Beyond Bitcoin: How Alt Layers Will Shape the Next Crypto Boom

While Bitcoin and Ethereum continue to dominate the headlines, there’s a whole new wave of networks poised to shake up the market. Better known as “alt L1s” or “L2 solutions”, these new blockchains are scaling crypto to levels never before possible. We’re talking thousands of transactions per second, near-instant finality, and fees so low they’re almost free. Some are designed to work with multiple chains, while others are tailored to particular sectors like the creator economy, gaming, or finance.

The meteoric rise of Bitcoin and Ethereum dominated the last major crypto bull run. In 2017, Bitcoin’s price surged over 1,300%, and Ethereum gained a whopping 9,000%. These astounding profits spurred a speculative frenzy and increased public awareness of cryptocurrencies.

Bitcoin and Ethereum accounted for over 80% of the total crypto market cap during the last Bull Run. Bitcoin was seen as a “store of value” and “digital gold“, while Ethereum enabled a flourishing new market for decentralized apps and tokens.

While Bitcoin and Ethereum aren’t going away anytime soon, the next crypto Bull Run could see other layer 1 and layer 2 networks take more of the spotlight. Networks like Solana and Avalanche are gaining traction as they offer an alternative to Ethereum with lower fees and faster transaction times.

Ethereum is struggling under the weight of its success. With popularity comes scaling issues, and gas fees have skyrocketed. Solana and Avalanche were built for speed and can handle thousands of transactions per second at a fraction of the cost.

Although scaling blockchain networks has proven to be a constant challenge, layer 2 solutions are opening the door for decentralized applications and cryptocurrency to be adopted more widely by the general public. Layer 2 networks are built on top of underlying blockchains like Ethereum to help scale the network by handling transactions off-chain before bundling them together to record on the main chain. This helps to address the major problems affecting first-generation blockchains, specifically latency, expensive gas costs, and network congestion.

Two scaling solutions are promising: optimistic rollups and ZK-Rollups. Optimistic rollups bundle multiple transactions together and run them off-chain, assuming they are valid. They then post the bundled transactions back to the main Ethereum chain. To ensure security if invalid transactions are included in an optimistic rollup block, this method relies on fraud-proof mechanisms. Optimistic rollups can achieve up to 1000-4000 transactions per second. 

ZK-rollups use zero-knowledge proofs to validate transactions off-chain before bundling them together and posting them to the Ethereum mainnet. They don’t require fraud-proof methods since the zero-knowledge proofs cryptographically prove the validity of transactions. ZK-rollups can achieve 2000-3000 transactions per second.

Layer 2 solutions have enabled new scalability and performance for Ethereum and other blockchains. They address the trifecta of scalability, security, and decentralization by focusing on scalability without sacrificing safety or decentralization. 

The next wave of Dapps, DeFi protocols, and NFT platforms will likely be built on layer 2 networks, enabling new mainstream audiences to access the open financial systems of the future.

The potential of layer 2 solutions is only starting to be realized. As blockchain networks continue to scale, layer 2 and beyond may shape the future of how we transact and interact in a decentralized world. 

The question is, will the next crypto boom be built on layer 1s, layer 2s, or what comes next? The future is hard to predict, but one thing is clear: crypto is just getting started.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.