Editor's Note: This article discusses the current state and challenges in the blockchain field: L1s (such as Cosmos) that have failed to adapt to innovation are facing serious difficulties, while emerging L1s (such as Sui, Sei, and Aptos) have gained some attention in the short term but still need to continuously innovate to establish a foothold in the long run. At the same time, the new L2s are similar to the past L1s, lacking differentiation and innovation, and facing survival pressure. Although some diversification trends are beginning to emerge in the market, overall, Ethereum has not won the L1 war. Instead, alternative L1s and L2s are striving to create their own new future.
The original content is as follows (edited for easier reading):
Has Ethereum Won the L1 War?
If you ask me this question now, my answer is clearly negative, which is also an important reason for the stagnation of the $ETH price. However, during the bear market, the view of ETH as the "L1 winner" was widely circulated.
We all know that the bull market will eventually come, so many people have sold their other L1 assets and increased their holdings in the two assets we believe will not disappear: BTC and ETH.
All other L1 assets are believed to disappear for the following two reasons:
First, other L1s compete for the same yield-seeking investors by offering liquidity mining rewards, using protocols that are essentially the same as Aave and Uniswap V2. Apart from Ethereum, there is almost no innovation at the application layer.
Avalanche, BNB Chain, Polygon... are all about the same, the only differences being:
1. Lower transaction fees
2. Faster speed
3. Brand image
4. The amount of liquidity mining reward tokens they can provide
Secondly, with the rise of L2s such as Optimism and Arbitrum, a new narrative for Ethereum is gradually taking shape, as these L2s promise scalability without compromising security. During the bear market, they have performed quite well, while other L1s have continued to lose total locked value (TVL) and users.
Solana has been a huge blow to Ethereum maximalists.
Although SOL suffered a heavy blow due to the FTX collapse, it not only successfully recovered, but also broke the illusion that Ethereum's aggregation method is the only viable scaling solution. As more and more L2s come online, the problem of fragmentation of liquidity and user experience becomes more and more serious. With each new L2 launch, Solana's monolithic structure approach becomes more appealing.
The emergence of the debate between modularity and monolithic structure has ended the narrative of "Ethereum winning the L1 war". Those investors who increased their ETH holdings during the bear market are now continuing to sell ETH to buy SOL and other L1s.
Other L1s are also innovating, with clearer and richer visions today than a few years ago.
Avalanche: Just launched Avax9000, allowing permissionless L1 (not L2) deployment based on application needs.
Compared to Ethereum L2s, Avalanche's L1 benefits from unified cross-chain communication. Furthermore, the value accrual to Avalanche's mainchain is more explicit. Avalanche's biggest win is the "Off the Grid" game, which demonstrates that its vision is being realized. This can also revive the past GameFi narrative.
Near: Establishing its position as a monolithic and modular blockchain, Near also provides chain abstraction for L2s through a unified user interface (BOS), supporting L2 account aggregation, and has implemented the sharding technology that Ethereum abandoned.
BNB Chain: Launched opBNB L2 to reduce fees, but the more important upgrade is BNB Greenfield, focusing on DataFi to monetize data and intellectual property, as well as decentralized AI (LLM training under privacy protection).
Fantom: Further strengthens its monolithic design through the Sonic upgrade, aiming to achieve 2000 TPS without sharding or L2, with the goal of attracting the next generation of decentralized applications (dApps).
Gnosis: Building the financial dApps I use daily.
L1s that have failed to innovate and adapt are facing difficulties, the most obvious example being Cosmos. Once a pioneer of modular blockchains, it is now losing users, liquidity, and market attention, with the trading price of $ATOM falling back to pre-2020/21 bull market levels.
Meanwhile, emerging L1s like Sui, Sei, and Aptos are still relying on the old "new shiny L1" strategy, and although they have gained some attention in the short term, they must innovate and differentiate themselves to thrive in the long run.
The new L2s today are similar to the past L1s, with almost no transaction fees and little difference beyond their branding. They have attracted some forked protocols for airdrops, but lack true innovation. As the airdrop fever subsides and total locked value (TVL) declines, L2s must diversify and attract unique decentralized applications (dApps) to survive, and their token economic models are also relatively poor.
Projects that cannot adapt to market changes may be eliminated, just as some EVM chains that emerged during the 2020 DeFi summer.
Nevertheless, there are signs of diversification in the market: L2 interoperability alliances (such as OP Superchain, zkSync Elastic Chain, etc.) are developing, and Base is also benefiting from Coinbase, with zkSync even investing millions of dollars to attract unique dApps.
Overall, Ethereum has not won the L1 war, and the value accrual of all L2s is still unclear. However, this is a good thing for the entire industry. Even if Ethereum faces challenges, alternative L1s are still working to build their own future and provide use cases that Ethereum may not be suitable for.
And now, it is time for L2s to prove their worth.
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