The rise of decentralized finance and non-fungible tokens has transformed the blockchain ecosystem, generating near-unimaginable wealth for investors, but none of this would be possible without the strong foundation that layer-one blockchain networks like Bitcoin and Ethereum provide.
Smart contracts and Layer Two protocols promise to revolutionize the finance and logistics industries, but they require a robust, secure, and distributed network to operate on and ensure their immutability.
Currently, most of the top Layer 2 projects are working on the Ethereum network, which has resulted in increased transaction costs and delayed confirmation times due to network congestion.
The network’s recent London hard fork attracted a lot of attention due to the implementation of a fee-burning mechanism that could eventually turn Ether (ETH) into a deflationary asset, but it did little to solve the problem of high transaction costs and average transaction costs has actually increased since its inception.
Due to high fees and limited scalability, competing Layer-One protocols like Avalanche, Terra and Cardano have appreciated in value in recent months and attracted new users as popular projects connect their ecosystems to these next-generation blockchain protocols.
The avalanche rush
One of the biggest price winners in August was AVAX, the native token of the Avalanche protocol.
Enthusiasm for the project began to rise after the Avalanche Bridge was released on July 29th. The bridge supports a new cross-chain bridging between the Avalanche and Ethereum networks, and the product’s ease of use opened the gates for new users to the burgeoning avalanche ecosystem.
As of Aug. 24, the bridge has processed more than $ 1 billion worth of transfers between the two networks, and plans to list new assets and stablecoins like USD Coin (USDC) in the near future.
The #Avalanche Bridge (AB) has transferred nearly 1 billion Ethereum assets since its inception on July 29th.
$ USDC is now available to send to AB! https://t.co/UAY69mBjpo pic.twitter.com/z5FgpZvQ2U
– Avalanche (@avalancheavax) August 24, 2021
The protocol has also partnered with blue-chip distributed finance (DeFi) projects like Aave, Curve and SushiSwap for the “Avalanche Rush DeFi Incentive Program,” a $ 180 million liquidity mining program that has more applications and to bring assets into its growth DeFi ecosystem.
Funds for the program will be used to provide AVAX Rewards as an incentive to run out of liquidity for Aave, Curve and SushiSwap users over a three month period.
Avalanche’s proprietary DeFi protocols have also seen a dramatic increase in the overall value of their platforms. Pangolin leads with a Total Value Locked (TVL) of $ 379.4 million, and Benqui has already passed the TVL mark of $ 1 billion, according to Defi Llama.
Avalanche also has a transaction-burning mechanism in place, which at the time of writing has burned more than 182,000 AVAX.
A layer one with a stablecoin focus
Terra is a unique blockchain protocol as it has a broad focus on the network’s use of fiat-linked stablecoins such as TerraUSD (UST) to operate price-stable global payment systems.
The protocol’s native LUNA token saw its price jump 530% between July 20 and August 24, as a unique token-burning mechanism and ongoing community vote to update the network put pressure on the value of the token.
On August 25th, the Terra community successfully voted to migrate the Terra network to the Columbus-5 mainnet and is expected to fully launch on September 9th.
1 / The on-chain proposal to migrate the Terra network to the Columbus 5 mainnet was officially accepted, with 99.99% of the votes signaling “yes”. https://t.co/22CS19RbLV
– Terra (UST) Powered by LUNA (@terra_money) August 25, 2021
The Terra ecosystem has grown steadily over the course of the year as established projects such as Curve and Yearn.finance integrate UST into their stablecoin pools and new projects starting on the Terra blockchain also benefit from its stablecoin payment options.
Terra ecosystem. Source: Terrier
One of the network’s most popular uses is the Anchor Protocol, a savings protocol that offers UST holders low volatility returns on deposits while LUNA holders can lock their tokens as collateral for stablecoins on loan.
The platform helped increase network activity and tokens connected to the ecosystem after adding Ether as a security option for UST minting on Aug. 13.
Since the introduction of ether as security for the Terra ecosystem, the total value of the protocol has risen to over $ 6 billion, according to Defi Llama.
This makes Terra TVL’s third largest blockchain network behind Ethereum and Binance Smart Chain.
Related: The arrival of stablecoins and the future of financial inclusion
Cardano investors expect the network’s smart contracts to be rolled out
Another project that has gained momentum thanks to the promise of smart contract functionality is Cardano, a proof-of-stake blockchain protocol.
The introduction of smart contracts has resulted in Cardano’s ADA token increasing more than 190% in the past three weeks, and investors are excited to see DeFi applications launch as soon as the smart contracts are activated.
The network and token have also benefited from high participation in staking pools, and the latest data from PoolTool shows that 70.98% of the circulating ADA supply is staked on the network.
The protocol has also developed a non-fungible token (NFT) maker that allows users to mint NFTs without the need for smart contracts through the creation of “native tokens”.
Discover native tokens
Find out more in the developer portal about:
What are native tokens?
how to shape them
Ways to create NFTs
why you don’t need smart contracts for all of this
➡ https://t.co/9AkCXrjxX9#CardanoCommunity #Cardano #blockchain pic.twitter.com/Oglcg1jTAJ
– Cardano Foundation (@CardanoStiftung) July 22, 2021
DeFi and NFTs have been the biggest attention-grabbers in the crypto ecosystem this year, so the ability to run both on the Cardano network may have contributed to ADA’s current rally.
As blockchain technology and the cryptocurrency ecosystem continue on the slow path to mass adoption, the field of competing networks is expected to intensify.
Ethereum is currently the top layer one blockchain network in terms of smart contract functions and active protocols, but needs to evolve as a handful of competitors are rapidly gaining ground.
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