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05/22/2021

Persistent struggles with excessive charges and community congestion have allowed layer-one options like Polkadot, Solana and Cosmos to develop into established rivals.

In bull and bear markets, sensible cryptocurrency traders know that the first focus needs to be on mission longevity moderately than leaping on each short-term worth motion. Because the crypto ecosystem expands and new sectors come up, protocols that provide essentially the most worth to the neighborhood stand one of the best probability at long-term survival and worth appreciation.

The purpose of this article is to take a extra thematic, macro view of area of interest sub-sectors throughout the cryptocurrency market and establish tasks whose sign they are going to be profitable throughout the house.

It isn’t in regards to the token worth; it’s in regards to the tech, the basics of the mission, and the way every one should assist push the sector ahead to the following stage.

In a latest dialog with Cointelegraph, Élie Le Relaxation, accomplice at digital asset administration agency ExoAlpha, stated: “Sector tendencies and crypto are large and are right here to remain, however idiosyncratic danger should be taken under consideration whereas weighing portfolios.”

In response to Le Relaxation, the “crypto market tends to work on comparable rules,” which is a repeating pattern seen a number of occasions in its historical past.

With that stated, let’s take a deeper dive into the present market cycle rotation going down within the wider crypto market to get a greater grasp on the place new cash and contributors coming into the market are starting to focus their consideration.

Layer-one tasks proceed to draw customers

Layer-one is a time period used to explain the primary underlying blockchain structure of a community, whereas layer-two options are protocols that function on high of the underlying L1 blockchain and can’t perform with out the framework that they supply.

Bitcoin is by far the dominant L1 answer by way of worth, whereas the Ethereum community has been basic in reshaping the crypto market panorama over the previous few years because of sensible contracts and the rise of sectors corresponding to decentralized finance and nonfungible tokens.

Ether worth vs. variety of energetic addresses. Supply: Glassnode

Whereas Ethereum has acquired a majority of the eye in terms of discussions about sensible contract platforms, a number of tasks have been rising in prominence of late as excessive charges and a low transaction-per-second rely on the Ethereum community have enticed tasks to construct on up-and-coming networks.

Common fuel price on Ethereum. Supply: Etherscan

Ethereum’s success has demonstrated to the world the capabilities of sensible contract platforms, however its continued struggles have opened the door for protocols like Polkadot, Solana and Cosmos, which supply an identical worth proposition together with options to the underlying issues talked about, to develop by way of worth and relevance over the previous 12 months.

Polkadot

Polkadot has develop into one of the vital well-known and profitable L1 tasks within the crypto house in addition to Ethereum in 2021 thanks largely to the mission’s strategy of interoperability and cooperation versus the earlier “Ethereum killer” strategy taken by many.

Created partially by Gavin Wooden, who additionally performed an instrumental position within the creation of Ethereum, the Polkadot community has taken a extra complementary strategy as an open-source sharding multichain protocol that permits cross-chain bridges in order that tasks and builders can select the community that most accurately fits their wants and simply switch their protocols if needed.

Not restricted to simply tokens, Polkadot’s multi-chain performance allows the cross-chain switch of any information or asset sorts, serving to to determine a variety of interoperability between separate blockchain networks.

Polkadot’s ecosystem is likely one of the largest and most energetic within the house, with a quickly increasing checklist of tasks launching on the protocol and seeking to acquire one of many restricted parachain slots within the upcoming parachain auctions.

Polkadot Ecosystem. Supply: Web3 Basis

As seen within the graphic above, the Polkadot ecosystem has quickly expanded to include the most important sectors of the cryptocurrency ecosystem, together with DeFi platforms, nonfungible token protocols, oracles and decentralized autonomous organizations.

The community additionally has a rising checklist of functions that facilitate interacting with the protocol, together with a variety of wallets that assist Polkadot’s DOT and Polkadot-based property, in addition to a number of community explorers, together with Polkascan.

Fashionable tasks which are at the moment working on the Polkadot testnet and are favored to win a parachain slot embody DeFi ecosystem Acala Community and the Polkaswap decentralized alternate, that are each out there now for testing and may be accessed utilizing the Polkadot-js pockets browser extension.

As soon as the parachain auctions are completed and the tasks go stay on Polkadot, the community’s launch will formally be full. Whereas there isn’t a definitive date but set for when the parachain auctions will start, pleasure for DOT has continued to construct, which has translated into its worth rising greater than 800% in 2021.

DOT/USDT 4-hour chart. Supply: TradingView

With the prospect of full community capabilities set to launch inside a interval of weeks to months and mainstream consideration starting to reach, many traders really feel that Polkadot is well-positioned to see additional development in worth and adoption as a key participant in the way forward for interoperability throughout blockchain networks.

