This is the time of year when Bitcoin and Layer-1 coins seem to have remained in a seemingly endless range. However, other cryptos are rallying. Although the crypto market closed 2021 with significant profits, it didn’t bring in the same kind of boom that everyone expected.
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Arcane Research saw significant growth in Layer-1 currencies, like Fantom (FTM) and Avalanche(AVAX), as a result a full adoption of 2021. These cryptocurrencies rallied more than 15x to Ethereum (ETH) in a fraction of their market share.
Arcane Research claims decentralized financial services (DeFi), NFTs, and increased transaction fees for the Ethereum network are all growing in popularity. The latter phenomenon started in 2020 with the “Summer of DeFi”, the period that saw the biggest boom in DeFi users leading to an increase in network usage.
NFTs have facilitated this issue by allowing layer-1 coins like Binance Smartchain (BSC), Solana, and other to be onboard users who were not priced in Ethereum. Fantom as well as Avalanche are experiencing the same thing. Arcane Research stated the following:
These charts illustrate that the higher the value of a protocol the more users it has. The hypothesis of a multiyear bear lurking in altcoins has to be questioned.
These layer-1 coins may experience an explosive rise in demand. This could be similar to cryptocurrencies which have experienced a temporary boost but then saw their user base decline. Users could also form communities or become contributors to their growth. The implementation of Ethereum’s second level scaling solution could pose a risk to these projects.
The Layer-1 Cryptos are supporting a multi-channel industry
Separate reportDelphi Digital reports a significant growth in layer-1 projects over 2021. Terra (LUNA), a scalability tool for Ethereum, was most prominent of these terms.
Terra had a 356x increase in total value lock, while Polygon recorded a 17,100x improvement in its TVL. Below, Fantom & Avalanche were among the top 10 Blockchains according to TVL. However, this was a lesser increase than the previously mentioned cryptocurrencies.
In spite of its congestion problems and high transaction fees Ethereum was the most popular network by TVL for 2021. It also retained its dominant position, at least for now. It’s interesting to note that Multichain and Lido Finance, according Delphi Digital, are the two largest protocols by TVL. They have cross-chain and interoperable capabilities.
As users seek a cheaper ecosystem and cross-chain capabilities, this could indicate that Ethereum and layer-1 will be in equal company.
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ETH traded at $3811, with a 1% decline in the previous day.
