Public Chain Market Outlook

Published in

Coinmonks

5 min readJun 2, 2022

A New Ecology is Taking Shape as Public Chains Struggle to Match or Rival Ethereum.

In 2022, the blockchain sector is trying to strike a new ecological balance amid all the integrations and estrangements with ETH, while the latter sees a sharp drop in its market share to 62%. This disaster is incurred when hundreds of dApps including DeFi, NFT, GameFi, and SocialFi run on congested Ethereum.

Almost all public chains seek to handle more transactions than Ethereum in a faster and cheaper manner. They may resort to technical upgrades, ecological dynamics, traditional financial means, or emerging trends.

Altogether, public chains are categorized into three types:

Layer 1: Challenging Ethereum by upgrading its technology. Examples include famous CEX public chains (BSC, Cronos, Heco, etc.), interoperable chains (Cosmos, Polkadot, etc.), Solana, Avalanche, Terra, Fantom, etc.

Sidechain: The EVM compatible blockchains run in parallel to Ethereum Mainnet and operate independently. Handles Ethereum’s excess capacity. Examples include Ronin (developed for the NFT game Axie Infinity) and Polygon (a blockchain framework for building and connecting Ethereum).

Layer 2: Scaling solutions complementary to Ethereum. Part of Ethereum in nature. A secondary framework built on top of an existing blockchain system works on achieving off-chain scalability by rolling up transactions. Two main types are Optimistic rollups and Zero-Knowledge rollups (ZK rollups).

Till now, the total TVL of all public chains has reached $100 billion, five times higher than last year. L1 networks see skyrocketing TVL as they establish their own ecosystems and swallow a great amount of Ethereum market cap.

Smart contracts are raking in big, fat money as users join and make cheaper transactions. L2 chains and sidechains enjoy scalability and decentralization, through their distinct mechanisms, consensus, transaction execution, data availability, and privacy protection. A multichain ecosystem is one in which multichain models run in parallel. This novel concept is tested out to further enhance the system.

Ethereum community also embraces multichain bolstered mainly by rollups. High throughput is achieved through L2 scaling solutions, which has not only cut gas fees but also safeguard security for the Ethereum Mainnet. Ethereum validates off-chain computations through fraud proof or validity proof. Then, it improves rollup calldata with sharding technology. As the blockchain world has been segmented into several parts, these isolated public chains are urgently calling for cross-chain solutions, most of which are L2 scaling bridges running on Ethereum, aiming for interconnection to the Ethereum.

Besides various bridges, bridge aggregators, such as Chainswap and FundMovr, also enjoy popularity among users and developers. These platforms enable cross-chain asset transactions and exchanges. Public chain contenders aim at tackling pressing Web 3.0 plights and relatively low cost attracts many developers to join in the race. While the competition causes segmentation which boosts demand for interoperable solutions amid new challenges.

The best examples lie in Bitcoin and Ethereum, the two largest blockchain networks. The former recognizes BTC, the most widely used cryptocurrency. The latter runs the most dApps and supports most parts of the DeFi Ecosystem, valued at billions of dollars. The absence of interoperability intercepts asset flow between the №1 cryptocurrency and the №1 DeFi ecosystem and hinders the advancement of the two.

Cross-chain technology halts the monopoly of large entities. Given the fact that Bitcoin and Ethereum take up the most portion of the crypto market at 60%, cross-chain technologies are introduced to divert transactions. Blockchain interoperability carries great significance for scalability, wide application, and innovation, making its upgrade a priority.

Projects may relieve this scaling headache in their own ways. But fruits cannot be communicated across chains for lack of bridges. Meanwhile, chain rules don’t share interrelated grounds for new solutions.

Cross-chain smart contracts may subvert the development mode of dApps but won’t change the fact that most blockchain networks are still isolated in nature. These siloed chains cannot natively send or receive data between them. To tackle this, bridges are the prerequisites.

Currently, cross-chain bridges mainly target the transfer of tokens. Native assets are bridged to another blockchain through a simple “mint and burn” approach. Transmission of data packs, tokens, and instructions, however, is only possible on generalized bridges. Security and reliability are especially important for this kind of infrastructure. Codebase must be strictly audited for on-time message transmission to intended chains without malicious manipulation and not affected by external distractions, such as blockchain reorganization.

The potential of cross-chain technology can be further tapped into for better user experience and higher efficiency. At the same time, bridging will make this field less competitive, a good way to keep blockchain at a good price. Interoperability is essential for a blockchain boom, as it expands its portfolio to more industries. Marriage of private and public chains will draw in more audiences. And generally speaking, fast and cheap response to user needs is what underlines a mature cross-chain bridge.

Equities on public chains as well as many concept chains are decoupling with Bitcoin. Chain ecosystems are building up. Exclusive user groups are gradually summoned. Such that, the strong correlation with BTC value is fading away. Creative productive forces, transparent relations of production, and freely competitive markets are the driving forces behind crypto growth. Similarly, advocacy for public chains highlights a vision for enhanced architecture, rather than the overthrow of native systems.

NetX, the Chain-Native Internet for the Digital Living of Trustworthy and Reliable Intelligent Autonomous Systems (Trias)

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Written by Trias