Q1 2021 Layer1 Review: The Scaling Wars Have Arrived

This past quarter was a tale of two stories within the world of Layer-1s.

The first was about Ethereum, which reached new all-time highs, confirmed a launch date for perhaps its most significant upgrade to date (EIP-1559), and increased the total value locked (TVL) in its DeFi sector by almost 200% to around $48 billion. It has solidified itself as the most used blockchain and has plenty of momentum heading into its next stream of upgrades.

The second story was about Ethereum’s challengers. With crypto markets on the rise, the ensuing retail gold rush once again pushed Ethereum to its limits and average transaction fees (in dollar terms) to new heights. Users that couldn’t stomach the rising fees looked outside of Ethereum and found what was once a wasteland, now teeming with early signs of life. The growth of application ecosystems on new Layer-1s like Binance Smart Chain (BSC) and Solana, as well as interchain solutions like Cosmos and Polkadot, accelerated throughout Q1. This trend shows no signs of slowing down.

While Ethereum stands to benefit from the entire Layer-1 sector growing, it also continues to lose market dominance. In Q1, its market dominance dipped to 51% and may fall further as newer, faster chains find their footing, and many others continue to get foolishly priced relative to Ethereum. The next year will be a defining one for Ethereum as developers explore solutions like flash bots and rollups to scale the network. Q1 affirmed that the long-awaited scaling wars have officially arrived.

Ethereum Challengers