Several new Layer 1 blockchains such as Solana, Cardano and BBN Chain have carved their own niche in the rapidly expanding Web3 ecosystem, posing a challenge to the Layer 2 Ethereum blockchain.
Says Pardeep Narwal, blockchain technology expert and founder of New Edge SoftSol Private Limited, an Infrastructure as a Service (IaaS) company, “With the advent of blockchain innovations, many blockchains are much faster and have better scalability than the Ethereum network. This includes Solana, Cardano and Polygon.”
“The new blockchains work on different algorithms and have their own use cases. Besides proof of stake, proof of time and space, proof of location and proof of history have real-world applications,” he adds.
Layer 1 tokens have their own blockchains, while Layer 2 tokens are built on top of Layer 1 blockchains, usually using smart contracts.
According to Anshul Dhir, co-founder and COO of EasyFi Network, a layer-2 DeFi company, “Layer 1 blockchains refer to a base network, similar to a foundation of a building. We refer to them as layer 1 because these are the main networks in their ecosystem. They can validate and complete transactions without the need for another network. It should be noted that different Layer-1 blockchains are designed and optimized for different goals.”
Ethereum’s challengers
Ethereum was the first and most established mainstream blockchain. It was the first to start the first wave of dApps and tokens that heralded the arrival of DeFi and Web3.
Despite its success, Ethereum is not without its flaws. Chainanalysis, a blockchain computing firm, stated in its report titled ‘The Chainalysis State of Web 3’, published in June 2022, that Ethereum can only handle around 15 transactions per second due to its Proof of Work (PoW) consensus mechanism and current transaction processing methodology , compared to 1,500 for non-cryptocurrency solutions such as the Visa network.
Although Ethereum has emerged as the most popular blockchain for Layer 2 project development, the DeFi ecosystem’s transaction speed and scalability have been hampered by the Proof of Work (PoW) mining method.
Ethereum prioritizes security and decentralization over scalability. This results in higher expenses and slower service. The new blockchains are looking to change this situation.
Despite Ethereum’s ongoing success, a number of other projects have emerged as the competitor, notably Solana and Cardano.
“The problems plaguing the Ethereum blockchain are being addressed in a number of ways by Ethereum alternatives. In fact, a large number of Ethereum’s competitors were developed specifically to solve the scalability problem. Ethereum really isn’t going away, but new blockchain cryptocurrencies are becoming more popular and eroding market share from Ethereum, says Darshan Kothari, founder and CEO of Vardhaman Infotech, a technology company.
Some of Ethereum’s competitors include:
Solana: It is one of the upcoming new blockchains that can be considered worthy contenders.
Solana’s PoH mechanism includes time-stamping in the blockchain itself, while other blockchains rely on third-party infrastructure, enabling faster block validation and consequently faster transaction times.
Solana is less secure but more efficient, resulting in fast and affordable transactions.
NFTs are an area where Solana is expanding rapidly. Solana’s low fee structure, on the other hand, has made it much easier for creators to launch new projects. Almost 15 million NFTs have been issued via Metaplex, the Solana NFT standard, compared to just over 1 million on Ethereum.
Cardano: It is an environmentally sustainable alternative to Ethereum, but its technological progress has been slow.
The main difference between Cardano and Ethereum is that Cardano’s consensus mechanism is far more adaptable than Ethereum. Due to its thorough and in-depth development process, Cardano is one of the most secure digital assets. It is affordable and its value can grow as the DApp market grows. On the other hand, Ethereum, with its large market share and the expected improvements in Ethereum 2.0, may also see growth in the long term.
BNB chain: Cryptocurrency exchange Binance has introduced the blockchain BNB Chain, formerly Binance Smart Chain. The chain’s original token is BNB. The BNB chain’s ability to support new tokens and decentralized applications (dApps) without incurring the exorbitant fees associated with Ethereum was a key factor in its rapid growth. In fact, according to DappRadar, which provides a global app store for decentralized applications, BNB Chain has seen growth in Layer 2 projects more than other blockchains.
Tezos: It is a community-managed smart contract-capable blockchain, on which many projects are built.
What’s preventing new blockchains from becoming Ethereum killers?
Many new Layer 1 blockchains have been dubbed “Ethereum killers,” poised to replace the second most popular cryptocurrency, but none have succeeded so far. Ethereum continues to lead in transaction volume, especially in popular Web3 areas such as NFTs.
“The Ethereum blockchain is constantly expanding, leaving a higher hardware footprint on both miners’ and users’ systems. Ethereum, like several other digital currencies, has a lot of potential and a huge market capitalization, which shows that it is a cryptocurrency worth investing in,” says Kothari.
Ethereum’s efficient smart contract is one of several elements that make it one of the most sophisticated blockchains. Moreover, Ethereum continues to be the industry standard for smart contracts and blockchain-based applications.
However, there are clear issues forcing projects to switch to Cardano, Polygon and other blockchains. One of the big challenges is scalability. “All these new rivals have exciting value propositions; but unlike Ethereum, they also need to demonstrate that they can draw a significant enough user base to enable widespread acceptance and success,” adds Kothari.
