The blockchain industry is filled with a variety of different projects
all competing for the same market share.
The communities attached to these projects are always thinking their project is the best.
They always have a list of reasons for why their favorite will end up on top.
This isn't exactly how it works though.
It's not a zero-sum game where the winners take all.
It's hard to say which project is the best.
And they're talking about different approaches and optimization for different things.
It's like asking whether a dolphin is better than a cheetah.
Well, the answer depends on whether the competition is on land or in water.
Still, it's important to know which trade-offs are being made with the projects you're invested in.
In this video, we're going to compare some of the top smart contract platforms in the crypto space
and identify some of their main strengths and weaknesses.
Let's get it!
There is fierce competition in the layer 1 race.
With newer projects like Avalanche and Solana seeing explosive growth over the past year.
These projects have positioned themselves as faster, cheaper and better versions of Ethereum,
the original smart contract platform.
It is true that these projects are faster and cheaper than Ethereum's layer 1,
but that doesn't necessarily mean that they're better.
Now, don't get me wrong.
These are all ecosystems that we are invested in here at BitBoy Crypto.
But there are more factors than speed and price that we have to consider.
You also have to think about layer 2 networks on Ethereum
that are tapping into the security of layer 1
while still offering cheap and fast transactions.
A recent post from the account polynya laid out the prices for the various smart contract platforms,
which included Ethereum mainnet,
its most popular layer 2 networks
and the other layer 1 platforms competing in the space.
polynya is an account that's focused exclusively on promoting
what is happening in Ethereum's layer 2 ecosystem,
so they definitely have a bias,
but their research is very informative,
and they have included all their sources.
The most expensive blockchain on the list was Ethereum
in an average of $4.55 per transaction.
No surprise there.
The competing layer 1s are far cheaper,
all of them having transaction fees of under $1.
Solana was the cheapest layer 1 network
with an average transaction fee at 0.002¢--
a fraction of a penny.
If we're going to rank these blockchains by affordability,
Solana would be at the top of the list.
But Solana's high speeds and cheap transaction fees come with a cost.
There have been multiple occasions now
where Solana's blockchain has gone offline for long stretches at a time.
And while funds that were locked into cold storage were safe,
these outages were responsible for major losses in NFTs
and widespread liquidations on Solana DeFi.
When a network is down,
users are unable to sell their assets and take profits.
And they're also unable to increase their collateral to avoid liquidations.
These are serious considerations that big money players take into account
when deciding where to keep their money.
And it's something that we should be paying attention to as well.
Now, I'm not here to FUD Solana.
It's still one of our biggest holdings.
But we need to be aware of the pros and cons of each project.
This is also a concern with Binance's BNB coin,
which has an average cost of about 37¢ a transaction.
Now, BNB has a very small number of validators,
which makes it very centralized,
and it has several other technical vulnerabilities that create security risks.
But BNB is still in our portfolio though.
And it will probably do very well with the force of Binance behind it.
Fantom would be next on the list with an average transaction fee of just 2¢.
Fantom had a huge run-up earlier this year
in anticipation of a new DeFi ecosystem created by Yearn founder Andre Cronje.
But much of the hype has died down
because he announced he was stepping away from DeFi development.
Fantom is certainly cheap,
and there are some great projects being developed there,
but the instability on the social layer could be a potential drawback
that keeps investors on the sidelines.
Terra is another layer 1 blockchain
that is offering transaction fees under 10¢
with an average fee of about 9¢.
Terra is a stablecoin network and payment application
that is extremely popular in South Korea, where the project was founded.
Terra has millions of users in South Korea,
which has helped kickstart its meteoric rise to the top of the crypto charts.
Terra's value comes from its algorithmic stablecoins,
which have been extremely resilient
despite some volatility during major market corrections.
Algorithmic stablecoins are still a very experimental and competitive space though,
so the future can be hard to predict.
Next up is a new kid on the block,
Avalanche,
with an average transaction fee of 39¢.
Avalanche has not been around very long though,
so it is one of the least battle-tested blockchains at the top of CoinMarketCap.
Finally, we have Cardano at an average of 86¢ per transaction.
Still under $1, but more than double
or even triple the cost of transactions on some of the other layer 1 networks.
Cost isn't everything though.
Cardano has had an incredibly robust network
with a thriving community of stakers.
In fact, Cardano remains one of the most staked crypto assets in the market,
keeping an average of over 70% of the supply staked.
Now, if we take a look at Ethereum's layer 2 ecosystem,
transactions get much cheaper than mainnet.
Sometimes, they make security trade-offs though as well.
Not all layer 2s are the same on Ethereum.
In fact, not all scaling solutions on Ethereum are true layer 2 networks.
Some of them are sidechains.
And this is an important difference.
A true layer 2 network is a rollup that taps into the security of the Ethereum mainnet.
Optimism and Arbitrum are the most popular examples of this model.
Both of these blockchains have transactions that are under $1.
However, there are sidechains like Polygon or Ronin network
that are helping to scale Ethereum,
but depending on their own security.
Polygon and Ronin have both transaction fees that are a fraction of a cent,
but because they aren't rollups,
they're less secure than other layer 2 networks.
It might not be like this forever for Polygon though.
Over the past year, the Polygon team has been developing its own ZK-rollup technology.
It's promised to eventually become a true layer 2 rollup.
ZK stands for zero-knowledge proofs,
which are some of the most advanced cryptography in the industry.
This technology will offer the scale that is needed for mass adoption
without sacrificing the security that's given crypto its value in the first place.
Most experts believe that it will be a few years before ZK technology becomes the standard,
but there are a few ZK-rollups that are already live.
Transactions on zkSync are just about 10¢,
and it's a rollup,
so it taps into the security of Ethereum while using zero-knowledge proofs.
There are also app-specific ZK-rollups
like the one used by the decentralized exchange dYdX.
Transactions on dYdX average somewhere around a cent
without needing to make major security trade-offs.
Blockchains are getting cheaper and faster all the time.
That's a plus not just for DeFi
but for the emerging NFTs and metaverses that are being built on them.
The cream will rise to the top,
and if you pick your projects correctly,
so will your portfolio.
That's all I got.
Be blessed.
BitBoy out.