What are alternative Layer 1 blockchains?

Token Takeaways ✍

✨ Many blockchains known as “alternative Layer 1” networks offer similar capabilities to Ethereum with smart contracts.

✨ The Layer 1 space saw huge growth as interest in tokens soared in 2021.

✨ While it’s hard to tell which projects will succeed, some alternative Layer 1 blockchains have a good shot if the multi-chain token ecosystem expands.

Ethereum is arguably the most vibrant ecosystem in the token economy, but it’s started to face some hot competition over the past few years. Many newer projects that offer similar use cases to Ethereum have emerged in hopes of taking some of its market share, and some have had huge success. At token.com, we believe that the future will be multi-chain. Though Ethereum is set to play a central role within the token universe, we’re also excited by the potential of some of its challengers. To help the token.com community discover the token world beyond Ethereum, we curated a Collection dedicated specifically to its main rivals. We go deep on it in this feature, explaining why Ethereum has competition, what are the advantages of some of its rivals, and the reasons we’ve selected them for our Collection. 

Ethereum and its rivals 🤺

When Ethereum launched in 2015, it presented a visionary approach to blockchain technology by acting as a platform to support decentralised apps. Unlike Bitcoin, which has primarily been used for exchanging and storing value, Ethereum used smart contracts to run powerful applications. Known today as a “Layer 1” network, it was the first of its kind to embrace the idea of a “decentralised Internet,” a concept popularly known as Web3 today. 

Ethereum quickly found success. It attracted groundbreaking projects such as MakerDAO and Aave, two of the leading protocols operating in the DeFi space. It later established itself as the main hub for NFTs. But while Ethereum has proven to be popular, it’s faced some issues. As there is high demand to use the network, it has faced congestion issues. When many people are trying to access the network at the same time, transaction fees soar. Ethereum is working on solutions including Layer 2 and sharding, but in the meantime, several other networks have built out their own nascent ecosystems catering to the DeFi and NFT markets. 

Solana Monkey Business is one of the most popular Solana NFT collections (Source: OpenSea)

Some of Ethereum’s competitors have established their own communities by offering compatibility with the Ethereum Virtual Machine. In other words, they function in a similar way to Ethereum—but usually have lower transaction fees as they are less crowded. Examples of EVM-compatible Layer 1 networks include Avalanche, BNB Chain, and Fantom. 

Other networks have taken a completely different approach to Ethereum while still supporting innovations like DeFi and NFTs. Solana, for example, uses a mechanism known as Proof of History that allows for high-speed transactions and extremely low fees. Polkadot and Cosmos, meanwhile, offer projects a chance to build their own individual blockchains within one interoperable ecosystem. 

How the Layer 1 space has grown 📈

Although Ethereum is widely regarded as one of the most important networks in the token universe, in recent years other blockchains have started to gain adoption. While Ethereum is likely to be around for a long time, it’s become increasingly clear that it will not be the only network that hosts decentralised applications. 

While Ethereum once held the entirety of the total value locked in the DeFi ecosystem, today it represents closer to 60% of the space. The rest is distributed across other networks such as Solana and Avalanche. 

How the future of the token economy will play out is difficult for anyone to predict, but we believe that we will enter a world in which different networks cater to different use cases. Moreover, while exchanging value, DeFi and NFTs are currently the most popular use cases for tokens today, we think this could change over time as the space grows. 

While Ethereum could be the main home of DeFi, other networks such as Solana could cater to activities such as gaming and decentralised social media due to its high speed, low cost capabilities. Similarly, Polkadot may become known for novel use cases beyond DeFi as it currently supports individual projects that focus on different activities to those typically found on Ethereum. 

Some of Ethereum’s top rivals have seen rapid growth over the past few months following a boom for tokens in 2021. As they have grown, some Ethereum-native applications have taken the steps to embrace “multi-chain” and expand to new networks. Moreover, with emergent concepts such as the Metaverse gaining pace across different platforms, there’s every reason to believe that some of Ethereum’s competitors will have bright futures ahead. 

The Ethereum’s Most Promising Rivals Collection 💫

The Ethereum’s Most Promising Rivals Collection features a small handful of some of the most innovative networks competing with Ethereum today. As these networks are smaller than Ethereum with lower valuations, if they succeed, they could see faster growth than Ethereum itself. 

Our curated Collection features the top three EVM-compatible Ethereum competitors: Avalanche, BNB Chain, and Fantom. Each network has its own identity, though all of them support DeFi (and they typically have much lower fees than Ethereum). 

The Collection also features Cardano and NEAR, two popular Layer 1 networks with their own vibrant ecosystems and communities. 

We’ve also included Polkadot and Cosmos, two networks focused on supporting cross-chain compatibility with one chain at the core. Polkadot and Cosmos are sometimes referred to as “Layer 0” networks and their technology is considered some of the most boundary-pushing in the token universe. 

The Collection also gives a nod to what may be Ethereum’s greatest competitor, Solana. The popular Layer 1 network can process up to 65,000 transactions per second with fees coming in at fractions of a cent, and the Solana community is also one of the strongest in the token universe. We think it will thrive for many years to come. 

Discover more 👀

It’s difficult to imagine a world in which the token economy thrives and Ethereum fails, but just as importantly, it’s difficult to imagine a world in which Ethereum thrives and every other network fails. Now that you’ve learned more about the challenges facing Ethereum and some of its most promising rivals, why not head to our curated Collection and check each of them out for yourself? 

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