Do We Need This Many Layer 1 Blockchains? The Shocking Truth

The cryptocurrency business has witnessed an explosion of Layer 1 (L1) options, every providing distinctive guarantees of scalability, decentralization, and improved consumer expertise. Yet, regardless of the rise in L1 platforms, lots of the similar challenges persist. With the rising reputation of Layer 2 (L2) options that handle these scalability issues, questions come up concerning the worth of regularly launching new L1 blockchains.

BeInCrypto spoke to 3 key blockchain builders—Jack O’Holleran from Skale Labs, Charles Wayn from Galxe, and Matt Katz from Caldera—to unpack this subject. Their insights spotlight the business’s wrestle with scalability, the rise of L2 options, and the fierce competitors amongst each new and established L1 platforms.

The Layer 1 Glut: Solving or Exacerbating Problems?

L1 blockchains kind the muse of decentralized networks, powering decentralized apps (dApps) and protocols. Ethereum, Bitcoin, and a handful of different L1 chains dominate the market. Still, new contenders seem usually, aiming to resolve blockchain’s most persistent challenges.

However, the inflow of recent L1 blockchains raises a crucial query: Do we’d like extra, or are we over-complicating the ecosystem with out delivering actual enchancment?

Jack O’Holleran, co-founder of Skale Labs, believes the L1 market has turn into overcrowded. He argues that whereas many L1 tasks are rising, just a few are gaining significant traction.

“The Layer 1 market has been crowded from a narrative and new token perspective, but a much smaller quantity of chains are actually executing in terms of market traction,” O’Holleran mentioned.

O’Holleran pointed to metrics from CoinGecko, noting that almost all of developer and consumer momentum is consolidating across the high 10 blockchains. Even when a brand new L1 presents a novel answer, O’Holleran emphasizes that it’s not sufficient to ensure success.

(*1*) O’Holleran informed BeInCrytpo.

The competitors within the L1 house has intensified, with new tasks needing to be considerably higher than present ones to make an influence. O’Holleran believes we’re at a degree the place solely the strongest L1s will survive.

A Case for New L1 Blockchains

However, not everybody agrees that the market is oversaturated. Charles Wayn, co-founder of Galxe and Gravity, sees the proliferation of recent L1 chains as an indication of innovation. His firm not too long ago launched its personal L1 answer, Gravity, to handle scalability challenges inside its platform.

“The Layer 1 space has exploded, with many new blockchains entering the market,” Wayn mentioned. According to him, these new L1 blockchains usually are not simply redundant however carry scalability and specialization to the forefront.

“Older blockchains struggle with congestion and high fees, while newer L1s offer better throughput and transaction costs,” Wayn added.

Wayn additionally famous that a few of these rising L1s are incorporating superior applied sciences like Zero-Knowledge Proofs (ZKPs), enhancing privateness and safety. His perspective displays the rising demand for area of interest or specialised L1 chains that handle particular business wants.

Gravity, as an illustration, focuses on cross-chain interactions, offering an omnichain infrastructure that general-purpose blockchains like Ethereum could not handle as effectively. For him, the introduction of recent L1s retains the event ecosystem agile and aware of real-world challenges.

Layer 2 Solutions: The Future of Scalability?

While the controversy over the necessity for brand new L1 blockchains continues, L2 options have turn into a well-liked different. L2 options intention to enhance scalability by constructing on high of present L1 chains, assuaging the necessity for totally new blockchain infrastructures.

Matt Katz, co-founder and CEO of Caldera, advocates for L2 options. His firm’s “rollup-as-a-service” platform helps builders shortly create L2 chains for Ethereum.

“Ultimately, the distinction between an L1 and an L2 primarily involves implementation details and affects the overall architecture of the blockchain,” Katz informed BeInCrypto.

He believes that whereas L1s present the muse, L2 options provide builders extra flexibility with out the overhead of constructing a completely new blockchain. Katz additionally highlighted the interoperability points that many new L1 blockchains face.

“L1 blockchains, in contrast to L2 solutions, lack native, built-in bridges to Ethereum. This absence exacerbates the issue of liquidity fragmentation, introducing significant friction when bridging assets,” he mentioned.

Read extra: Layer 1 vs. Layer 2: What Is the Difference?

In distinction, L2 options profit from built-in bridges that align with the safety mannequin of the chain, making them extra environment friendly and safe. Despite his help for L2 improvement, Katz acknowledged that the inflow of recent L1s can hurt the ecosystem. Too many L1s can result in fragmentation, liquidity points, and elevated competitors, which in flip can stifle innovation.

The Path Forward: L1 or L2?

The blockchain business faces a crucial determination: ought to the main target shift from launching new L1 blockchains to refining present L2 options? Both approaches have their deserves, and it’s clear that no single answer will handle all scalability issues.

O’Holleran argues that the market will naturally filter out weaker L1 chains, leaving solely those who present actual worth. Wayn, then again, believes new L1 blockchains are important for innovation, whereas Katz sees L2 options as a method to streamline the ecosystem.

Read extra: Layer-2 Crypto Projects for 2024: The Top Picks

Ultimately, the trail ahead will rely on how builders and customers stability the necessity for innovation with the need for a extra scalable and interoperable blockchain ecosystem. Whether by way of L1 or L2 options, the purpose stays the identical: to construct a blockchain infrastructure that may help the calls for of a rising digital financial system.