This is shaping up to be a killer week for so-called “Ethereum killers.”
Of the 100 largest tokens in terms of market capitalization, seven of the top ten biggest gainers in the last week are smart contract platforms, according to CoinGecko. Eleven of the top 15 smart contract platforms are up double digits on the week, according to crypto research company Messari. Of those, three, Solana, Terra, and Avalanche, are up over 75%. Cardano, Polkadot and Cosmos are all up over 25%.
ETH, with its $364B market cap, moved is down a little over a percent on the week.
Investors are encouraged by the rise of Solana, whose SOL token doubled in the past two weeks, and now want to put chips onto other Layer 1s, said Muneeb Ali, founder of Stacks, a smart contract platform built on Bitcoin which has $1.4B in market cap.
“I think people are realizing how large the potential market for smart contracts can be,” Ali told The Defiant. “Success of Ethereum fuels demand for new L1s and L2s. And as people see initial signs of traction of a new L1, recent example being Solana, then their confidence level on newer L1s being able to take market share can go up in general.”
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Traders speculate high transaction fees on Ethereum will drive activity into other blockchains. Binance Smart Chain attracted thousands of users seeking cheaper transaction costs earlier this year, while Solana is picking up steam and projects like Avalanche are also promoting their low fees.
Meanwhile, Polygon and other Ethereum scaling solutions are helping the second largest blockchain after Bitcoin meet the demand to use its apps. These side chains and Layer 2 platforms take transactions off the main Ethereum chain, so that they can be processed faster and for lower fees.
It also helps that Avalanche, Binance Smart Chain, Polkadot and others all allow for Ethereum code to be easily ported over and run on their blockchains as they are compatible with Ethereum’s Virtual Machine.
Investors looking to capitalize on the Layer 1 momentum would do best to look at projects started in 2017 and 2018. According to a Twitter thread by Ali, the networks take two to three years of development to launch. Any project raising money now would launch in 2024.
“There are only 6-7 high-quality L1s,” Ali said in his thread. “New ones are not entering this market.”