In 2021, the blockchain world officially went multi-chain.
According to Footprint Analytics, there are now 86 public chains in total, compared with 11 at the beginning of last year, a seven-fold increase.
Whereas at the start of last year, Ethereum held 96% market dominance, the hundreds of new DApps in DeFi, NFTs, GameFi, and SocialFi have made the network nearly unworkable on its own because of congestion and fees.
As Ethereum’s market share dropped to 62% by end of the year, these new chains — both competing against and working with the Ether ecosystem—have become the big story going into 2022.
In this article, we will look at the different types of chains that have emerged to make the blockchain more usable at scale.
Overview of Public Chain Development and Classification
There are 3 types of public chains:
- Layer 1 technology competes with Ethereum by modifying the public chain to improve performance. L1s include CEX branded public chains like BSC, Cronos, and Heco, interoperability chains like Cosmos and Polkadot, and public chains like Solana, Avalanche, Terra, and Fantom.
- Sidechains are Ethereum expansions compatible with the Ethereum Virtual Machine (EVM), built mainly to deal with excess traffic on the network. Examples include Ronin, which is specifically designed to address NFT transactions, and Polygon, a blockchain network that builds and links to Ether by providing a common framework.
- Layer 2 solutions complement Ethereum by processing partial transactions (called rollups) off-chain. The two main types of rollups are Optimistic rollups and ZK rollups. For more info about L2, read this Footprint deep dive on the topic.
Public Chain Ecosystems
By 2021, the total TVL of all public chains peaked at $293 billion, a rapid 10x increase compared to 2020.
Among them, the various L1 public chains have adopted different strategies to build their ecosystem and take market share from Ethereum.
Currently, the number of DeFi projects on each public chain is approaching 1,000. BSC, Polygon, Avalanche, Solana, Fantom, Terra, Arbitrum, and Cronos have grown to be the top 10 public chains with many DeFi projects besides Ethereum.
Each public chain ecosystem also has projects for DEXs, yield, lending, assets, staking, minting, and more. However, the bulk of their TVL at the moment consists of DEX, lending, and yield.
NFTs and GameFi also emerged as booming trends in 2021, and some public chains have emerged specifically to focus on these. For example, Ronin has leaped to become the second-largest NFT trading public chain.
GameFi, which requires higher yields, playability and fluidity, also requires higher performance and lower transaction fees. Hive, WAX and BSC are the top three public chains in GameFi in terms of active users per month.
Terra, a public chain built around a stablecoin protocol, surpassed BSC to become the second-ranked public chain after multiple rounds of funding at the end of the year.
Avalanche is undoubtedly one of the brightest public chains in 2021. Its TVL is the biggest gainer in 2021, and its TVL is ranked fourth among all public chains.
Avalanche’s strong rival, Solana, is currently ranked fifth in TVL.
The Rapid Growth of Cross-Chain Bridges
With the blockchain world now fragmented into multiple chains, bridging between these different solutions and projects has become a necessity.
Projects in this area saw rapid growth in October 2021. As of Dec. 31, the TVL of cross-chain bridge projects exceeded $10 billion.
Most cross-chain bridge protocols are L2 extended cross-chain bridges built on Ethernet, whose purpose is to achieve interconnectivity with Ethereum.
In addition to the wide variety of cross-link bridges, cross-link bridge aggregators like Chainswap and FundMovr are also popular among users and developers. Cross-chain bridge aggregators can help users directly exchange between different assets while cross-chaining assets. Another major goal, interoperability across chains to allow developers to build their use cases more efficiently, has also become an emerging demand.
With widespread adoption and an influx of new users, the blockchain has expanded to far more than just Bitcoin and Ethereum
Different public chains aim to solve pressing Web3.0 problems, and their relatively low development cost makes it possible to have many public chains. However, this fragmentation also brings new challenges to developers and users, creating a need for interoperability solutions as well.
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Date and Author: Jan 12th, 2022, [email protected]
This article is part of our Year in Review series.
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