (ADA) has soared about 200% in the last month, currently standing at $1.09 in the market.
New systems such as Hedera (HBAR) and Mantra (OM) have demonstrated outstanding results, recording increases of approximately 220% and 138% respectively.
As a researcher, I’ve been astounded by the exceptional growth of Mantra. Since its starting point in January, it has skyrocketed over 6,000%. It reached an impressive high of $4.45 on November 18, but then took a dip by 19.3%, now trading at $3.54.
Conversely, Binance Coin (BNB), another significant Level 1 platform, has trailed its counterparts recently. Even though it’s currently trading at $658, it has only managed a relatively small increase of 10% over the last month, making it a notable laggard during this surge.
Is the increase we’re seeing in blockchain usage and value authentic, representing real growth, or is it largely driven by speculation? Let’s explore this topic further.
Ethereum’s TVL leadership
To truly evaluate the effectiveness of L1 blockchains beyond just looking at their market prices, it’s crucial to take into account the amount of value that is secured within them, often referred to as Total Value Locked (TVL).
Fundamentally, the Total Value Locked (TVL) acts like a gauge, indicating levels of trust and activity within a blockchain network.
- High TVL typically signals robust adoption of DeFi applications such as lending, borrowing, and staking
- Low TVL may indicate diminished usage or waning interest.
As of November 29, Ethereum continues to reign supreme in its domain, holding more than $70 billion in Total Value Locked (TVL). This figure represents a significant 44% surge compared to the $47.5 billion recorded on November 5.
A significant part of Ethereum’s expansion is attributed to Lido, a leading liquid staking service for Ethereum, which currently manages close to $35 billion worth of assets on the network, making up a large portion of its Total Value Locked (TVL).
Staking your ETH in a liquid form gives you the ability to keep your assets staked, all while having access to derivative tokens that allow for continued involvement in DeFi transactions and opportunities.
Solana’s growth trajectory is impressive, as its Total Value Locked (TVL) surged by more than half, reaching approximately $9.17 billion. This figure comes very near to its previous peak of $10 billion, a milestone it last touched in November 2021.
On the other hand, Binance Smart Chain (BSC) has witnessed more moderate increases in growth. Specifically, its Total Value Locked (TVL) rose by approximately 17% during the last month and currently stands at around $5.57 billion.
However, this figure is still significantly lower than its November 2021 peak of over $22 billion.
Currently, the value locked (TVL) on Cardano is at a record peak of around $619 million, significantly surpassing its TVL worth less than $1 million in January 2022, demonstrating a substantial increase over time.
The fee race: Who’s winning?
As a crypto investor, I’ve come to realize that transaction fees on L1 platforms serve as a crucial indicator of their activity, utility, and popularity. These fees signify not just the amount users are prepared to spend for transactions, but also the need for block space and the overall vitality of the ecosystem.
In the years 2020 and 2021, Ethereum was the leading player in the cryptocurrency market, often referred to as a bull run. Its significant earnings from transaction fees underscored its status as the preferred platform for decentralized applications (dApps) and Decentralized Finance (DeFi) projects.
By the end of 2020, Ethereum regularly surpassed $1 million in daily transaction fees, significantly outpacing competitors such as Tron (TRX), which barely reached a few thousand dollars per day. At that point, Binance Smart Chain and Solana hadn’t yet established themselves as significant players in this area.
During the latter half of 2021, Ethereum’s daily fee income typically ranged from 20 million to 50 million US dollars on average.
In comparison, Blockchain Service Consortium (BSC) earned between 3 million and 10 million dollars per day in transaction fees. Tron came next with daily fees ranging from 300,000 to 800,000 dollars. Solana, a newcomer among competitors, generated only around 100,000 to 200,000 dollars per day in transaction fees.
By November 2024, Solana had consistently surpassed Ethereum in terms of daily transaction fees for the entire month. This significant achievement underscores Solana’s rising popularity and expanding network usage.
As of Nov. 28:
- Solana recorded $7.4 million in daily fees.
- Ethereum hovered around $6.19 million.
- Tron came in third with $2 million.
- BSC lagged behind at $680,000.
“The decrease in Ethereum’s fee market dominance might be the most telling change. Despite still being a major player, various elements have led to a decrease in its control over the fee market.
The increasing use of scaling solutions for layers 2 and 3 on Ethereum’s network has significantly reduced the cost of transaction fees. Moreover, a decline in retail investor enthusiasm over the past few months has led to less overall activity.
Originally, the steep costs associated with Ethereum were justified due to its exceptional Decentralized Finance (DeFi) environment. However, today, users opt for cheaper alternatives that provide similar functionality at a significantly reduced price.
The current state of the dApp ecosystem
In essence, the decentralized application (dApp) environment acts as a testing ground, demonstrating the capability of Layer 1 platforms to stimulate user interaction and activity.
By examining the number of transactions and significant participants, we can reveal the driving forces behind these networks and compare their performance (as of November 29th).
Ethereum: Dominating volume, not value
In the realm of Decentralized Finance (DeFi), Ethereum continues to lead with an impressive $175 billion worth of transactions being processed over a total of 4,844 decentralized applications (dApps) in the last month. Notably, Uniswap V3 (UNI) and 1inch are the two platforms that have dominated this activity.
