When the King and Queen are asleep, where do thou find riches?

A fundamental look at the list of Ethereum competitors.

Bitcoin has been sideline ranging longer than grapes take to ferment into a fine wine. Ethereum likes to pretend it’s different, but it’s as correlated as that same wine and a wild night out in the kingdom.

TL;DR

• With the Bitcoin and Ethereum price stagnated, opportunities arise in alternative layer 1 systems: Solana, CELO, Cardano and Polkadot. We discuss opportunities and risks that trigger both buys and sells.
• Solana is praised for its scalability and potential in DeFi and NFT’s. Solana summer might be close.
• CELO is less promising and might switch to become an Ethereum Layer 2.
• Cardano’s future is uncertain due to regulatory battles with the SEC.
• Polkadot’s rebranding doesn’t offer a unique advantage, making it less attractive for buying. Why?

With two investments of royalty-status following the stock market like a traumatized baby duck swimming in a pond of salt-water neglect, how do you and the other risk-on heavy degenerates possibly do any sensible investing?

The different types of investors

There is a group that doesn’t touch anything other than Bitcoin. There’s a group that only cares about Ethereum.

There is a group that doesn’t mind putting all their capital into offshore hamster races and frog currencies. We are talking about the group of people perfectly sandwiched in between these groups.

This is the group of people interested in the opportunities that blockchain might bring, but without the need to quote Saifedean Ammous at every birthday party, or having sleepless nights because the maniacal creator of their Sonic the Hedgehog coin has 80% of the circulating supply stashed in a hot wallet.

It is the group that values a 300% gain instead of a ten-thousand one, and can stomach a 60% loss instead of a 4% one. We are talking about a digital landscape of “Alternative Layer 1 ecosystems”.

Exploring the realm of possibilities of decentralization and yield, without turning into an unsustainable, 15% steady APY, Ponzi scheme. A constant battle of TVL and explorations of gaining attention and adoption from the masses.

The alternative layer 1’s

To value both your attention span and my psyche, this article focuses on Solana, Cardano, CELO and Polkadot. Bitcoin might be the most valuable of cryptocurrencies, but as a Proof of Work system, it differs greatly from these Staking-based L1 ecosystems. Therefore, most of the comparisons here will be made to Ethereum.

How do these alternative L1’s differ from Ethereum, and what are some of the opportunities and risks involved? We will discuss some potential triggers for positive and negative price movements and spread those out all the way to Q4 2024.

Solana

Known for its scalability, efficiency, and a developer-friendly environment. Lots of tools, libraries, and documentations for decentralized apps. It’s compatible with the Ethereum virtual machine and works with Solidity, a programming language actually enjoyable to use.

Solana summer does not seem like a far-fetched idea and has some strong commanders leading the DeFi frontline, like newly founded Marginfi and Cypher Protocol. The NFT ecosystem actually has the tiniest bit of blood running through its metaphorical veins and therefore is gaining more money flow.

The Solana foundation seems quite genuine, and actively support ecosystem development. They are constantly funding grants, working on collaborations, keeping up with innovations and endorsing sustainability.

The Solana (SOL) token moves along nicely with the activity on chain. Since the down-only movement in the FTX debacle, the price has been steadily picking up pace, having found a clear, potential bottom.

Opportunities

When the bull market hits, Ethereum might not be able to scale sufficiently. If this happens, Solana is first in line to chip away users and value with its cheap and fast transactions. Both DeFi and NFT’s builders could, at any point, very easily switch over to Solana.

Risks

Solana is known for halts in the chain, usually through bugs that prevent the network from creating new blocks. There is also, as is the case with all chains, a chance of redundancy. Ethereum might scale to a level where Solana is merely grasping for a breath of air in its shadows. Forever, and forever, in an abyss of non-activity.

Verdict

The range between $22 and $26 (10 billion MC) for Solana appears to be a fair value, compared to the current market cap of Bitcoin and Ethereum. However, if the market decides to pick up steam in Q4 2023/Q1 2024, the opportunities will have had a time to come to fruition. Solana could reach up to 50% of the previous highs, indicating a price of $100 — $134. At that point, newer chains will take the stage, and Solana will not take that road to previous all-time highs.

Celo

The least well-known Layer 1 of this report. Celo aims to address the barriers of crypto asset adoption by allowing users to use their phone numbers as public keys.

As an addition, it is planning to issue a native stablecoin. The network supports smart contracts and decentralized applications but is currently not well known for either.

The best application currently running is the Celo wallet, allowing you to make payments through your mobile phone. The token serves as a utility that enables users to participate in network consensus, pay for on-chain transactions and vote on governance decisions.

The Celo foundation is convinced that useability and price stability remain two of the main inhibitors of cryptocurrency adoption, and they feel that Celo’s mobile-first approach will bridge that gap.

Opportunities

With a 250M market cap for a Layer 1, there is a lot of room for price growth for Celo. The mobile-first approach for the unbanked is logical and can be a cheaper alternative than Bitcoin or Western Union. Celo calls their chain carbon-negative, which looks good on paper for companies.

Risks

Definitely redundancy. Celo is small, unknown and fixates on solving one specific issue. An issue that Bitcoin is already trying to solve with a decentralized payment system that also works on phones. The stablecoin seems valid for now, but in case Celo grows, the 1$ could turn into a risk.

