How will the new public chain and Ethereum evolve in 2022?

In 2021, DeFi is growing at an unprecedented rate, with DEX trading volume tripling and total value locked (TVL) quadrupling. As Ethereum transaction fees soared, the rise of L1, a new public chain with faster transaction speeds and cheaper fees, caused Ethereum’s market share to drop by more than a third in a year. Crypto users are attracted by a vibrant new public chain ecosystem and cheap fees, especially EVM-compatible public chains. For example, in the past year, BSC’s TVL has grown from $62 million to $21 billion, an increase of 31,000%. As new public chains gain development opportunities, Ethereum L2 scaling solutions are released, and Ethereum 2.0 is approaching, the importance, complexity and interoperability of cross-chains will continue to increase.

The formation of a multi-chain world

How will the new public chain and Ethereum evolve in 2022?

Ethereum has been a huge success over the past year (total fee revenue far exceeds Bitcoin ). According to data on January 18, 2022, Ethereum’s daily fee income is $46.3 million, while Bitcoin’s daily fee income is only $380,000. Looking at the number of transactions, the Ethereum network has a daily transaction volume of about 1.28 million, which is 4 times that of the Bitcoin network, which reflects the amazing growth of Ethereum in the past year – at the end of 2020, Bitcoin’s revenue was about 2x that of Ethereum; since then, Ethereum revenue has grown by more than 50x, while Bitcoin’s daily revenue has fallen by 66%.

How will the new public chain and Ethereum evolve in 2022?

Although Bitcoin remains the undisputed leader in the cryptocurrency industry. However, market interest and demand for smart contract-driven decentralized applications is clearly stronger than store of value demand, with applications such as DeFi, NFTs, and GameFi all driving Ethereum’s growth. However, this direct demand has also greatly raised the Ethereum block space premium, resulting in a substantial increase in the fees paid by users. The average fee reached a record high of $68.72 in May last year – this is still the simplest token. Transferring the average cost, if doing complex interactions, such as smart contracts that power DeFi protocols, the fee costs can be much higher.

Ethereum’s high transaction costs have led many users to look for cheaper alternatives. In early 2021, TVL on applications on the Ethereum blockchain accounted for 98.2% of DeFi protocols. Currently, that figure has dropped to 67%. The biggest winners are BSC, Solana, Terra , Avalanche, Fantom and Polygon.

Growth of L1 public chain addresses

How will the new public chain and Ethereum evolve in 2022?

Ethereum: The number of daily active addresses on January 1, 2021 was 426,000, with a peak of 800,000 in May, currently about 558,000, and a TVL of $153 billion.

How will the new public chain and Ethereum evolve in 2022?

BSC: The number of daily active addresses on January 1, 2021 was 49,500, the peak reached 1.624 million in mid-October, and is currently about 1.313 million, with a TVL of $19.07 billion.

How will the new public chain and Ethereum evolve in 2022?

POLYGON: The number of daily live addresses on January 1, 2021 was 759, the peak in October was 566,000, and the current value is 367,000, with a TVL of $4.59 billion.

How will the new public chain and Ethereum evolve in 2022?

AVALANCHE: The number of daily live addresses on January 1, 2021 is 22, currently reaching 67,000, and the TVL is $8.2 billion.

Compared with Ethereum, these new public chains have their own advantages. However, there is no perfect solution for the impossible triangle of the blockchain for the time being, that is to say, it is impossible to take into account speed, security and decentralization at the same time. The PoW mechanism of about 2,500 mainnet nodes in Ethereum performing intensive network security protection makes the attack cost of hackers extremely high, ensuring security and decentralization, but at the expense of speed, which is manifested in limited transaction throughput and high transaction costs.

BSC employs a consensus mechanism of 21 trusted PoSA validators, which greatly increases speed and reduces transaction fees at the expense of decentralization. The disadvantage of this mechanism is decentralization and weak security. For example, in September last year, Solana, which has a similar consensus mechanism, suffered a DDoS attack and was down for more than 18 hours. Nonetheless, since most retail investors cannot afford the tens or even hundreds of dollars in fees on Ethereum, new public chains that support cheap and fast transactions have still become an alternative for many retail investors. Although there are many debates about the design and advantages of each public chain, the current vigorous development of multiple public chains shows that as long as there is a demand for projects in the market, they may occupy a place in the future.

Users who value decentralization and security insist on paying the necessary high fees for transactions, while users who are more sensitive to transaction speed and fees will choose to embrace the new public chain. In 2021, although Ethereum’s dominance in DeFi has declined significantly, its fee income and TVL are still growing significantly, which is a positive sign for the health of the industry, as the rise of new public chains will promote the public chain industry to continue. Innovation.

After June 2022, Ethereum will switch to a PoS mechanism, but according to the team’s roadmap, Ethereum will need several years of upgrades to complete sharding, the ultimate form of ETH 2.0. Converting to PoS is an important step for ETH2.0, but the increase in the number of users will continue to put huge pressure on Ethereum L1, unable to make its speed and fees reach the same level as the new public chain (users who are more sensitive to speed fees) May still not choose Ethereum), and the L2 of Ethereum will still be needed to help scale. Therefore, the new public chain in 2022 will not compete with Ethereum, but with Ethereum L2s. In addition, as the multi-chain pattern of the entire industry takes shape, cross-chain interoperability will become more important.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-will-the-new-public-chain-and-ethereum-evolve-in-2022/
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