In a standout performance, Uniswap V3 handled an impressive $85 billion in transactions, firmly establishing itself as the pillar for liquidity provision and token exchanges. Simultaneously, 1inch (1INCH) managed to process $11 billion, drawing users in with its streamlined approach to pooling together liquidity from various sources.
It appears that Ethereum remains attractive to institutional investors and wealthy individuals due to its reputation for reliability and abundant market liquidity.
Nevertheless, given that there are approximately 1.76 million active wallets, it’s clear that expensive transaction fees and scalability issues are prompting smaller users to explore second-layer solutions or alternative primary network platforms as viable alternatives.
In essence, while Ethereum continues to cater to large-scale investors, its attractiveness among smaller users is waning due to their preference for less expensive alternatives.
BNB Chain: The retail hub
The BNB Chain has solidified itself as a user-friendly platform, handling transactions totaling $38.2 billion from over 5,500 decentralized applications (dApps).
It’s evident that the BNB Chain is striking a chord with ordinary users, particularly those who value affordability and simplicity, as it now boasts over 2.41 million active wallets, surpassing Ethereum in this regard.
PancakeSwap V2 outshines other performers on the platform, accounting for approximately 29% of the total volume, or about $11 billion. Moreover, BNB Chain handled a staggering 14.73 million transactions in the past month, demonstrating its ability to handle numerous small-value interactions at high frequency.
Even though the numbers are significant, it’s important to note that the typical transaction amount on BNB Chain is much lower compared to Ethereum. This suggests that BNB Chain serves more as a platform for individual traders, rather than large institutional investors.
Additionally, the increased examination by regulators and investigations from government bodies have slowed down Binance’s advancement. In order to regain traction, the BNB Chain may need to entice more significant projects.
Solana: Growing engagement
Over the past month, Solana has been leading in terms of sheer activity, with approximately 113.66 million individual wallets actively using it, as well as a whopping 594.7 million transaction occurrences.
These figures far surpass its competitors in sheer engagement. However, its $8.6 billion transaction volume indicates that the average transaction value remains modest.
The primary source of activity on the Solana network is Pump.fun, an entertaining platform that has accounted for approximately $3.1 billion or 36% of the entire chain’s volume. Given its emphasis on rapid, affordable transactions, Solana serves as a bustling center for experimental and speculative decentralized applications (dApps).
Although Solana has a strong user interaction, its comparatively lower overall transaction volume indicates that it hasn’t yet made significant inroads into high-value DeFi sectors. However, its swift expansion indicates that it is increasingly becoming the preferred choice for speculative and user-friendly decentralized applications favored by retail investors.
Tron: The stablecoin workhorse
Last month, Tron handled a total of $5.45 billion in transactions, originating from 63,660 distinct active wallets, and recorded 953,220 individual transactions. Although these figures are smaller than those of Ethereum and BNB Chain, Tron’s unique strength lies in its focus on niche areas.
Since Tether primarily uses Tron as its chosen blockchain for USDT transactions, it directly reaps advantages from Tether’s substantial daily trading volumes.
Emphasizing stablecoin transactions has kept Tron significant, yet it exposes a possible weakness. If Tron doesn’t expand into fields such as gaming or comprehensive DeFi uses, there’s a risk that it could be categorized solely as the “stablecoin network.
Cardano: Slowly finding its feet
The fledgling dApp ecosystem of Cardano is starting to exhibit potential, although it’s still in its early stages. To date, it has only around 60 decentralized applications (dApps), yet in the last month, they managed a transaction volume of approximately $29 million from about 40,250 distinct active digital wallets.
Even though the figures may appear small when compared to similar platforms, they signify significant advancement in a blockchain that’s frequently been under fire for its slow growth in innovation. The emphasis Cardano places on safety and environmental friendliness might entice developers and users in the long run.
As a researcher, I acknowledge that while there’s significant progress, my project still lags behind established platforms such as Ethereum, BNB Chain, and Solana in terms of competency. To ensure future success, it’s crucial for us to prioritize expanding our decentralized application (dApp) ecosystem and remain adaptable to the dynamic market demands.
The road ahead
In this ongoing bull market, L1 blockchains are receiving increased attention, showcasing not only their advantages but also potential weaknesses.
The leading role of Ethereum in significant transactions, the consumer-focused actions of Solana, the user-friendly nature of BNB Chain, Tron’s focus on stablecoins, and Cardano’s steady advancements jointly depict an ever-changing and vibrant ecosystem.
The direction ahead depends significantly on how these platforms address crucial hurdles. Maintaining scalability is one of the major concerns, along with drawing and keeping developers, all while navigating increasing competition.
In the ongoing trend of rising prices and increasing popularity, the real challenge for L1s (Layer 1 blockchains) is maintaining this forward progress. Demonstrating their value outside of speculative market fluctuations will play a pivotal role in securing their position within the cryptocurrency realm.
Is it possible that this recent surge in cryptocurrency (bull run) could mark a significant period of transformation or just another twist in crypto’s rollercoaster ride? It all depends on how these digital platforms evolve to cater to the expanding global user base. The scene is now set, but the narrative still remains to be penned down.
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2024-12-01 19:45