This month, we have seen multiple layer-1 blockchains outdoing Ethereum’s performance in terms of price action. Both Solana and Terra have seen price increases of 123% and 179% respectively, whereas Etheruem has increased by 19%. Let’s examine why this has happened, and what it means for the industry overall.
Before exploring this, it helps to understand what exactly layer-1 blockchains are. Essentially, this represents the most foundational layer of a blockchain, with its consensus mechanism—such as proof-of-work or proof-of-stake—as part of the protocol. Bitcoin and Ethereum are the two most popular layer-1 blockchains.
Layer-2 blockchain solutions can then be built on top of the first layer, as an overlaying architecture that’s designed to improve efficiency. Lightning Network is one of the most popular layer-2 solutions.
L1 Blockchains Are Exceeding Ethereum’s Percentage Gains
Layer-1 blockchains have performed exceptionally well this month, with Solana and Terra among the most impressive. Solana’s price moved from $35.69 on August 1 to $82.90 by August 27.
Incidentally, this also marks an all-time high for SOL. There are two reasons for this recent behavior, the first being Solana’s successful sale of its Degenerate Apes NFT series. These are an assortment of NFT collectibles, loosely based around the numerous ape-related memes.
Solana timed the market perfectly with this release, as NFTs have been seeing a resurgence throughout the month of August.
The second reason for SOL’s recent success is the launch of Wormhole, its cross-chain protocol allowing for non-native assets to integrate with the Solana blockchain. The main aim of this project is to help expand Solana’s DeFi ecosystem.
The project supports cross-chain activity among Ethereum, BSC, and Terra–bringing us to our next layer-1 blockchain to see huge gains.
Terra (LUNA) moved from $10.81 on August 1st to $30.24 on August 27th. During that time, it reached an all-time high of $34.51 on August 24th.
Terra’s success is likely due to its recent partnerships and the consistently positive news it’s been experiencing. For starters, Wormhole’s announcement surely helped spike the price. Plus, at the start of the month, Anchor Protocol and Lido partnered to provide wrapped Ethereum on the Terra network.
Terra’s Mirror Protocol—a tool used to reflect real-world asset price such as TSLA or AAPL on blockchains—was recently revealed as a major component in the Wall Street Bets synthetic trading app in early August. Mirror was also listed on Kraken on August 12th.
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Ethereum Alternatives Continue to Gain Traction
Solana and Terra are far from the only layer-1 blockchains to outperform Ethereum in August, but they have largely seen the greatest jumps in value. Others also rose, such as NEAR Protocol by 101%, Cardano by 100%, and Qtum by 64%.
There are several factors behind this. All of these projects have a smaller market cap and are significantly cheaper than Ethereum, which results in increased volatility.
Secondly, Ethereum’s sky-high transaction fees earlier in the year have left a bitter taste in many people’s mouths, which could be a catalyst for crypto users looking for alternatives.
Lastly, perhaps the largest reason these rivals are performing so well is they are rapidly maturing. This might be the first year where other blockchains have gotten sophisticated enough to finally take on Ethereum. For most of its existence, ETH has been unmatched in its performance, breadth, and architecture—but this could eventually change as numerous competitors are getting increasingly refined.
If this trend continues, Ethereum could struggle to keep its top spot as the most established smart-contract ecosystem. Solana, Terra, and many others are gaining traction and improving at an impressive rate.
To catch up to Ethereum however, they still have significant progress to make.
Do you think a rival blockchain will ever surpass Ethereum? If so, which blockchain do you think will do it first? Let us know in the comments below.
About the author
Kai Morris is a crypto and DeFi specialist and researcher. He has a B.A Hons in Law and Philosophy at the University of Essex, where he studied complex economic, legal, and ethical theory relevant to the FinTech landscape. Kai has a particular interest in decentralization and privacy blockchains, as they directly relate to our human rights and flourishing. He cares about blockchain, DAG, and DeFi as a means of positively changing our lived experiences. Kai is an investor in Ethereum and Monero.