Verdict

Celo reached over $7 in late 2021 and is currently sitting at around 50 cents (250M MC). It has not reached any more traction since the positive crypto numbers in 2023, which hints at deadness.

If the bull market picks up, Celo will undoubtedly gain some price action, but there is currently no further proof of adoption.

I do not expect Celo to make new highs and will top at a maximum of $1, underperforming both Bitcoin and Ethereum in the time to come.

*At the time of writing, builders of Celo are debating making a move to become a Layer 2 on Ethereum, abandoning their own blockchain. This has not yet been officially confirmed.

Cardano

Known as the ‘professor blockchain’. This alternative layer 1 has been attracting smart people to their chain like comedians to an appearance on the Joe Rogan podcast. It’s completely open source and aims to facilitate secure and scalable financial applications.

The proof-of-stake mechanism called “Ouroboros” ensures security and sustainability. The ancient reference of the snake biting his own tail makes me imagine Charles Hoskinson suckling his own toes. Hopefully not the direction Cardano is aiming for.

Cardano implemented smart contracts in 2021, shy of 6 years after Ethereum did. At the time of writing, their DeFi activity is still non-existent.

Opportunities

ADA, the token Cardano uses to secure their Proof of Stake mechanism, was actually doing okay in the first half of 2023. It’s a project known to have a cult-following because of CEO Charles Hoskinson.

The buying pressure was there. However, since the SEC had labeled Cardano an unlicensed security in June, the price started dropping again.

Now that there’s the verdict of a similar project, Ripple, not being an unlicensed security, there is some new-found hope for the Cardano investors.

Depending on the court case of either XRP or ADA itself, the price will adjust accordingly.

Risks

There is a clear lack of DeFi on the Cardano blockchain. Adoption is low and the cult-following has weakened since June. While Bitcoin is up over 100% this year, Cardano has risen just shy of 30%.

As redundancy lies in wait for most alternative layer 1’s, it is definitely also aiming for Cardano.

Verdict

Since the high of just over $3 in late 2021, Cardano has not seen a lot of positive price action. Cult followers changed into bag holders, and activity on the chain is low. Despite all of that, there are still a lot of smarts in the project.

This could elevate the price back up to a maximum of about a dollar in 2024. Chances that it will outperform Bitcoin and Ethereum though, are slim.

Polkadot

An alternative layer 1 that connects different blockchains, allowing them to work together. Developers and projects gain the ability to create and customize their own blockchains, then having those seamlessly communicate among each other.

The utilization of the multichain network called ‘a sharded multichain’, or ‘parachains’.

Recently however, Polkadot has announced a change in their vision, no longer seeing themselves as a blockchain, but identifying as a “blockspace”.

In this blockspace, Polkadot will introduce computing resources rental, a decentralized framework to execute smart contracts, an app centric middleware to communicate between parachains, and the development of advanced zero knowledge primitives.

Opportunities

The rebrand to a blockspace could differentiate Polkadot from the rest of the ecosystems. Words like ‘blockchain’ turn into ‘multi-core supercomputer’ and ‘ecosystem’ turn into ‘framework for creating opt-in, treaty-like agreements across the world’.

Polkadot has partnerships with Vodafone, Aventus and OpenZeppelin, all helping to build this blockspace world.

Risks

Polkadot and everything surrounding it, is brain-numbingly boring. There is no DeFi, there are no NFT platforms. No lending, borrowing, degenerate margin trading or interesting views that stand out from the rest.

Parachains are like modular blockchains, that are being built all over the rest of crypto land as well. Without a unique selling point,

Polkadot will slither away in the shadows, and a dinosaur company like Vodafone is not going to pull them out from under the cool rocks.

Verdict

Polkadot reached the top in November 2021, where it peaked just over $50. If it reaches even 75% of that anywhere in the future, I hereby promise to suck Charles Hoskinson’s toes myself.

The Polkadot chain has had its time to shine, and barely even glittered. New chains that use the same ‘interchain’ approach of Polkadot will take away the remaining attention of Polkadot, making sure it won’t top over $15–20 even in a full-blown bull market.

It will underperform Bitcoin, Ethereum, Solana and potentially even Cardano.

Conclusion

With Bitcoin and Ethereum stuck in a range, investors will definitely look for gains on other chains. Be it the token of the chain itself, or the Layer 2 tokens within those chains.

Solana has a fair chance of taking a big piece of the DeFi and NFT pie, if the halts on the chain become close to non-existent and programmers stay interested. The SOL token is one to pay attention towards.

CELO is not well-known and has no reason to become so in the near future. A complete switch from an alternative Layer 1 to an Ethereum Layer 2 seems the most sensible thing to do.

Currently, there is not a lot of reason to buy the CELO token, unless you want to play on the short-term hype of the chain switch.

Cardano has an insecure future, as it is still under investigation for being an unlicensed security. The final nail in the coffin or the wings to become a big, free-flying bird in the cyber-sky, lie in the hands of the SEC.

The Cardano token is not the worst to buy if you are planning to keep up with the SEC storyline but try not to turn into one of Charles’ bag holders.

Polkadot will rebrand from a blockchain to a blockspace. That is about all they have going for them. If you are interested in potentially making a quick profit from this ‘buy the hype, sell the news’ event, the time is probably July-August.

After the rebrand, Polkadot will once more, slither away under the rocks of nothingness.

Thanks for reading.