“Etherium Killer.” This was a fashionable term for blockchain networks competing to be a legitimate competitor to the most popular smart contract platforms.
The story of the potential Ethereum murderer goes back a few years. However, it wasn’t until 2021 that a legitimate alternative to Ethereum finally came into the limelight, by which time it was given a new name: L1s.
L1 stands for Layer 1. The term layer really came into play, as the “Layer 2” blockchain scaling technology was still mostly speculative when the originally envisioned Ethereum Killer (a class roughly defined by EOS and Cardano) appeared. Was not needed. 1.1. In the years that followed, the rise of Layer 2 spawned a new nomenclature for the base layer blockchain.
Then last year, some emerging L1s finally started to support the label, giving Ethereum a real run for that money.
The catalyst for the change was the surge in demand for DeFi services. In 2021, Ethereum, the network on which DeFi was born, has increased its DeFi protocol total lock value (TVL) from $ 16.1 billion at the beginning of the year to $ 101.4 billion as of November 30. According to Block Research..
However, while Ethereum basically dominated DeFi at the beginning of the year, by the end of last month Defi TVL’s share had dropped to 63%. One reason is that Ethereum transaction fees jumped to record highs earlier this year, and DeFi enthusiasts began looking for cheaper alternatives.
Binance Smart Chain (BSC) was the first to benefit from L1. DeFi traders began to flock to the platform in February, boasting 26% of DeFi TVL by May. BSC usage statistics bounced back in the fall and winter after a dramatic drop in the market downturn and a series of high-priced exploits. Currently, the BSC-based DEX PankcakeSwap is one of the most popular DEX in all blockchain networks.
As BSC gained momentum, other networks followed suit and established native DEX and lending protocols similar to those of the popular Ethereum base.And some L1 projects to invite developers and users to move into their chain Started paying them..
The Avalanche Foundation has put in place by distributing $ 180 million worth of AVAX tokens to liquidity providers for the Avalanche-based DeFi protocol. Since then, at least eight other projects have launched similar incentive programs designed to attract developers.
These incentive programs are paying off. The graph below shows TVL growth across major L1s since July. The metric is normalized to the token price to better understand the amount of capital that has flowed into each system, taking into account the US dollar profit from rising token prices.
Read BlockResearch’s complete 2022 Digital Asset Outlook Report here.
© 2021 The Block Crypto, Inc. all rights reserved. This article is for informational purposes only. It is not intended to be provided or used as legal, tax, investment, financial, or other advice.