There may no longer be an L1 public chain war in the next cycle, but may be replaced by an L2 public chain war.
I am very optimistic about General L2 and Vertical L2.
The following analysis:
All L1 have the problem of the impossible triangle, that is, there is no way to achieve decentralization, scalability and security at the same time. All L1s want to solve this problem in 2018-2020 and 2021-2023. The fact is that no one can do these three points and must achieve Trade Off.
When people realized there was a problem with the direction of L1, Israel produced the first Layer2 Starkware. L2 is the operating node of the project party. It creates a "chain" by itself. There are multiple transactions in a batch. It packages the multiple transactions into a single transaction and submits it to L2's contract in L1. The contract will be executed in L1, and then the host The chain confirms L2 transactions, so that it can be fast + cheap, and it can also inherit L1 in terms of security and decentralization.
In 2022, Celestia proposed the concept of modular blockchain, that is, the blockchain should be divided into 4 parts, Execution, Settlement, Consensus and DA data availability. Among them, Execution and DA are the most worthy of attention. These two parts undertake the top-level (execution) and bottom-level (archived transaction) business.
Let’s take the time back to 2017-2018. Most of the investment targets at that time were ethereum fork chain. Needless to say, the grand occasion at that time, but why was it so popular? This is related to the issuance of IEO IDO, a new asset type ERC20. Anyone can issue new assets without permission for the market to subscribe. This was the trigger of the bull market at that time. The targets for making money at that time were L1 (eth fork) and various new asset trading platforms.
In 2020-2021, in addition to Ethereum competitors, investment targets also gradually include dapps represented by defi and gamefi, and the new asset type NFT can also be regarded as one of the entry points for traffic. The targets that make money and survive in this world are L1 (eth competitor) and various asset trading platforms (in addition to the various cexdex mentioned above, there are also NFT exchanges, and various derivatives exchanges have also begun to grow bigger and stronger).
Let’s look at another interesting phenomenon. Thanks to Boss Tang for enlightening me. Let’s look back at L1 that came out in the last cycle. At that time, looking at their last round of financing before listing, we thought it was very expensive. However, after going through a bull and bear period, and comparing it with the current valuation, we still feel that the valuation at that time was very expensive. How cheap. But this sentence has survivor bias.
Why was it L1 that made money in the last cycle? Because: 1. Everyone really wants to use different ways to solve the scalability of Ethereum 2. Innovation of various consensus methods 3. Everyone wants to create their own ecological perspective 4. The release of water caused by the epidemic has caused funds to rush into the story The grandest track that can be talked about 5. The ecology of Ethereum at that time was not enough to have absolute dominance.
From the perspective of General L1, I define them as L1 that is large and comprehensive, with the grandest narrative. Everyone is an Eth killer, and everyone wants to create their own ecology. Even if it is the last round of investment, or even the first and a half investment after the coin is issued, even if it is put into the current valuation, it will be more than double. If it can be sold at a high point (and it can be sold because it is unlocked), the multiple It is quite high and is the optimal solution.
From the perspective of L1 as a service, this seems to be a larger and more comprehensive story than L1, but the problems will arise: 1. It tests the team’s ability to build an ecosystem more than L1 2. The token’s ability to capture value is very poor (cosmos’ Token is pure air, and Polkadot’s card slot auction has been criticized for a long time). But you can still make a lot of money, and even if you get on the bus in the last round, you will have more than double the income, but the overall ceiling is relatively small.
From the perspective of vertical category L1/L2, this is more subdivided. Indeed, from the perspective of ceilings and other aspects, they are inferior to the above options, but the reasons why it was not implemented at the time are: 1. There was no modular idea at the time 2. Essentially I still made an L1, and I still need to re-engage vm capital users and development. 3. The performance is still quite bad, and there is no way to support enterprise-level finance or mass adoption on the consumer side. But when the momentum comes, the benefits will be extremely obvious.
But I think there may be different situations in the next cycle, such as ethstorage and xxxx (to be honest), one is to solve the problem of data storage on Ethereum, and the other is to achieve the ultimate execution layer to support consumer grade Applications and high-performance derivatives/spot exchanges serving enterprise levels. There has been no mass adoption so far. Is it because blockchain is simply not suitable for mass adoption?
Not necessarily, especially from the financial perspective, blockchain or distributed technology is very suitable for mass adoption of transactions. If a fast execution layer, that is, a fast vertical class layer 2, can be created, web2 developers, especially the Chinese development team, are likely to be able to create a new paradigm on it.
These two cycles have proven Ethereum’s unshakable status. Will the public chain war reappear in this cycle? I don't think so. The reasons come from: 1. Development (3w developers). 2. Users (30-40wDAU) 3. Funds (30B TVL) 4. Full iteration and update, we have confirmed the direction of Rollup, modularization, DA and other directions in three years. Therefore, the public chain war in the next cycle will be the L2 war.
The current L2 is still mainly General. In fact, it is not cheap or fast. There is still a lot of room for improvement, and the current L2 ecosystem is not that big. At present, the performance of L2 cannot close the gap with other L1 competitors. For example, for 2B type financial projects, let’s take gravity as an example.
Derivatives on the CeDeFi chain are born to serve large customers, but due to the current performance of Starknet, even if you build an appchain, from the cost side and the speed side, there is still no way to achieve on-chain matching (currently it can only be done on the chain) (off-chain settlement), so it still cannot be completely transparent and trustless. If Gravity is moved to xxx, it will be a high-performance and fully transparent 2B on-chain derivatives exchange.
Can we find another way and temporarily give up part of the decentralization capabilities to build a very high-performance L2 to compete differentiatedly with the current General L1? Maybe this L2 is not suitable for defi, etc., but it is very suitable for consumer projects (games or e-commerce, etc.) and some enterprise-level financial projects (orderbook exchanges matched on the chain). This creates possible ground for potential mass adoption.
At present, this type of vertical layer 2 has taken a different approach, and may instead provide good infrastructure for dapps that achieve mass adoption. But this may require improvements from hardware storage, parallel MEV, data structures, etc. Let the bullets fly for a while and take a look at the progress of the high-performance vertical L2 in half a year. Let’s see if we can achieve mass adoption on it in two or three years, whether it’s consumption or finance.