Solana

Solana is a quick, safe and censorship-resistant blockchain community that “supplies the open infrastructure required for international adoption,” in response to the mission’s web site.

The mission’s reference to the FTX cryptocurrency alternate and its CEO, Sam Bankman-Fried, who additionally had a hand within the creation and operation of the Serum decentralized alternate, which operates on the Solana community, has been helpful for the protocol by way of monetary backing and media publicity.

Apart from these constructive associations, the underlying expertise of the Solana community has attracted the eye of a variety of tasks curious about launching or bridging to its high-speed, low-cost surroundings.

Solana ecosystem. Supply: Coin98 Analytics

The speedy growth of the Solana ecosystem over the previous 12 months started with a deal with decentralized finance and has been bolstered by the success of the Serum, which customers can interface with utilizing a number of wallets that assist Solana, together with Sollet, Ledger and Math Pockets.

Whereas a majority of the instruments and supporting infrastructure on the community have been geared towards DeFi, latest additions to the community, such because the decentralized music-sharing and streaming protocol Audius, present that the protocol is starting to department out and entice the eye of different kinds of tasks curious about its capabilities.

The Solana protocol makes use of an revolutionary hybrid mannequin consisting of a proof-of-history consensus mixed with the underlying proof-of-stake consensus of the blockchain to extend the community’s total scalability.

Extra lately, the community has seen a variety of new tasks launch which have employed among the similar ways that drummed up exercise and enthusiasm on the Ethereum community in 2017, together with airdrops and copycat tasks.

Whereas some might even see this as a unfavorable, it demonstrates the elevated adoption and attract of a low-cost surroundings in addition to exhibiting that Solana is a developer-friendly community.

SOL/USDT 4-hour chart. Supply: TradingView

These influences, mixed with a large number of different components, have helped increase the worth of Solana (SOL) by greater than 3,200% to date in 2021.

On condition that DeFi and different sizzling sectors of the cryptocurrency sector nonetheless of their infancy, Solana is effectively outfitted to see its ecosystem develop and token worth enhance as international cryptocurrency adoption will increase.

Cosmos

Cosmos refers to itself as “the web of blockchains” consisting of “an ever-expanding ecosystem of interconnected apps and providers, constructed for a decentralized future.”

The community arose out of the Tendermint mission, which is taken into account “the gateway to the Cosmos ecosystem” and launched by way of a token sale in 2017. The protocol makes use of a PoS consensus algorithm that permits token holders to stake their cash to assist maintain the mission’s flagship blockchain Cosmos Hub safe, whereas additionally incomes a yield that’s paid out in Cosmos (ATOM) tokens.

Momentum for the mission in 2021 was kicked up a notch in February following the Stargate replace, which included the Inter-Blockchain Communication protocol, an interoperability layer for Cosmos blockchains.

The IBC permits tasks constructed with the Cosmos software program growth package, like Kava and Band Protocol, to simply interoperate and bridge tokens throughout different blockchains on the Cosmos community, which at the moment hosts greater than 240 apps and providers.

Cosmos ecosystem. Supply: Coin98 Analytics

The capabilities of the IBC will finally join with different blockchain networks, such because the Binance Good Chain, serving to to extend interoperability throughout the cryptocurrency ecosystem.

With a transaction velocity of seven seconds and a median price of $0.01, transacting on the Cosmos community is a welcome expertise for customers fleeing excessive charges on Ethereum.

The Could 10 completion of the Gravity decentralized alternate testnet buying and selling competitors reveals the protocol is gearing as much as supply options much like Uniswap for a fraction of the charges, hinting at a promising future for this rising ecosystem.

Layer-one tasks are bullish, however there are a couple of hurdles to beat

Rising ecosystems and the deliberate growth and integration of interoperability options are sturdy indicators of longevity for layer-one tasks within the quickly rising cryptocurrency house.

Potential threats to the success of L1 options embody tasks, corresponding to Polygon and Fantom, which give cross-chain bridges to different extra succesful networks and L2 options that get rid of the scaling points that plague the Ethereum community.

Whereas these threats are actual, every community or protocol will finally run into its personal distinctive set of challenges that hamper its capabilities and open the door for rivals to supply a greater answer.

Ethereum launched the world to sensible contracts and expanded the scope of what may very well be achieved on L1 options past what was beforehand achievable on Bitcoin.

Limitations within the unique and present design of the Ethereum community have opened the door for newer L1 options like Polkadot, Solana and Cosmos to determine themselves as viable contenders because of quicker transaction occasions and an already-established proof-of-stake consensus mechanism.

The views and opinions expressed listed here are solely these of the writer and don’t essentially mirror the views of Cointelegraph.com. Each funding and buying and selling transfer entails danger, you must conduct your individual analysis when making a call.